How the new Coalition could revitalize South Africa's property market

South Africa’s property market has experienced its share of challenges, but the new Government of National Unity (GNU) brings a glimmer of hope for better days ahead. Just Property CEO Paul Stevens notes that, similar to the previous GNU, this coalition could enhance the residential property sector, provided it focuses on pro-business policies.

The effectiveness of the GNU will largely depend on how well the disparate parties work together and the coalition’s ability to implement effective economic strategies. Key areas of focus will include improving infrastructure, streamlining property transactions, and enhancing transparency. These measures could foster a more inviting environment for property investment.

Bradd Bendall, National Head of Sales at BetterBond, emphasizes the importance of these factors. He points out that the residential property market has slowed significantly due to high inflation and interest rates. However, with inflation rates dropping (from 6.8% and 6.5% in April and May 2023 to 5.2% in April and May 2024), and potential interest rate cuts of 25-50 basis points on the horizon, there is hope that consumer confidence will improve, thereby stimulating the property market.

The coalition’s impact on the property market will be closely monitored by investors and home buyers, with its success hinging on political stability and effective policy implementation. Without these, market volatility could undermine property values and investor confidence.

Investec Chief Economist Annabel Bishop notes that fixed investment remains crucial for economic growth. Despite the Bloomberg consensus predicting a modest growth rate of 1.1% for 2024, improvements at Eskom and Transnet are expected to boost GDP growth in the second quarter of 2024. Although recent forecasts have shown a temporary dip, economists remain optimistic about medium-term growth, projecting rates between 2.4% and 3% over the next five years, contingent on stable governance.

On June 20, the rand strengthened to below R18/USD for the first time since August 2023, though it dipped again as markets awaited cabinet announcements. If the GNU can demonstrate political stability, the rand could strengthen further, making investment assets, including property, more attractive due to potential capital gains from currency appreciation.

Foreign sentiment towards the ANC-led coalition is cautiously optimistic, driven by the promise of greater political stability and predictable governance. This optimism may lead to increased foreign investment in South Africa, potentially boosting property development and values. Locally, there remains cautious hope, with many recalling the positive effects of the previous GNU on services and investment.

Despite this hope, past disappointments have made investors wary. South African buyers and investors will weigh the benefits of the coalition against the risks of political instability and policy uncertainty. This cautious optimism reflects a wait-and-see approach, where significant investments may be tempered by concerns over the coalition’s effectiveness.

For home buyers, an improved economic outlook can enhance consumer confidence, crucial for sustaining demand in the residential property market. Increased financial security often leads to greater willingness to invest in homeownership.

While the GNU has the potential to positively influence the property market through increased foreign investment and improved consumer confidence, success depends on its ability to deliver political stability and sound economic policies. Property investors and home buyers should stay informed about political developments and market trends. At Just Property, we remain optimistic, believing that the GNU can build on past successes and lead to a renewed period of growth and prosperity in South Africa’s property market.