Home News Impact of SA Politics on Housing Market: Strategic Buying and Selling Tips

Impact of SA Politics on Housing Market: Strategic Buying and Selling Tips

This year, almost half of the world’s inhabitants will head to the polls to elect their new governments, including 8 of the world’s 10 most populous countries.

“In South Africa, we can expect our own election to put the property market into a temporary holding pattern, dragging on the subtle buyer’s market we have been experiencing” says Renier Kriek, Managing Director at Sentinel Homes.

While he advises owners to wait until the end of the year to consider selling their property, Kriek cautions buyers to not get caught up in election fears and miss out on real estate bargains.

The impact of sentiment
All market behaviours are driven by sentiment. South Africans face uncertainty around the outcome of the election and the likelihood that, for the first time in its history, the country will be led by a coalition government at the national level.

This creates negative sentiment that is also being fuelled by the heightened and increasingly populist rhetoric of competing political parties. And persistent factors, like the delay in interest rate cuts and a declining rand, only add to the doubt.

“While we were all hoping for a downturn in the rate cycle at SARB’s May or July meeting, I now doubt anything will happen before September. The MPC remains hawkish and seem unlikely to move interest rates down before the US Federal Reserve has lowered their policy rate,” says Kriek.

That’s expected well after the election and these compounded concerns are pushing people to take a wait-and-see approach, including in the buying and selling of property.

A first for South Africa
All countries with a proportional representation electoral system eventually face a coalition government scenario. The likelihood of a national governing coalition is therefore a sign that our political system is maturing.

This will be South Africa’s first coalition government at a national level and the norms associated with such a structure have never been firmly established among the political class or the voting population. While national coalitions are a sign of progress and maturity, it is likely to lead to a lot of short- to medium-term noise, that is likely to have a continuing and unpredictable impact on sentiment in all markets, including the property market.

The nearest we have to some agreement is the Multiparty Charter whose only purpose is to counter a national coalition between the ANC and EFF

Countries like Belgium with older proportional representation systems have developed the advanced bureaucracy necessary to almost run the country on autopilot, even without a government. South Africa, however, still needs to find its footing in any coalition pacts and develop the necessary protocols among participants intent on promoting their own interests.

“This means things will probably be noisy and messy for some time after the election, as parties attempt to nail down the terms of their respective alliances,” says Kriek.

What to expect from property
Currently, it’s still a buyer’s market for property and it definitely won’t turn into a seller’s market until after the election and a rate cut. Until then, we can expect that property price growth will remain low. Once the election outcome is known, and provided we have avoided worst-case scenarios, and the rate cut is at hand, we can expect pent-up demand for property to spill into the market and significantly increase demand.

In addition, weak economic growth means sellers who can afford to wait should indeed wait until spring or summer to see if they can fetch a good price for their property relative to the market. Winter is historically not a great time for selling homes anyway.

Despite the general modd brought on by politics and the interest rate cycle, the market in the Western Cape remains buoyant and there are signs of buyers returning in earnest to areas like southern Gauteng and areas eastof Pretoria.

The smart money of property investors also remains in the market, signalling that opportunities exist. Along with low property price growth, this means that astute buyers can still pick up bargains while others hesitate.

“If you want to buy, buy now and don’t be put off by sentiment-driven hesitance that currently prevails in the market election sentiment,” advises Kriek. “In the South African property property market, due to structural factors, what goes down must eventually come up.”

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