Reasons for Negative Sentiment in SA

Property Dragged Down by Negative Sentiment

Dispatch Online’s business reporter, Siya Miti discusses how political uncertainty, the current electricity crisis and the never-ending effects of crime are “hot on the heels” of interest rate hikes as some of the key factors behind the residential property market’s literal “nosedive” in the past months.

This is according to FNB’s property barometer for the first quarter, which was released yesterday. The survey has identified these as the concerns behind emigrations and “semi-grations” (those moving to other parts of the country), which are currently influencing the residential property market.

The survey is conducted among estate agents and the three factors of politics, electricity and crime, together with the effect that neighbouring Zimbabwe’s brewing political turmoil is creating, came out ahead of the National Credit Act as the major causes of the current slump in the residential property market.

FNB’s property economist, John Loos has said that estate agents interviewed as part of the survey pointed to interest rates as the leading cause for the current situation. “We believe that rising interest rates are probably still ‘public enemy number one’ in terms of exerting pressure on the residential property market,” said Loos. “However, the gap is narrowing between the importance of interest rates and non-interest rate negative forces.”

Two of the main reasons given for selling property were relocating for security reasons and emigration. Accordingly, the barometer denotes crime as a “significant contributor” to negative sentiment. The Southern Cape Coast seems to be the most favoured location when it comes to semi-gration.

It is believed that the lifestyle offered in the region, as well as the ever-repellant forces of crime in the major metros, may increase the Southern Cape’s ability to attract the skills set necessary to sustain the high rates of economic growth that it is currently experiencing, thereby boosting the demand for residential property, this according to Loos.

Of the non-interest rate factors currently dragging the residential property market down, Loos says that, “Amongst these would feature the perceived heightened political and policy uncertainty following Polokwane, which leaves the ruling party seemingly at odds with its own government, while the Eskom debacle early in the year must have contributed. The negative effects of a global economic slowdown on the local economy must also have played a role. And the heightening Zimbabwe crisis and government’s poor handling of it has been noticed by many,” adds Loos.

The information in this article is courtesy of Siya Miti (“Negative sentiment drags property down”, Dispatch Online, 20 May 2008).

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