A 3.2 percent decline registered for the first three months of the year, as announced by Statistics SA last week, is the largest quarterly drop in a decade. Such shrinkage is double what was anticipated by commentators who are now suggesting that the SA Reserve Bank and the National Treasury will need to readjust their 2019 GDP growth expectations from some 1.3% to somewhere around 0.5%.
The Stats SA announcement followed a day after the International Monetary Fund indicated that growth outlook for the nation is dependent on the pace of reforms inclusive of governance, increasing labour market flexibility, encouragement of competition and reductions in the cost of doing business.
This is a hard task for the recently elected government that have inherited a legacy of poor economic management with consumers now feeling the pinch caused by frequent fuel price hikes, the additional 1% VAT, increasing high unemployment, and the Eskom crisis.
Read more: 2019 is the year for first time home buyers
We asked residential property market stakeholders to share their thoughts on the status quo and the potential impacts on the sector.
- How can the residential market sustain in such a negative economy, and what are the positives?
Adrian Goslett, Regional Director & CEO of RE/MAX of Southern Africa:
We are merely feeling the consequence of the culmination of poor decisions and mismanagement of resources, both human and material, over the past few years. To have expected any sort of immediate recovery would have been overly optimistic. However, time and time again, the South African property market has proven to be resilient. I have no doubt that the real estate market will bounce back following this period of economic decline.
Dr Andrew Golding, Chief Executive of the Pam Golding Property group:
The SA housing market remains underpinned by the young population who continue to enter the market – i.e. we have growing numbers of people who need somewhere to live whether bought or rented. This is an important source of demand for the market – and we still see its impact in the lower end, where prices continue to rise.
Myles Wakefield, CEO of Wakefields Real Estate, Kwazulu-Natal:
Our property market loves a healthy GDP. This shocking one – albeit a backward-looking statistic - will affect sentiment, which always impacts negatively on the market. Having said that, during the period covered by this statistic, property sold, and will continue to do so, but prices will continue to be under pressure. Two factors help, but won’t heal: the banks’ very high home loan approval ratio, and the likelihood of a rate cut.
Rudi Botha, CEO of BetterBond:
Our residential market is actually in better shape at the moment than many others which have seen rapid price growth over the past few years and are now experiencing bubble conditions. Low price growth rates over the past four years means that there is excellent value to be had and we are hopeful that this will encourage a steady increase in purchasing as this year progresses.
Read more: Home buyers should make the most of the stable repo rate
- Do you believe there will be any growth improvement during the balance of the year?
Adrian Goslett, Regional Director & CEO of RE/MAX of Southern Africa:
The trajectory will improve if our leaders follow through on the promises made, starting by bringing the corrupt to book and making sound policy decisions that positively impact both local and foreign sentiment. This, however, will take time and one can realistically only expect the results of these decisions to be felt late this year if not early next year.
Rudi Botha, CEO of BetterBond:
As far as the real estate sector is concerned, a more positive sentiment has definitely been evident in the second quarter, and especially since the elections. This has been evidenced by a steady increase in the number of home loan applications linked to offers to purchase.
- What do you believe are the priorities that the new government MUST focus on, and will likely be addressed in SONA on 20 June 2019?
Adrian Goslett, Regional Director & CEO of RE/MAX of Southern Africa:
I would like to see government focus more on creating 1-million entrepreneurs than on creating 5-million jobs by reducing the red tape and constraints around being a small business owner to encourage growth via tax relief. If each entrepreneur employs three or four people, not only do you create multiple jobs in the process, but you also start building a sustainable economy that can stand on its own two feet.
Myles Wakefield, CEO of Wakefields Real Estate, Kwazulu-Natal:
It is imperative that decisive action is taken over the finances and functioning of SOEs, crucially of course, Eskom. The over-inflated public sector needs immediate attention, labour laws need to be put under the microscope, and the landscape of constant policy uncertainty has to be stabilised. The overwhelming sense that the government is playing to the crowd rather than for the people, needs close scrutiny and swift attention.
Gerhard Kotzé, MD of the RealNet estate agency group
We hope that the SONA will be more of a progress report than a statement of intent. At the same time, both local and international investors need to be reassured when it comes to matters such as the independence of the Reserve Bank, labour law reform and land redistribution. The reality is that SA is not going to achieve a turnaround and start to show better levels of economic growth without their support.
Rudi Botha, CEO of BetterBond
SONA will be an opportunity for the President to reassure investors and the ratings agencies that the government is taking action to fix the SOEs that have been such a drain on SA’s resources, and is also committed to maintaining the independence of the Reserve Bank and dealing with land reform in a structured and responsible fashion. Confidence is the real key to getting money to flow into the economy and having the means to fund the employment and development projects that have been envisaged.
See more: SONA bodes well for property market
- What would you like to see changing and/or your read on the market?
Dr Andrew Golding, Chief Executive of the Pam Golding Property group
Weaker growth is raising the prospect of a small interest rate cut, possibly as soon as the July MPC meeting which may provide a confidence boost for the property market.
Myles Wakefield, CEO of Wakefields Real Estate, Kwazulu-Natal:
This GDP is essentially the government’s report card, and they are failing. We need to start taking the steps required to move towards a more capitalist economy. For us to see growth, we need to be competing vigorously with other countries. Increasingly, as seen by the weakest performing sectors in our economy, we are failing to capitalise on what should be our strengths. We need to change the national focus from politics and politicking, to GDP growth. That is the golden ticket to job creation - and the resultant reduction in crime - increased investment, and building confidence in the economy and our structures.
Gerhard Kotzé, MD of the RealNet estate agency group:
Consumers and investors are urgently looking for less talk and more action and tangible results when it comes to addressing unemployment, the functionality of the SOEs and the infrastructure backlogs that are hindering the delivery of basic services.
Adrian Goslett, Regional Director & CEO of RE/MAX of Southern Africa:
The residential market would benefit from land reform policies that are transparent, fair and equitable. Government also needs to appoint competent individuals in key leadership positions within SOEs that can be held accountable for their actions and/or inaction. Those that have been plundering the country’s coffers also need to be forced to pay for their transgressions. If these things come to pass, I’m sure we will see recovery in the housing market.
