In our post-Zuma economy, South Africa looked set to remain in a uniquely precarious position for some time, compounded by a contentious wage bill cut intended to curb public sector expenditure; load-shedding - which has effectively become another form of 'value-added tax' on consumers, and increasing debt burden. With the new threat to the economy that COVID-19 poses, our Finance Minister’s thoughtful, conservative Budget looks set to be obliterated, seemingly overnight.
The ongoing emerging markets selloff brought on by the failure in confidence on the back of the COVID-19 fallout leaves SA with nowhere to hide - but conditions are working to bring about a rare silver lining.
Jacques van Embden, Managing Director at Blok property development firm says, “We are living in fearful times, and consumers are understandably uncertain over what the future may hold. However, if there is one thing history has taught us, it is that the economy will eventually recover; and that property is one such asset class that shows stability over the long term.”
While the famous Warren Buffet quote related to market investment timing, ‘“Be fearful when others are greedy, and be greedy only when others are fearful” may seem somewhat exploitative given the current context, the experience of past economic crisis does reveal this rare silver lining. Current SA conditions favour those looking to enter the property market even more - and not just the top 1%.
“Although times are undoubtedly very tough with the economic life of the country crippled by the Coronavirus outbreak, we are now entering a phase in which it will be easier to finance the purchase of a home, particularly if you are a First Time Home Buyer or buying in the lower price categories,” says Rowan Alexander, Director of Alexander Swart Property.
In a recent article, a well-known bond company agreed that property was far less volatile than the stock market, maintaining a high tangible asset value. “People will still need accommodation, which offers a measure of security in terms of a property investment holding ground in times of turmoil.”
“What’s more, the property is an asset class with supreme resilience and a unique ability to ‘bounce back’ as market conditions improve.”
This is not to say that current conditions will have no impact.
Employment levels - currently sitting at a stark 29% in South Africa - and predicted to rise with the current pandemic - are among a host of other factors heavily influenced by the macro-environment, which have a domino effect on buyer confidence.
Yet looking to US shores, CNBC recently reported that property continues to offer investors a ‘safe haven’ in volatile climates as the risk-reward ratios remain reassuringly linear, while an article published in the Global Property Guide analysing the 2007 economic crisis, reiterated that residential property was generally far more stable than non-residential real estate, regardless of country.