Concerns about the political and economic climate in South Africa, and the risk of land expropriation, are preventing people from buying investment properties in the residential market, according to the latest Absa Homeowner Sentiment index.
Talk of land expropriation without compensation in South African continues to create unease among local and foreign residents and investors alike. Many of those who live here and have the means or the passports to relocate are doing so- or at least seriously considering it.
Investment property is bought for the purpose of earning rental and capital appreciation. In other words, it is not occupied by the owner.
The index, which covers the third quarter of this year, shows a decline in confidence in the investment property sub-sector. About 90% of respondents are concerned about the political and economic instability in the country.
“A significant large partition of investors with a negative sentiment is concerned about South Africa’s future (87%), and that land expropriation without compensation could make property an uncertain investment (62%),” states the index report.
Government has not been clear on how land expropriation will be implemented and this has had an effect on local markets. However, it it’s not all doom and gloom and could very well suggest that potential homeowners consider that the cup is half full rather than half empty. It is a buyer’s market after all.
Banks are continuing to lend aggressively, signalling that they are confident that land reform will be done in a matter that will not compromise South Africa’s residential property market.
Apart from the decline in confidence in the investment property sub-sector, the survey shows that confidence in the South African property market improved to 82%in the third quarter- four percentage points higher than in the second quarter and at the same level as a year ago. This is despite interest rate hikes making it more expensive to buy property.
A positive change in sentiment is mainly from first-time homeowners or lessees.
“Although there is a strong positive sentiment in the property market, there are indications of potential buyers delaying property purchasing decisions,” states the index report.
Source: Ooba home loans, Ground News, News24, image from Twitter: @RantsSouth
