Do provincial election outcomes affect property market?

Do provincial election outcomes affect property market?

Private Property South Africa
Kerry Dimmer

Over the past six months, analysts, economists, wealth management advisors and similar professional opinions have generally expressed the same sentiment; that investors are hesitant to enter the property market, or any other platform for that matter, pending the outcome of the national and provincial elections.

With much focus on the national elections, and rightly so, the provincial outcomes are just as important because ultimately the appointed Premiers’ impact and influence provincial residents almost on a daily basis. In many respects there is no other environment where one’s voice can be heard louder than on one’s own turf, and when enhanced with similarly-minded people, actions required by local government are usually more prompt.

I say usually, but the exception to the rule manifested earlier this month when angry Alexandra residents began protesting over poor service delivery. It drew the attention of President Cyril Ramaphosa who, along with the Premier of Gauteng David Makhura, visited the area in advance of the Executive Mayor of Johannesburg, Herman Mashaba, whose schedule and commitments to other similar communities did not allow him to react as quickly as the protestors would have liked. Mashaba holds office in a coalition governance between his party the Democratic Alliance, and the Economic Freedom Fighters (EFF).

One must not forget that April is the busiest month for campaigning, and it could be that Ramaphosa and Makhura, both from the ANC party, saw a campaigning opportunity in Alexandra, and from a provincial perspective may have viewed their visit as a chance to secure a stronger voting advantage.

Semigration not caused by provincial elections

The Independent Electoral Commission’s spokesperson Kate Bapela would not comment on how often a provincial election outcome results in a change of party governance. She did confirm however that “there has been a change in government in the Western Cape and KwaZulu Natal results from previous elections.”

With no absolute facts available, the question of whether semigration and home values can be directly attributed to provincial election outcomes was answered by Tony Clarke, managing director of the Rawson Property Group. “Rarely. Change, be that location or property value, is most often a result of non-delivery by regional municipalities of services and increases in crime.

“Issues such as major property price/rental increases, traffic, water issues, the collapse of local agriculture and the tourism industry are impacting, for example, on retiree’s decision to move to the Garden Route, rather than the previously-popular Western Cape. So while it might have been that provincial semigration was driven by governance in a region, it is now motivated by the lack of service delivery factors that rule our daily lives.”

It’s no different in Natal, specifically Pietermaritzburg, as Paul Campbell, director of Natal Property Consultants, explains. “Provincial semigration on the basis of voting outcomes does not play a massive role. The only time I have experienced a change in demand and value of property in Pietermartizburg that was directly related to provincial elections, was when the ANC confirmed that PMB would be the official capital city should it win the region in 2004.

“This created a sellers market because government employees began moving from Ulundi back to Pietermartizburg creating a significant demand with properties in short supply. Since then however, it is the day to day running of the basic services by the municipality that likely cause people to leave the city.”

Positive turnaround dependent on government policy

Both Clarke and Campbell concur that it is likely there will be a positive turnaround for the residential property market post-election, but this will not be immediate. The new governments – national and provincial - will need some time to clarify policies, especially that of land expropriation. “In the meantime, we can expect the increase in the number of properties available to continue to create a buyer’s market,” says Clarke, “but for now we live with buyers being cautious, and sellers over-eager.

“There is still a long hard road ahead for the average consumer, despite the possibility of more affordable properties on the horizon. Rising inflation, fuel prices, municipal rates and taxed are taking a big bite out of disposable income across the board.”

On a more positive note, banks are showing more confidence in the market, indicated by their relaxing of credit criteria. Moody’s did not downgrade South Africa’s sovereign credit rating either in March, keeping it one notch above junk status. Its decision was partly based on the Reserve Bank’s forecast for 2019 of a growth rate accelerating to 1.3 percent for this year, and 1.5 percent for next.

Property stablisation, no matter what the outcome of elections, is anticipated to continue with buyer’s remaining in the driving seat. The cyclical highs and lows of the industry will always be difficult to predict, dependent as they are on a myriad of circumstances that affect both the country and its provincial and local governance.

“Although it remains a great idea to have a foot in the property market, I don’t recommend consumers overextending themselves,” advises Clarke. “If anything, buy a little lower and use time wisely to pay off as much debt as possible while bank rates remain favourable.

“This will put home owners in a far stronger position for the future, regardless of what that future may bring.”


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