Although it was fairly low-key, the mini-budget speech delivered by Finance Minister Pravin Gordhan this week should have the effect of increasing consumer and business confidence, which will be positive for the residential property market.
That’s the reaction of Berry Everitt, MD of the Chas Everitt International property group, who says: “The speech came at a good time to reassure many South African and foreign investors who have been worried by months of strikes and unrest as well as a feeling that corruption and incompetence were becoming so widespread as to soon be irreversible.
“Indeed, such concerns had already led to the downgrading of SA’s sovereign credit rating by both Moody’s Investor Services and Standard & Poors, which caused a further loss of local business confidence. However, the Minister’s statement that government spending will be capped for the next two years at least, and his commitment to the improved oversight and management of public funds should put a lot of minds at rest.”
And that, he says, will definitely benefit the property market, in which both consumer and business confidence play a major role. “Obviously corporations and small business owners who are worried about the country’s economic future don’t invest in expansion or grow their businesses to create new employment opportunities. Similarly, people who are unemployed can’t buy property, and those who are worried about their jobs or security issues in the country won’t buy homes or invest in second or third properties. In those conditions the property market will simply stagnate, no matter how low prices or interest rates are.”
Everitt says this phenomenon is very evident in the US, where the housing market – with everything in its favour – has been “holding its breath” for most of this year while everyone awaits the outcome of the presidential elections, and some clear indication of the country’s future economic direction.
“And we have noticed a similar wait-and-see stance begin to emerge in SA the past few months, as it has become increasingly evident that the ANC’s Mangaung conference will be about much more than the election of new party leaders. But I think the mini-budget speech has come in time to give the property market a boost and help us avoid stagnation, even though the Minister had to announce a drop in his growth projections for this year and a likely drop in revenue."
“Such facts are not what frighten off homebuyers, who really don’t expect our economy not to be at least somewhat affected when others around the world are taking terrible strain. What does scare them off is the feeling that no-one is steering the ship. And the Minister has made it plain this week that this is not so. There is still someone at the helm who knows what needs to be done.”