The uncertainty in South Africa’s property market ahead of this pivotal general election is not a cause for concern, pre-poll economic jitters are a common thread of elections worldwide and invariably the market bounces back fast.
This according to High Street Auctions Director Greg Dart, who says there’s a rhythm to election cycles well known to the global property sector, and to which it adapts – perhaps more easily than investors in this field.
“The effects of elections on real estate markets vary, but some common trends have been observed in multiple countries, including South Africa. As an investor if you understand the cycle, it becomes less disconcerting – especially during election periods like we’re experiencing when the headlines scream words like ‘critical’, ‘pivotal’ and ‘game-changing,” Dart said.
Pre-Election Jitters
Dart said global markets almost universally demonstrate an uncertainty-driven slowdown in the months preceding a general election.
These jitters can start as much as a year before polling, and are marked by:
Reduced Transactions:
Typically, the period leading up to national elections is marked by uncertainty, causing potential buyers and sellers to adopt a wait-and-see approach. This often results in a slowdown in real estate transactions.
Price Stability or Mild Decline:
Due to reduced market activity, property prices may stabilise or experience a slight decline as demand wanes.
Investor Caution:
Investors might delay significant decisions or new projects due to potential changes in policies that could affect property taxes, regulations, and economic stability.
Post-Election Performance
Dart added that in most instances, regardless of the outcome of an election, over a period of months the real estate market will adapt and then recover in accordance with the new political realities.
Global trends indicate the most likely performance-related changes to be:
Market Rebound:
Following the resolution of political uncertainty, the real estate market often experiences a rebound. Transactions may increase as buyers and sellers who were previously hesitant, enter the market.
Policy Impact:
The specifics of the election outcome, particularly changes in government policies affecting the economy, taxation, and real estate regulations, can significantly impact market trends.
Confidence Restoration:
If the election results are perceived as stabilising or economically favourable there can be a boost in market confidence, leading to increased activity and potential price appreciation.
“What’s critical is that all South Africans make the effort to get to the polls and cast their ballots on May 29th. It’s not a public holiday; it’s the day we as the shareholders of this country have our say in its future management. We need to elect those leaders we believe will have the best economic interests of all South Africans at heart. That’s not just a nice sentiment; we only have to look at polls from two countries last year to understand how important it is to vote,” he further added.
“Voters in Argentina and Greece last year elected pro-market leaders, who introduced economic reforms that led to a significant market upswing. In Greece an MSCI gauge of Greek equities show them soaring 48% that year, while the index for Argentina rose 67% in dollar terms. This year the rand is one of only five emerging market currencies to have strengthened. We need to build on this now, and have our new leaders take a leaf from the books of the governments of Argentina and Greece,” Dart said.
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