If you are looking to sell your overseas property in South Africa fast, you would be well aware of the economic crisis in the country. South Africa has three finance ministers in a week towards the end of 2021, which indicates how the government has lost its grip on the economy. The South African Rand has plunged by over 30 percent against the USD. This in turn has seen a flurry of overseas investors snap up properties across the country as they can buy at bargain prices due to the low rand value.
The stock market has been in a decline in South Africa for over 3 years now, because of the constant political meddling in the running of the economy. Now, there is a new finance minister in South Africa, a renowned economist, Pravin Gordhan, who held the office.
Mr. Gordhan understands the South African economy better than most people, and if anyone can get it back on track, it would be him. The stock markets reacted positively to him being given the position, and the Rand went up against the USD by 5 percent. But Mr. Gordhan knows that he has a tough job ahead.
The outlook for the South African economy continues to be grim. The biggest problem is the slump in the commodity prices and the slowdown in China, which has hit South Africa very hard. Anglo American, one of the biggest companies in South Africa, recently announced that it would be cutting down on 85,000 jobs as a part of its restructuring efforts.
Job losses are common in the mining industry. Mining accounts for 50 percent of South Africa’s exports. Because of the slump in commodity prices, we expect the South African economy to grow by just 2 percent this year. That’s really pretty bad for a country which was at one point one of the fastest growing economies in the world.
Rising US rates have dampened market sentiment in South Africa as it pushes up the value of the USD against the South Africa Rand, which further devalues South Africa’s national currency. Unemployment is as high as 25 percent, inflation is 5.6 percent and the budget deficit is 4 percent. The credit rating agency Standard & Poor has warned about downgrading South Africa’s credit to junk status.
David Rees, senior market economist at Capital Economics says, “The dire fiscal position, coupled with high inflation and a fragile balance of payments position, all point to a further depreciation of the Rand against the dollar ”.
So what does this mean for the residential property market in South Africa?
George Radford, who heads the global property investment firm IP Global, says that the property market in the country is still fairly stable. “With a volatile start to the year for many global markets and a mixed economic outlook for 2022, the property investment industry remains stable.”
The property market in South Africa has always outperformed the national economy. However, this cannot be so for long, as a healthy property market requires a good economy. Property will continue to be an attractive investment for South Africans, but confidence is down because of the decline in the economy.
The Chairman of Seeff Properties, Samuel Seeff says that things are going to get tougher in South Africa’s property market, especially for first-time homebuyers, who will find it hard to get credit. He says: “Basic living and property costs will climb considerably, as will mortgage loan costs. Buyers will be looking very closely at prices and will be driving a hard bargain as they know that the market is getting tougher.”
“The average price growth will deteriorate further and we may even see negative equity growth when we adjust for inflation. For now though, we are still sitting with a fairly healthy housing market, packed with plenty of demand,” Mr. Seeff added. Overseas investors are now flooding the market because of the low price of the Rand there has never been a better time to sell property in south africa internationally