Heightened socio-political uncertainty has not yet had a noticeable effect on the residential property market, First National Bank (FNB) said on Thursday.
“There appears to be some heightened investor concern regarding South Africa's future stability and prosperity,” the bank said in a statement, referring to widespread strikes, service delivery protests, and rating downgrades.
Higher costs of borrowing for South Africa - resulting from rating downgrades or heightened risk perceptions - had the potential to restrict economic growth.
Rand pressure could also increase imported prices, pushing up inflation, which in turn would eat into household disposable income.
It also raised the risk of higher interest rates. All of this would potentially impact on the residential market in an indirect way. However, direct impacts were also possible.
Changes in sentiment prompting more local home owners to consider emigration, and changes in confidence for potential foreign buyers could impact the market directly.
FNB's third quarter estate agent survey had found little evidence of such direct impacts, the bank said.
The percentage of sellers who put homes on the market in order to emigrate dropped from four percent of total sellers in the second quarter to three percent in the third quarter.
This was the lowest emigration selling percentage estimated since 2008.
Based on a two-quarter moving average, the third quarter did show foreign buyers declined to only three percent of residential property, following a prior improvement to around four percent.
“As yet, though, we would not draw any hard and fast conclusions based on one quarter's data, but it is something to watch,” FNB said.
Weak global economic conditions probably masked a change in sentiment towards South Africa.
Job prospects in traditionally popular emigration destinations were far from rosy.
In addition, times were tough in economies such as Europe and the United Kingdom, which could put pressure on foreign buying.
“In short, therefore, with regard to emigration 1/8and 3/8 selling of local property we do not appear to be seeing any negative impact from recently heightened domestic tensions,” FNB said.
But in better economic times, the negative impact might have been different.
Foreign buyers from African countries did not appear to have been affected by recent tensions.
This group had increased to 21 percent of total foreign buyers for the previous two quarters.
“This continues an upward trend in this percentage from a low of 8.5 percent back in the 3rd quarter of 2010,” FNB said.
South Africa was likely to see further increase in this percentage as Africa's economic fortunes continued to improve. - Sapa