FNB said home selling because of emigration increased to an estimated 7.4percent of total selling in the fourth quarter of last year from 7.3percent in the previous quarter. Expressed as a percentage of total home selling, emigration-related selling reached its lowest level in the history of FNB’s estate agent survey at an estimated 2percent in the fourth quarter of 2013 following the introduction of this question to the survey in early 2008. John Loos, a household and property sector analyst at FNB, said they would be looking for signs of a reversal in the rising trend in emigration-related home selling this year.
“The rand appears to reflect significantly improved sentiment and expectations among investors and a stronger rand can also help boost sentiment,” he said.
Loos added that the SA Reserve Bank and OECD Leading Business Cycle indicators had been rising in recent times, which pointed to a mildly improved economic performance in the near term.
He said investors appeared to have interpreted a change in the governing party’s leadership at its December elective conference as raising the possibility of future positive economic policy changes, partly resulting in the rally in the value of the rand.
“We would expect this improved sentiment to lead to some near-term decline in the estimated emigration-related home-selling percentage,” he said. He said emigration-related selling was arguably a good confidence indicator in regard to how middle- and high-income households perceived the longer-term economic and financial future of the country, but also appeared to have a strong cyclical component to it. Loos said this estimated percentage peaked at 20percent in the third quarter of 2008 in the middle of a sharp domestic recession and then faded away to 2percent in late 2013 in an apparent lagged response to an economic recovery from 2009 until about 2011.
FNB said estimated home buying by foreigners in South Africa as a percentage of total home buying had dropped to 3.96percent in the two quarters up to and including the fourth quarter of last year, from 4.1percent in the third quarter, and the 5.8percent high reached in the fourth quarter of 2016. The bank was reluctant to conclude that drought conditions in Cape Town had a significant role in the decline in estimated foreigner home buying, particularly as the national estimate had also declined.
It suspected weak sentiment dominant among the investor community, the business community and consumers towards South Africa last year was a more likely factor.
The estimated percentage of foreign home buying in Cape Town declined to 5.5percent of total buying in the fourth quarter of last year from 8.9percent for the two quarters up to the first quarter of last year.
Loos said the weak sentiment was influenced by a number of factors, including a weakened rand, weak economic performance and a lack of political and policy direction.