How land reform is impacting South Africans looking to buy a home

After declining in the first quarter of 2018 from late last year, positive sentiment regarding conditions in the South African residential property market dropped further in the second quarter of the year.

This is according to the latest Absa Homeowner Sentiment Index (HSI), which measures sentiments of South African consumers with regard to various aspects of the residential property market.

The index is based on a sample of urban consumers which are representative of current demographic survey information.

“The overall national HSI score, which reflects the percentage of survey respondents with positive sentiment regarding residential property market conditions in the country, declined to 73% in the second quarter of 2018 from 75% in the first quarter and 82% in the fourth quarter of 2017,” Absa said.

“The main positive and negative factors mentioned by survey respondents were as follows in the second quarter of the year (percentage of respondents in brackets)”:

  • Positive factors: Property is a secure asset (36%) and still increases in value (22%).
  • Negative factors: The land reform issue causes uncertainty regarding property as an investment (25%), with some political uncertainty still prevailing (25%).

Investing in property

“The second quarter of the year saw the positive sentiment regarding property as an investment declining to 77% from 81% in the first quarter and 83% in the fourth quarter of last year,” Absa said.

“The issue of land reform was indicated by 20% of survey respondents as the main negative reason, which contributed to the abovementioned further drop in this sub-index.”

Reasons in favour of property investment were as follows in the second quarter of the year:

  • Property remains a good investment (29%);
  • Property still accumulates in value (15%);
  • There is a demand for rental property (13%);

Additionally, positive property-buying sentiment dropped to 61% in the second quarter of 2018 from 70% in the first quarter, which was much in line with sentiment back in the first quarter of last year.

The lower second-quarter buying sentiment was largely related to tough economic conditions, as indicated by most survey respondents as the main negative factor.

However, the main reasons why the majority of respondents were still in favour of buying property were as follows:

  • Property still increases in value and is a good investment (35%);
  • Property prices are relatively low and there are bargains in the market (27%);
  • Interest rates are low (7%);

Read: How much you need to save each month for a R100,000 home loan deposit

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