The businesses that can’t wait for the elections to be over in South Africa
South Africa’s property sector is ready for the 2024 elections to be done with, expecting a major rebound in business and trading once the dust has settled.
According to High Street Auctions director Greg Dart, the uncertainty that has hit the country’s property market ahead of the elections is not uncommon and not cause for concern, saying that history has shown this particular market bounces back “fast” than others after a national vote.
He said there is a rhythm to election cycles and it is well known to the global property sector, which typically adapts.
“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’,” he said.
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
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, he said.
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.
Dart said real estate investors were also jittery ahead of the US election in 2020, but afterwards the market rebounded strongly, driven by low interest rates and the economic stimulus measures that were anticipated with the new administration.
Both the number of transactions and the value of property rose significantly in the following months.
“The South African economy has suffered in recent years, in large part due to bad policies, a lack of will to follow through, corruption and grid instability.
“But through all of this, property has remained a stable long-term investment. That won’t change anytime soon,” he said.
“Investors need to understand election cycles, and know that the following the elections we will be seeing a rebound in the market – especially if the results are perceived to bring economic stability or favourable policy changes.”
He added that between the rebound and the expected drop in interest rates—albeit slow and delayed—the prospects for the property market in South Africa are more positive than has been seen for some time.
“We have already seen some interesting pre-election confidence in an outcome that may be investor-friendly. This year the rand is one of only five emerging market currencies to have strengthened.
“In addition, South African bonds absorbed the most cash in April since 2019 when Bloomberg started tracking the data, and the trend is continuing in May. Recently stocks have also been at a 15-month high.”
While analysts and investors have cautioned about potential outcomes to the 2024 election that could be damaging—especially around ANC coalitions with the EFF or other anti-business parties—the tone has shifted to expectations of stability.
Markets now generally expect the ANC to fall marginally fall below 50% of the vote and entering into coalitions with smaller parties, giving some degree of maintaining the status quo and avoiding any shocks.
South Africans will head to voting booths across the country on Wedensday, 29 May.
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