Why a stronger rand is good news for property in South Africa

 ·22 Jun 2024

The rand has strengthened substantially this year, which should be good news for house price inflation.

South Africa is entering a new political era, with the ANC losing its majority in parliament for the first time since it started contesting national elections in 1994.

The party has since formed a Government of National Unity (GNU) with several other parties, including the DA, IFP, Good, PA, FF Plus and PAC.

The markets have responded positively to the news, with the rand breaking through the R18/$ mark for the first time since August 2023.

John Herbst, CEO of Fine & Country Sub-Saharan Africa (SSA), said that currency strength intersects with domestic house price inflation.

Currency strength plays a major role in effective economic robustness and global confidence, affecting the real estate landscape.

A stronger domestic currency boosts purchasing power, which entices foreign investment and drives demand for high-end properties.

However, it can also pose challenges by making exports less competitive and potentially cool economic growth.

“In the context of real estate, a strengthening currency often correlates with increased house price inflation,” said Fine & Country.

“This phenomenon stems from heightened investor confidence, bolstered consumer spending, and decreased borrowing costs – factors that collectively propel property prices upwards.”

That said, foresight is crucial, as a strengthening currency offers enhanced equity and investment potential.

A strengthening currency may offer enhanced equity and investment potential, but prudence in home loan management remains crucial amid fluctuating interest rates.

Investors should thus focus on asset diversification and adaptive investment strategies.

Read: South Africa riding high – but it all comes down to Ramaphosa’s next call

Show comments
Subscribe to our daily newsletter