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Johannesburg - ANC Youth League leader Julius Malema's controversial utterances do not bode well for the country's residential property sector.
First National Bank's property market analytics division said on Monday Malema is placing the sector at risk by boosting emigration selling.
"Sentiment appears positive in the residential market," said FNB Home Loans strategist John Loos in a report. "But recent political developments in the form of the 'hate speech' issues rearing its ugly head pose risks for sentiment."
According to Loos, such events can lead to a renewed rise in the prominence of emigration selling.
An emigration selling surge in 2008 (during the Eskom crisis and after the ANC's Polokwane congress in 2007) saw an oversupply of property on the market at the time.
"The reality is that events that stir up a lot of hype do have the potential to dampen sentiment in some of the country's major residential markets," said Loos.
The report also said that despite positive economic data released in March, households are still struggling with debt.
Mortgage rates are at their lowest level in three decades as the South African Reserve Bank (Sarb) cut the interest rate to 6.5% in Match. February's Consumer Price Inflation figure had dropped, and the Sarb's leading business indicator for January showed further economic growth is likely in the short term.
Loos said the economic data releases were "the shining light" for property in March.
"[It's] all very positive for residential property demand," he said.
However, the Sarb Quarterly Bulletin showed household finances are still in a state of despair. Households' debt to disposable income ratio rose again from 78.4% to 79.8% in the fourth quarter of 2009.
According to Loos, the high debt levels of households imply there's little room to absorb any negative events such as rate hikes.
"Current high levels of debt-service ratio, at a time when interest rates are probably at or near their low point, continue to place the housing sector and thus the housing market at risk," said Loos.
- Fin24.com