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Land issue makes consumers more wary about residential property

Apr 23 2018 17:11
Carin Smith

Cape Town - South African consumers have become more cautious about conditions in the local property market.

Homeowners are not as optimistic as they were at the end of 2017, according to the latest Absa Homeowner Sentiment Index (HSI) released on Monday.

The overall HSI score, based on the percentage of survey respondents displaying positive market sentiment, was down to 75% in the first quarter from 82% in the fourth quarter of 2017.

According to Jacques du Toit, property analyst at Absa Home Loans, the level of positive sentiment about conditions in the residential property market dropped in the first quarter of 2018 compared to the fourth quarter of 2017.

Sentiment is now about the same as it was a year ago.

Du Toit commented that the dip comes against the background of various factors impacting consumers financially. These include a number of indirect tax hikes announced in Budget 2018, as well as the ongoing debate about land reform.

Land issue leads to uncertainty

In fact, 28% of respondents indicated that land expropriation without compensation causes uncertainty regarding property as an investment.

About 23% of respondents said they are concerned about still prevalent political uncertainty.

On the positive side, 35% of respondents still regard property as a secure asset, while 28% regard it as still increasing in value.

Buying and selling

The sub-index on selling property increased further in the first quarter, while property-buying sentiment was unchanged at 70% in the first quarter of 2018 compared to the fourth quarter of 2017.

It is, however, still well above the low of 60% recorded in the first quarter of last year.

According to Du Toit, property market sentiment may be hampered over the short to medium term by financial strain among consumers due to higher indirect taxes, as well as uncertainty about land expropriation without compensation.

He said the combined effect of these factors will be reflected in property market activity, buying patterns, transaction volumes, property price growth and the demand for and growth in mortgage finance across most segments and geographical regions of the property market.

This is despite positive factors such as expected higher economic growth of 1.8%, compared to 1.3% in 2017; consumer price inflation expected to stay within the target range of 3% to 6%; and interest rates currently projected to remain unchanged towards year-end after being lowered in late March.

(Source: ABSA)

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absa  |  sa economy  |  property
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