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The tragic events of the July uprisings have had a dramatic impact on the sentiment of homeowners around their property decisions, reveals Absa's Homeowner Sentiment Index Q2 (HSI), which is produced four times a year and quantifies beliefs in the property market. “The HSI Q2 results are a sad reflection of how acts of violence and destruction to property can change a positive curve into a negative one very quickly,” says Absa's Muzi Zim, Manager of Analytics at Absa Home Loans.
4% down in overall Q2 sentiment from HSI Q1 is one of the negatives that Zim is referring to. “The reasons given by respondents, who are not confident about the South African property market, cited: concerns around economic and political instability, which is up 25%, compared to Q1; high levels of crime and unemployment, up 28% compared to Q1; and land expropriation without compensation remains a concern, making property an uncertain investment.”
When comparing quarter on quarter, the biggest reduction was the sentiment towards investing in property. Sentiment towards property investment was down by 9% on Q1 2021, followed by 8% down on Q2 2019.
“Sentiment towards investing in property has generally been the highest out of all the indices that we look at, having briefly declined to an all-time low of 64% in Q1 2020. This was during a time of great uncertainty before the country went into hard lockdown at the end of March 2020. This sentiment, however, made a quick recovery to pre-lockdown levels by Q3 2020, but it has taken a knock again, seemingly due to the violence and destruction to property that was seen in July 2021,” says Zim.
He also confirms that the only sentiment that did not see a reduction from the previous quarter was that of selling property. Here respondents continue in their belief that achieving a good price for a property is still possible … “although, few respondents mentioned this as a driver of change in attitudes,” confirms Zim. This leads into a newly emerging theme, that respondents - the majority of which are between 25 and 44 years, 47% of which are female - believe that this still is a good time to sell property, particularly for those who are preparing to upgrade.
Although the overall sentiment is down, first-time homeowners and investors remain upbeat about the property market, with these two categories showing an increase in sentiment Q2 vs Q1. These segments were, however, overwhelmed by the non-first time homeowner and renter segments, which resulted in an overall reduction in sentiment.
“The gap between buying and selling sentiment has also reduced, given the reduction in buying sentiment (rather than an increase in selling sentiment),” says Zim. “This was seen across all respondent segments, except that of those who own investment properties, which shows an increase in buying sentiment and reduction in selling sentiment. This has resulted in an enabling environment for property investors, one where they are bullish while other players are bearish.”
This off play between bull and bear is consequential of economic and political uncertainty, which Zim confirms have been consistent themes in the HSI, which is largely driven by different socio-economic events and cycles. 'Since the beginning of measurement of the HSI, there have been long periods of low GDP growth, land reform uncertainty, and strained government finances. Currently, we also have to include the Covid-19 pandemic and its lockdowns, as well as the recent acts of violence and destruction.
The vaccine rollout may also have an impact, but nothing is clear in the responses yet. Zim suspects this has more to do with the property industry having been able to put processes in place to support buying/selling activity during the various lockdown phases, and so “it remains largely unknown how the vaccine will impact our socio-economic outlook given all the other factors that have a bearing on our country's overall economic wellbeing,” he says.
What is strongly confirmed, however, is that overall house prices have seen improved growth prospects, directly attributable to the multiple interest rate cuts of 2020. “The after-effects of these are still in play. While this initially gave rise to an increase in sentiment towards selling property, the slowdown now is likely because of the newly-found confidence in property's ability to increase in value over time - and that ultimately is what one expects from this asset class,” concludes Zim.
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