As the bitter infighting between the European Union and the UK continues perhaps it is now time to look further afield for property investment? South Africa is a country which has attracted praise and criticism in equal measures, has historically been extremely volatile but does have potential for significant long-term growth. Many experts believe that it is only the political situation which is holding the country back and a growing number believe 2018 could see improvement in house prices.
Recent house price performance
The average house in South Africa is valued in the region of £66,000 although this can be relatively volatile due to the exchange rate. The South African Rand has been strong of late with some experts believing we will see an increase in interest rates in 2018. However, after subdued economic activity in recent times there is a growing belief that the economy has bottomed out.
The average house price increased by 3.7% in 2017 and 2018 is expected to post an increase in the region of 5%. Much of this is on the back of improved economic activity with economic growth forecast to improve from 0.7% in 2017 up to around 1.2% in 2018. Experts are also expecting an interest rate rise towards the end of 2018 although this is not expected to have a material impact upon the economy or the property market. There is an ongoing argument regarding the short to medium term outlook for the currency with some expecting weakness after a period of relative strength.
Political situation
As ever, the political situation in South Africa is always headline news with many surprises and shocks along the way. Recent changes in the political arena have gone down well with international investors although the credit rating agencies are split as to how the economy will perform in the short to medium term. There is a growing confidence that the political elite, as we approach the 2019 elections, will be more pro-business and pro-credit which will obviously assist the South African housing market.
Towards the end of 2018 there was a significant improvement in house prices across South Africa and while many believe it is still a “buyers’ market” there is no doubt that demand has improved of late. As ever there are many economic and social challenges across South Africa but with change in Zimbabwe perhaps there is reason to be hopeful of significant restructuring of the South African political arena in the short to medium term?
General consensus
As we touched on above, the general consensus seems to be that property prices will continue to improve in line with the trend that emerged towards the end of 2017. An improvement in house price growth from 3.7% in 2017 up to 5% would be impressive in light of the often volatile political situation although there are certainly reasons to be hopeful. It will be interesting to see how the currency performs over the next 12 months as any weakness may well prompt an increase in foreign investment.
At a time when the UK and the European Union are at loggerheads, perhaps it is time to look away from the more traditional housing markets. For decades South Africa has been put forward as a country with enormous potential but there are many challenges in realising this potential. Recent changes to the political arena in Zimbabwe may prompt calls for a more democratic system across the continent but time will tell.