The impact of the technical recession

September signalled the start to Spring and this normally comes with a bump to everyone’s mood, but in 2018 that was certainly not the case as financial concerns amplified and even looking at property for sale in Randfontein became a concern.

The property market is one of the areas that can be affected by tough economic conditions, and with the announcement from Statistics South Africa that the country had entered a technical recession, the impact is starting to trickle through to average consumers.

If you are unsure what this means, essentially a recession is declared after the economy suffers back-to-back economic growth. This was seen during the first and second quarters of 2018, despite forecasts from the Treasury that they expected 1.5% economic growth this year. As it stands, their target is unlikely to be met and at present the economy is not growing, it is shrinking.

The weaker rand hurts the chances of buyers getting access to the required finance, and this will be especially true for those who may be looking to secure their very first home. The weaker rand adds to financial difficulties for households and the tightened budgets mean less affordability when it comes to home loans.

There is also the risk of negative home equity. Although this is not a common occurrence in South Africa, the current financial climate increases the risk of a home’s market value dipping below the current mortgage amount.

Looking further than the property market, South Africans had already been feeling strain after increased living costs, a sky-rocketing petrol price and the VAT increase that was announced earlier this year.

According to experts, the best thing to do currently is to assess your personal financial situation thoroughly before heading into the property market or taking on other long-term debt.