Things to consider when looking at property during the recession
The announcement of the technical recession in September came as another major blow to average South Africans, and if you were considering property for sale in Vereeniging, then we take a look at how this could impact on the property market.
September was another tough month in South Africa, and if you were looking at property for sale in Vereeniging, then there are some things that you need to consider.
Statistics South Africa revealed during September that the country had moved into a technical recession, and considering the fuel price hikes, increased living expenses and other global pressures, it put the average South African in a difficult spot.
Essentially, a technical recession happens after the country suffers two or more quarters of negative growth. The Treasury in South Africa had put out a forecast of 1.5% economic growth during 2018, but after contractions of 0.7% in the second quarter, after a 2.6% contraction in the first quarter, the economy was shrinking instead of growing.
This followed the VAT increase earlier this year and has seen consumers having to cut back on spending, while households were having to spend less on transport, food, clothing and similar items.
The property market also feels the pinch. The weaker rand results in more financial pressure and as such, it makes it more difficult for buyers to enter the market, especially first-time buyers.
The recession also creates the potential for negative home equity. This is essentially when the market value of property drops below the outstanding home loan amount. This is fairly unusual in South Africa, but it is important to remember that growth has been slow across the boards, with the exception of just a few areas.
So if you are planning on purchasing property now, you need to carefully assess your own personal financial situation, and be aware of the risks that could come with cost increases due to the recession.
