The property market is indirectly linked to the fortunes of the economy and, therefore, if one has a pessimistic outlook for South Africa's economy, then one must also have the same view on property, according to property economist Erwin Rode, CEO of Rode and Associates.
"The most important fact to consider in looking to the future of SA's economy is that it is on its knees, not only due to the Covid-19 pandemic, but also due to structural factors and the fiscal risk. This means there is not going to be a sudden miraculous recovery. Furthermore, the scenario is now made worse by the current unrest in parts of the country. A long period to recover lies ahead of us," Rode told Fin24 on Friday.
Regarding residential property, Rode says prices are driven by two important factors, namely, growth in the economy and the level of interest rates. In SA, economic growth already looks bleak. As for interest rates, inflation has already started to pick up on other parts of the world, increasing the likelihood of interest rate hikes within the next year. That is why, according to Rode, SA will also be forced to do the same.