Propery Investors To Face Tough Economic Condition in South Africa

March 1
4:42 AM 2016

This year could be a hard time for property investors in South Africa as the country's economy is currently experiencing crisis, resulting to slower rate of property investment.

Based on the information from SA Commercial , South Africa is facing economic recession. It is possible that the property investment rate in South Africa could be in a junk status. Economists are now concerned that SA's economy will barely grow this year.

The International Monetary Fund recently forecast 0.7% growth for 2016 which will make its operating environments highly difficult for property developers and even owners, reports Ortneil Kutama, SA Commercial Prop News Media Director.

Apparently, the property sector got the biggest impact as a result of the economic recession in South Africa that led to restrict investor shares from the said sector and move to offshore investments.

As reported by BBC news, South Africa's GDP growth fell from 1.7% to 0.9%. As the result, there was 25% unemployment and widespread poverty. This fact was also confirmed by the Finance Minister, Pravin Gordhan, who admitted  "There is no doubt about the fact that we are in crisis". 

To solve this, the Finance Minister tried to save the government spending. The solutions he brought are freezing civil service jobs and rising tax. These tax increase affects property sales, fuel, sugary drinks, alcohol, tobacco and capital gains. The tax hikes should help raise an additional 18.1 billion rand in revenue in the year 2016 and 2017. Therefore, it would be hard for property investors to expand their investments.

According to The Africa Report, Pravin Gordhan is trying to overcome this crisis, but accepting loans from other countries is not the best solution. "We cannot spend money we do not have. We cannot borrow beyond our ability to repay. Until we can ignite growth and generate more revenue, we have to be tough on ourselves" told the Finance Minister to the parliament.

Meanwhile an analysis on Pravin's solution said that his proposal is a good option. London-based EMEA analyst, Rajiev Rajkumar said that lower projections for the budget deficit are a plus. But he also stated that the "Country's weak economy could be cause for further ratings downgrades to junk status."

The economic recession reflects the future of property investment in South Africa. The higher tax, increase of unemployment and slower business demand should be cautioned by property investors in this country. 

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