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Does a slump in the South African housing market and falling GDP spell trouble ahead? 19 October 2016, 13:20
Whenever an economy is in trouble there are two key indicators which market analysts look at. One would be the housing market because when people don’t have money, new homes one of the first expenditures to go. Secondly, a falling GDP signals trouble in the economy and is the more obvious of the two, but when combined, many people begin worrying.
After the recession of 2009, everyone is still concerned that the nation has not really worked its way out again and global markets, many of which are South Africa’s largest trade partners, are also experiencing times of uncertainty. Does this spell trouble ahead? It may be too early to tell but with the release of the latest statistics in the housing market, many are beginning to feel a little uneasy. Housing dips for the fourth straight quarter
One of the main concerns isn’t that housing has dipped as indicated by the statistics released for Q2 of this year, but rather that it’s the 4th straight quarter to have done so. Apartments in the medium size range fell by nearly 1/3 of one percent in the quarter, as per the Global Property Guide’s assessment of the property market in South Africa. Although this is where a home auction from a foreclosure would help a new family find a house, it spells doom for the family that lost the home, and again, is a cause for great concern if the pattern continues. Other factors giving rise to concern
Not only is there a definite pattern in the 4th consecutive quarter to see a drop in the housing market, but the economy overall remains weak. The rand continues to lose value on the world market, investor confidence is beginning to fail and of course these three combined give rise to serious concerns about the economy. Whilst the economy did rise by a slight increase of 0.40% in the final quarter of last year, the first quarter of this year saw a fall of 1.2%, which doesn’t do much to dispel concerns. Too many signals to ignore
Coupled with a slower than expected growth in the GDP of just over half of one percent, concerns are beginning to escalate. On top of all these worries, the economy has slowed to 1.3% year on year for 2015, which is the slowest rate since South Africa emerged from the global recession. With a slowing economy, a falling house market and a slowed GDP, the warning signs are in the air. Market analysts and economists are saying there are now too many signs to ignore so a careful eye must be kept on the economy going forward.
Under normal circumstances, a slight dip in the housing market wouldn’t of itself give rise to panic, but with other factors in place, concern is growing. It will bear some watching over the next few quarters to see a definite pattern, but the clues are beginning to fall into place, so this is a time when house buyers are reluctant to buy and investors are on hold.
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