Analyzing the effects of July's civil unrest and the property market

During July, South Africa was hit with a level of violence that had not been experienced since the apartheid era. With the estimated damage reported to be over R50 billion and tensions higher than they have been before, we take a look at what ultimately led to this situation and what effect it will have on the South African economy and property market moving forward.

With a more informed analysis of the property market over a month and a half of recovery time, assessing the damage and impact to the economy is the most important step to moving towards a positive solution.

Analyzing the long term property market outcomes

In essence, the full impact of the civil unrest has yet to be realised. However, various property experts in the field from real estate CEOs to economists have weighed in to achieve a wider understanding of the unique situation the property sphere has found itself in.

With forecasts suggesting that most of the impact will be felt in the latter stages of Q3 2021 with the South African Reserve Bank's initial calculations of 4.2% increase for the year being revised downwards. On the surface, one might consider such news alarming but some experts in the field are more optimistic.

KwaZulu Natal & Gauteng

Key areas within Gautend and much of KwaZulu Natal have been uniquely affected by the unrest with most of the looting being concentrated in these areas. Hundreds of businesses were either permanently closed due to looting or shut down as a precaution. Regardless, the effect on the local economy of KZN, which sits in the region of R20 Billion, contributes a massive chunk to overall national estimates.

The knock-off effect of the violence has also had an impact on private property prices in key areas in KwaZulu Natal and Gauteng. Before the outbreak, the property share in the KZN region was seeing quite the recovery from the pandemic, mostly influenced by semigration to coastal areas thanks to standard of living changes that naturally formed after lockdown.

However, buyers still working through the semigration process are now quickly fast-pacing their plans to head to more stable regions such as the Western Cape.

The effects of Semigration

Short-term buyers are now thinking twice about moving to affected areas, especially KZN where most of the violence was concentrated. However, as time goes by, the medium to long term effect will drop off and prices will likely stabilise. The fact of the matter is, the property market remains far more resilient than most buyers realise.

Whether the effects of semigration or the unrest plays a key role in the overall market share, the fact remains that the seller market is entirely depressed. As it stands there are not as many buyers as sellers regardless of the circumstances and experts speculate that the market shift between sellers and buyers in these areas will likely tip even more out of balance.

The commercial sector

Some experts in real estate believe that businesses in many sectors were already suffering from severe losses before the unrest in large part due to lockdown. This also includes reduced foreign interest in property due to a variety of factors both legislative and economic.

Alongside this, inept government handling of the overall situation has further deteriorated confidence with some even claiming that recovery seems nigh impossible.

However, other experts have a more positive outlook and conclude that the effects of the unrest will have short-term consequences. They believe that when you take a closer look at the overall direction the economy, that despite lockdown and shaky governing, the general trend is positive and showcases a far more resilient property market than we may have anticipated.

Looking towards a positive future

Echoing this sentiment are economists who believe the impact is heavily based on how quickly the violence is quelled and order resumed. Unlike the infamous riots in the United States sparked off by the killing of George Floyde in May of 2020, the unrest in SA did not draw out over months of civil unrest.

This outcome would likely have had a far more disastrous effect on South Africa but despite a heavy toll on the economy, property values do not drop overnight. Everything within this sphere depends on the consistent level of supply and demand following the aftermath of the riots. South Africans are hardy and are already focused on rebuilding the economy.

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