Loadshedding's impact on the property market

As of the first week of October, the country has experienced 1,949 hours (81 days) of national load shedding in 2022, according to the EskomSePush app. A significant increase over the 1,153 hours over 48 days in 2021 and 844 hours over 35 days in 2020.

News of indefinite loadshedding, followed by statements from Eskom's CEO, Andre de Ruyter, that it may take 18 to 24 months to return our load to stable capacity, has recently dipped South Africa's overall happiness scale to an all-time low. What can we expect moving forward, and how will this affect homeowners?

A drawn-out crisis

The news of indefinite load shedding has significantly impacted the mental state of South Africans already reeling from the strenuous cost of living increases over and above rising interest rate hikes.

Since as far back as 2008, the dark cloud of load shedding has loomed over the economy. While homeowners are continually expected to fit the bill of demanding energy price hikes, the crisis seems nowhere near a resolution.

The indirect impact on the property market

This has presented unique challenges to property owners that are, while easy to understand, exceptionally difficult to quantify. Since intermittent load shedding continues to wreak havoc on South Africa's production, the overall GDP of the country remains constrained, inadvertently trickling down to homeowners who are left with the bill. GDP and growth are further impacted by the overall cost of the energy supply. This hampers businesses' performance and raises the cost of operation. Many companies are left with reduced financial viability and are often forced to close their premises.

Poor rates in GDP growth tend to translate to weaker overall business performance and confidence. This further reduces a business's ability to expand and stifles the emergence of start-ups. Thus leading to a reduction in demand for commercial property and ultimately bleeding out to both residential and industrial spaces.

Essentially, the energy crisis affects the property market directly regarding operating costs and, on a larger scale, via the economic impact. This ultimately leads to a demand for property with inbuilt solar or inverter systems which double as a backup during load shedding but also work to reduce one's overall electricity costs.

Analysing regional market differences

A curious development to note is how the energy price affects property on a regional performance basis. Each municipality and local government has the opportunity to differentiate itself from others in terms of its proactive approach to mitigating economic loss.

An example is the City of Cape Town, where Load shedding stages are incrementally lower than in the rest of the nation. Effective city management and the procurement of power from independent sources have placed them at an advantage in attracting affluent and skilled semigrators from KZN and Gauteng.

Should local governments and municipalities in other sectors follow the same model, they will benefit from creating more divergent economies and stimulating property growth in their regions. This, in turn, drives a more robust property market thanks to a more reliable power supply. Standing in strong contrast to those who leave their fate in the hands of Eskom. 

If you need more advice during these uncertain times, then feel free to contact one of our friendly Real Estate Property Practitioners; follow the link: https://www.homesofdistinction.co.za/agents/ or pop by our offices for a chat. Our doors are always open.

Homes of Distinction CC holds a Fidelity Fund Certificate issued by the Property Practitioners Regulatory Authority.