04 November 2024
As the South African Reserve Bank’s (SARB) interest rate announcement in November stirs up excitement on the local property market, many savvy investors are also keeping a close eye on events in the United States.
It's no secret that, as the world’s largest economy, changes in US policies or leadership have a ripple effect – particularly for countries like South Africa with strong trade links to global giants. As a result, many local experts are predicting that the outcome of the US elections will have a noticeable impact on South Africa’s economic landscape – and by extension, its property market.
Economic ties that bind
“No matter who takes the helm in the US, the effect on international markets – including our own – is inevitable,” says Roger Lotz, franchisee of the Rawson Properties Helderberg Group. “The US sets the tone for monetary policy, globally, and that’s bound to have a knock-on effect for South Africa’s interest rates, inflation, and currency strength, all of which influence our property market.”
Lotz explains that, as the US economy ebbs and flows, global investors adjust their portfolios,
which can cause currency fluctuations, commodity price shifts, and changes in investor sentiment. For South Africa, whose economy relies heavily on exports – particularly of commodities like gold and platinum – a stronger or weaker US dollar can significantly influence our export revenue.
A post-election boost in the US economy may strengthen the dollar, potentially improving our trade balance. However, it could also make imports more expensive and add pressure to inflation, forcing the SARB to reconsider its stance on lowering the repo rate.
Impact on interest rates and lending
According to Lotz, the US election’s impact on South African interest rates is the most immediate area of concern for South African homeowners and prospective buyers. The SARB tends towards a relatively conservative stance, but any changes in inflationary pressure and/or global monetary policy – especially from the Federal Reserve—could influence its decisions in future.
Property Investment and Foreign Buyers
Another key consideration is how the US elections may affect foreign investment in South Africa’s property sector. Over the past decade, Lotz says international buyers have played a crucial role in driving demand in certain hotspots like Cape Town’s luxury property market.
“If the election results in economic uncertainty or a downturn in the US, South Africa could see reduced foreign investment,” says Lotz. “That would have a ripple effect on property prices, particularly in the high-end market.”
Despite global uncertainties, however, Lotz remains optimistic about local conditions.
“The South African property market has proved its resilience, time after time,” he says. “International buyers are important, but demand from local buyers continues to grow and we don’t expect this to change dramatically as long as economic conditions remain relatively stable.”
Opportunities for Buyers and Investors
For savvy investors, the potential volatility caused by the US elections could still present a unique opportunity, however.
"Historically, we’ve seen that in times of global uncertainty, property remains a stable and reliable investment,” says Lotz. “While stocks and bonds may fluctuate wildly, real estate provides a tangible asset with reliable long-term growth potential.”
This sentiment is particularly true for South Africa’s property market, which, despite facing economic headwinds, continues to offer excellent value compared to international markets.
"Even with some short-term challenges, those who can buy property now – especially in well-located areas – stand to benefit from capital growth in the long run,” says Lotz. “A US election might shake things up, but property, unlike many other investments, has shown it can weather these storms.”
The Road Ahead
While it’s difficult to predict the exact outcome of the US elections and their impact on global markets, one thing is certain: South Africa will not be immune to the changes. However, by maintaining a level head and focusing on the fundamentals, local property investors can still find opportunities amidst the uncertainty.
"At the end of the day, elections come and go, but people will always need homes,” says Lotz. “Whether you’re looking to invest or secure your family’s future, the South African property market remains a stable, rewarding option."
