Will the Russia-Ukraine war impact South Africa’s property market?

Ukraine national flag overlooking the city
Ukraine national flag overlooking the city

Will the Russia-Ukraine war impact South Africa’s property market?

On 24 February 2022, Russia launched a deadly invasion of Ukraine. Since then the conflict has grown, creating billions of dollars in property damage and dispossessing millions of Ukrainian citizens. The world remains on edge as the war creates a ripple effect across the global economy. The question for many South Africans is whether the local property market will be impacted — and how.

In response, Prop Data ran a survey to gauge the real estate industry’s perception. We cover the results, with property practitioners offering their standpoint on the war.

Russia-Ukraine war poll results

In March 2022, Prop Data’s monthly poll asked property practitioners whether the war would impact South Africa’s property market. The poll found:

59% of property practitioners feel the war will have an impact.
29% of property practitioners feel it’s possible and we’ll have to wait and see.
12% of property practitioners feel it will have zero impact.
Debbie Van Rooyen, Managing Director at Team Seven, says she isn’t “surprised the majority of property practitioners agree that the Russia-Ukraine war will have an impact on South Africa’s property market. Although we are at the tip of the African continent, we are very much affected by what happens globally.”

However, not all property practitioners agree. John Fuller, Owner/Franchisee at Chas Everitt International Property Plettenberg Bay, is one of those who believe it is having no impact.

“People are naturally negative because there is a war, albeit far removed from South Africa, and its effect thus far on certain European countries,” he says. “My thoughts are more positive for reasons that are unique to South Africa and Africa, which I believe is on the threshold of a better future.”

Property practitioners weigh in on the impact

With their fingers on the property pulse, some property practitioners are seeing the impact of the war on the market. According to Van Rooyen, these trends include:

• Higher prices because of the war’s long-lasting effects on the price of food and oil.
• Tightening up of expenses in general for the majority of South Africans.
• Downscaling to smaller properties requiring less maintenance and having lower monthly holding costs.
Rise in popularity of freehold properties with granny flat/s. These can house extended families (to share costs) or provide additional income from tenants.
• Greater focus on location. A common reason for selling or moving is to be in closer proximity to work and schools due to the higher petrol price.
• High demand for complexes or secure estates due to crime concerns.

Rubé Bradfield, Principal (MPRE) at Home and Hectare, is also seeing pressure on household disposable income as a result of the rising cost of living. This, in turn, is having an impact on home-buying affordability and repaying existing debt. In terms of the property market, she has a positive outlook.

“Interest rates have been on the rise even before the war but might be felt more and sooner due to global inflation which will impact the property supply and demand cycle.

“We have seen a shortage of stock post-COVID-19 due to pent-up demand and low-interest rates. I think this will continue despite an increase in interest rates due to the net effect of supply and demand, meaning some people might sell due to affordability. However, there is still a strong demand for property in certain price brackets and segments.”

According to Fuller, other factors are currently impacting the property market rather than the war specifically. He points to:

Low emerging market inflation and real interest rates.
The strength of our world-class banking system and their appetite to lend.
Exciting massive growth in black middle-class buyers.
The demand for affordable housing, for which there is huge pent-up demand and available finance.
In the Western Cape, semigration is a strong driver and capital appreciation should be higher than in other provinces.
Barriers created by authorities failing to identify low-cost land for affordable housing, reducing red tape, and facilitating faster rezoning approval.

Navigating the property market

So, how can homeowners, home-buyers, and sellers make the most of current market conditions? War impacts or not, property practitioners offer the following advice to help:

1. Stay positive at all times.

“My philosophy is that what goes down always comes up and vice-versa,” says Van Rooyen. “The market will always go through peaks and troughs. Looking at statistical data, there’s historical proof that property remains a great investment even through bad times.”

“I advise first-time buyers to enter the market as soon as possible and sellers to stay in the market,” says Fuller. “If inflation does skyrocket because of external forces, you will be fortunate to have invested in residential property.”

2. Be frugal with your finances

Bradfield says homeowners should “not overextend but stick to their budget. Where possible, save up for emergencies and further increases in terms of property costs and utilities.”

When taking up a mortgage bond, Van Rooyen affirms the importance of “listening to the advice of your property professional and not overextend yourself financially. Instead, always allow breathing room for when interest rates increase or for regular maintenance and/or upgrades.”

3. Take care of your property

“Property owners should focus on maintenance – if you look after your investment, it will look after you when it’s time to sell,” advises Van Rooyen.

4. Choose a real estate expert

“There’s no substitute for working with professional real estate groups that have a national and international footprint,” affirms Fuller. “Sign up for services with someone who will guide you with integrity and empathy through either the buying or selling process, ensuring the best investment returns.”

Responding to property market changes

While real estate agencies and brokerages don’t have control over the political and financial environment they operate in, there’s much they can do. Van Rooyen believes in being attentive to the challenges of clients and ensuring her team acts with kindness.

“It’s vital to be more conscious of the stressful conditions that most people are living in today. My advice to property practitioners is to provide a caring and sympathetic ear to your clients and to make sure that you take the stress out of selling or buying their property by providing a seamless and hassle-free experience.”