Drought causes dip in Western Cape property sentiment

Cape Town - The relatively sharp drop of 11 percentage points in property market sentiment in the Western Cape in the first quarter of the year from the final quarter of last year is believed to be closely related to the ongoing severe drought, especially in the Cape Town metropolitan municipal area but also in other drought-stricken regions within the province.

This is according to the latest Absa Homeowner Sentiment Index (HSI) released on Monday. The overall HSI score, based on the percentage of survey respondents displaying positive market sentiment, was down to 75% in the first quarter from 82% in the fourth quarter of 2017.

In the Western Cape a dip was seen from 80% being positive in the fourth quarter of 2017, compared to 69% in the first quarter of 2018.

In the first quarter of 2018 76% of respondents in Gauteng felt positive about the residential property market, compared to 82% in the fourth quarter of 2017.

In KwaZulu-Natal 72% of respondents were positive, compared to 79% in the fourth quarter of 2017.

• READ: Drought does little to deter W Cape property investment - analyst
  

Buying rather than renting property

The positive sentiment regarding buying rather than renting property was marginally lower at 73% in the first quarter, compared with 74% in the fourth quarter of last year.

The main reasons mentioned in favour of buying rather than renting property were that it is better to buy and pay off your own mortgage bond than rent and pay someone else's bond (31%); that property still increases in value and is a good investment (21%); and that property prices are relatively low and there are bargains in the market (16%).

According to Jacques du Toit, property analyst at Absa Home Loans, property market sentiment may be hampered over the short to medium term by financial strain experienced by consumers due to higher indirect taxes, as well as uncertainty about land expropriation without compensation.

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