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In the July 2008 Issue of Property Investor News
South Africa
Last month we took a look at long term prospects for Brazil's property market in light of the World Cup to be held there in 2014. This month we will travel through time by a mere two years and look at shorter term prospects in South Africa, bearing in mind the upcoming 2010 tournament.
Although major sporting events undoubtedly help to attract investment, regeneration and publicity, previous World Cup tournaments suggest it is actually quite difficult to identify any direct and lasting impact on the property market. However, early figures show South Africa has already attracted more sponsorship than any previous World Cup - US$4.8bn compared to Germany's 2006 US$2.1bn.
Economy & State of the Market
The South African property market has been underpinned by strong economic fundamentals over the last few years. The country produces 18% of Africas GDP, 45% of its mineral production and 50% of its purchasing power. Growth averaged 3% 1994-2004 and has been 5% per annum since. Unemployment has fallen fast - an estimated 540,000 jobs were created in 2005.
However, indications are that growth has slowed of late in line with the global economy. As elsewhere consumers are finding finances increasingly stretched: inflation is 9.4%, the prime interest rate is 15% and one recent estimate suggests disposable income has fallen 39.3% since 2005.
Now to the property market: many commentators agree that South Africa property has been undervalued for some time. Nonetheless, price appreciation here has been impressive for several decades. Average annual price growth has been 11% since 1975, and in 2005 property price rises were some of the highest worldwide.
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