Can investing in a home stimulate the economy?

South Africa’s GDP contracted by 2% in the first quarter of 2020, during which lockdown had only just begun. This means that there will be worse news to follow for the second quarter of the year when lockdown restrictions were in full force and real estate services were unable to operate until alert level 3.

According to the most recent report by Stats SA, consumer spending remained positive in the first quarter, with households spending more on food and non-alcoholic beverages as well as on household furniture and equipment. The ‘Finance, real estate and business services’ sector was also one of the highest growing industries, increasing by 3.7% QoQ and contributing R667,396 million to the economy.

“I am encouraged to see growth in consumer spending within the real estate sector in the first quarter of the year. However, these results also make me more concerned about what the second quarter’s results will reflect, considering that real estate and all its related services were unable to operate for well over two months,”  states Adrian Goslett.

During the lockdown, Goslett and other industry players pleaded with government to reclassify real estate as an essential service, explaining that the industry contributed so substantially to the economy that preventing these services from operating would have detrimental effects on the country’s GDP.

“Some economists are predicting a 48% contraction in the second quarter owing to the effect of lockdown. This has already dramatically impacted negatively on consumer spending and will have a knock-on effect on employment in the coming months,” says Goslett.

While it remains to be seen what the results of the second quarter will be, Goslett encourages all who can afford to make the investment to purchase real estate, as this will help bolster economic growth during the third quarter. “The real estate industry fuels so many other subsidiary industries, including moving companies, bond origination services, attorneys, furniture and home décor stores and so many more. Investing within the local real estate market will help stimulate activity in all these industries which will lead to greater economic growth and will help us recover from this crisis faster,” he concludes.

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