Junk status: where to from here?
SA’s recent credit rating downgrade and the effects of the Covid-19 lockdown have an already ailing economy reeling as government scrambles for solutions. What does this mean for the property industry?
“The property market will remain a bellwether for the challenges in the country and will reflect the broader macroeconomic trends, but ultimately people always need somewhere to live” Samuel Seeff, chairman, Seeff Property Group
For a financially challenged country in the grip of a national lockdown, the Moody’s downgrade of SA to junk status could not have happened at a worse time, according to government.
The other two major credit rating agencies, Fitch and Standard & Poor’s (S&P), downgraded the country to subinvestment in 2017, and although analysts anticipated the same from Moody’s, the announcement came as a low blow to an economy already against the ropes.
CREDIT HEALTH
Moreover, navigating a national Covid-19 lockdown alongside the rest of the world experiencing its own medical and economic meltdown, SA’s latest credit rating downgrade may seem a lesser concern right now but it is significant – more than ever before.
Ratings represent the credit health of a country’s government and investors, especially foreign ones, really take these measures to heart. Moreover, it is the first time since 1994 that SA has not had an investmentgrade rating and this sends a message of no confidence to prospective investors.
RESET BUTTON
Could this latest downgrade be the catalyst to press the reset button on the South African economy? Or is it a final wake-up call? The jury is out and there is as much diverse opinion about government’s approach to combatting the spread of Covid-19 as there is about how best to fan back to life the fast-dying embers of our economy.
Either way, the economy needs urgent CPR and, as one of the major contributors to the overall GDP of the country, the property sector represents a vital lifeline.
HomeFront asked market experts about SA’s local and international property investment potential and how they advise their clients to navigate the real estate market during this unprecedented time.