News & Guidance

SA Unemployment Reaches New High

Unemployment in South Africa Record High in Spring

SA’s jobless population grows to a record 7.2 million


Earlier this spring it was reported that a record 7.2 million people (or 32.5% of the population) in South Africa are now unemployed. Although there were 333,000 job gains in the fourth quarter of 2020, unemployment still significantly outweighed employment.

The Coronavirus pandemic has added to South Africa’s already struggling jobs market and economy. Restrictions put in place to curb the spread of the virus has plunged the country into its longest recession in 28 years. Most businesses shut for five weeks from March 27th last year, and many have struggled to recover and have either cut wages and personnel or ceased trading entirely. The worst hit industries in South Africa include agriculture, automotive, repairs, tourism, and retail. In a flash survey conducted by McKinsey in April 2020, just over a third of businesses reported that they were pessimistic about the economic outlook and over 30 percent reported that they expected their revenues to fall by between 5-50% over the next six to twelve months in 2020.

Recommended Properties


Although South Africa has introduced some measures to combat the effects of the pandemic, it has not prevented businesses from reducing their workforce or closing entirely. Recent reporting had shown that only 6% of SMEs had received government funding and only 9% received support from private funds.

Research from McKinsey also showed that 36 percent of SMEs that responded to the survey said that they were not receiving government loans and 25% were not making use of payment reliefs such as UIF and PAYE. Measures that were introduced to help businesses include providing tax subsidies of up to R500 per month for private employees earning under R6500 per month under the Employment Tax Incentive, making payments of employment tax incentive reimbursements more frequent and allowing small businesses to delay 20% of their employees’ tax liabilities.

SMEs make up 98% of businesses in South Africa and provide employment for around 50-60% of the country’s workforce. The inability for many SMEs to receive adequate support has had a damning effect on the country’s unemployment level, as businesses cut staff to save money or close entirely.

South Africa’s unemployment rate to have a knock-on effect on real estate market


Experts have predicted that the rising unemployment rate will be one of the biggest obstacles for South Africa’s residential property market. Unemployment will cause more properties to be put up for sale, as sellers can ill-afford to make repayments and landlords struggle to either fill their properties or collect rent from tenants.

Surprisingly, a high number of middle-to-upper income earners are feeling the effects of the pandemic, even though they generally are better equipped to weather economic bumps. This has caused banks to tighten their lending criteria and as such, even though demand for property remains high, very few people will be able to get the finance needed to purchase property. Overall, it is predicted that property prices will increase by between 2-3%.

Related Articles


Second-tier property market predicted to face difficulty in South Africa


Property priced between 2 million and R4 million could face the most difficulty this year, and the demand will be highest for properties worth R2-million or below. This is because cheaper property is more attractive to young people planning on buying their first property and current homeowners look to downsize. Low interest rates could boost sales, as has been the case especially with regards to first-time buyers. It is expected that this could keep demand steady, especially considering that interest rates are only expected to rise by 0.5 points this year.

Comparison with how the UK is supporting businesses through the pandemic


Comparatively, the UK introduced more extensive measures to support businesses during the Coronavirus pandemic. They introduced a furlough scheme from the 1st of March 2020 and have extended it several times with the end date now being September 2021. Although the scheme has been tweaked in the past, the basis of the scheme is that government pays for up to 80% of an employee’s salary for hours not worked up to £2,500. The scheme has been widely used with over 70% of SMEs reporting that they have furloughed staff by May 2020. This government measure to protect jobs seems to have worked so far as the unemployment rate stands at 4.9% for April 2021, 0.1% lower than the previous quarter.

How has the furlough scheme and stamp duty holiday extensions impacted the UK property market?


The UK government has also stimulated the property market by introducing a stamp duty holiday. Stamp duty is a tax that is payable in incremental percentages depending on a property’s value, ranging from 5% to 12%. Additional stamp duty tax is levied on those who are buying a second property.

The government’s support for jobs combined with the extension of the stamp duty holiday scheme has promoted experts to re-evaluate their predictions for UK house price growth in 2021. Back in January both Savills and Knight Frank expected property prices to remain flat throughout 2021. Since it was announced that the furlough scheme and stamp duty holiday were to be extended, both companies revised up their predictions to 4% and 5% respectively.

It was recently reported that overseas investors who own UK property hit a five-year high and since the EU referendum there was a 19% increase in landlords investing in UK property. The UK’s property market is characterised by a supply and demand imbalance, which has caused house prices to have risen by 175% in the past 20 years from £81,628 to £224,337. £61,365 of that house price growth (38%) was gained over the past decade. It is understandable that overseas investors are attracted to the capital growth they could achieve through property, especially as the stable political environment and economy has allowed the market to achieve sustained growth spanning several decades.

For South Africans looking to achieve higher capital growth than what is offered in the South African property market, could it be the right time to start investing in UK buy-to-let property?

Start your property journey...

Call Back Request

Enter your details to request a FREE call back from one of our team.

Please complete all fields

Call us on (+44) 203 709 4275

By completing this enquiry form you give us permission to send you information about the property market and relevant opportunities

By contacting a UK property investment company such as One Touch Property Investment, individuals can be exposed to new opportunities within the market that can help meet their financial goals. Whether it is the potential to achieve good levels of capital growth or receiving high rental income in the short term, investors will be matched to their own personal consultant who will present options in the market – some of which are exclusive and may not be discovered otherwise.

Are you curious?

Speak with an experienced consultant who will help identify suitable properties that will capture the exciting fundamental mentioned here.

WANT TO LEARN MORE ABOUT PROPERTY INVESTMENT
& RECEIVE FREE GUIDANCE FROM LEADING EXPERTS?

SIGN UP TO OUR NEWSLETTER NOW!