Faith in property as an investment is beginning to rekindle, say the property experts.
Gerhard Kotzé, CEO of the ERA South Africa property group, says this discernable trend is mostly the result of somewhat improved economic conditions, lower interest rates and growing consumer confidence. "Interest in property as an investment has never really gone away, but it has been in hibernation for much of this year. Now that things are looking up, though, it's awakening again."
He notes, however, that the rules have changed, and that selectivity and caution are now very much part of the buying equation. In addition, the long-standing debate about property versus other assets is once more under the spotlight.
"In this regard, our view is that everyone should own at least one home, and that additional properties are arguably relevant once more as part of a general investment portfolio along with other assets.
"The positives traditionally associated with investing in residential property remain intact. It offers simple, hands-on control, it involves no balance sheets or annual meetings and there's no reliance on the competence of boards of directors and the performance of the companies they control.
"You can choose your own tenant. You can choose how much or how little to spend on a property and the tax system favours your investment in that your capital gains are taxed minimally at an effective 10%.
"Also, according to figures from Absa, property has actually outperformed other assets including shares, gold and fixed deposits over the past two decades, suggesting a consistent pattern of growth over time, notwithstanding slumps such as the one we have just witnessed.
"Simply put, property remains a store of value, provided, as always, that the investor/homeowner appreciates that it's a medium- to long-term investment and not something in which to speculate," Kotzé says.
"The key to success is not timing the market, but time in the market."
Dr Andrew Golding, CE of Pam Golding Properties (PGP), recently said there is the slow but steady emergence of the first-mover, investor-buyer who is seeing this as the opportunity to get into the market ahead of the pack.
"We hope and are optimistic that this upward trend will continue through 2010, but of course the major catalyst for the true re-ignition of the residential property market in SA will be when the banks start to vigorously lend again and actually compete for business. It is our hope that this will begin in earnest towards the end of the first quarter of 2010."
A recent report released by the Alliance Group showed that in the third quarter there were some strong signs of increased sales activity in commercial and residential property, but that the sales market is still far quieter than a year ago. According to the report, banks' stricter lending guidelines have constrained the market as have increased concerns about tenants.
"Investors who can raise financing or have access to cash are now looking for value in anticipation of a rebound in commercial and residential property values over the next 12 months," says Real Levitt, CE of Alliance Group.
The report also shows that there has been a bottoming out of sales confirmation rates over the last eight months, with a marginal decrease in the reserve sale price variance. "Both these indicators suggest an improvement compared to early 2009," says Levitt. – Eugene Brink
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