The South African property market is still the right place for all except the most sophisticated South African investors to be.

So says Bill Rawson, chairman of Rawson Properties, who adds that he would not advise investors to follow the overseas route.

Rawson's view is that First World property offers low returns and has dismal prospects for significant capital growth. "Then there are also difficulties frequently encountered with foreign legislation and foreign agents."

He says South Africans looking at overseas opportunities have to ask themselves:

- Will the likely increases in South African municipal rates be so high that they cut seriously into the returns and detract from South African property values?

- Is the current strength of the rand in relation to euros, dollars and pounds so advantageous that it would, in fact, be a pity not to be buying overseas right now?

- If the rand remains strong, would you still be in a position to sell at a profit?

- Accepting that the rand could always go on one of its roller coaster rides, are you willing to pay the extra cost for rand protection in case this happens? If not, do you appreciate that both your deposit and monthly payments could have risen 10% to 20% between the time of signing and eventual handover of the cash?

Looking at overseas prospects generally, do you foresee the European and USA economies recovering and if so in what period? Some have said that a full recovery will take at least a decade.

"Do you believe that the inefficiencies and corruption in South African national, provincial and municipal administrations are so serious that they will damage the economy irretrievably, or do you think that South Africa is just riding out these difficulties and that so long as we have a vigilant press and a strong opposition in parliament, the negative factors will be kept sufficiently under control?

Rawson said that European and UK property, although a safe bet, is currently giving only 2% to 3% returns whereas South Africa's residential property returns are usually in the order of 5% to 10%, while commercial properties are giving 7% to 12%. Furthermore, he said, capital growth rates in all sectors of South African property are likely to be once again above 8% by the end of 2010.

"Even allowing for a higher inflation rate, it seems to me fairly clear that the local product is preferable to that of foreign countries – and it is worth noting that some 150,000 expatriates seem to agree: Almost weekly we receive requests from South African expatriates looking for property buys back here in their homeland and many of these people now have several South African properties in their name."

John Loos, property strategist at FNB, says it is doubtful whether the woes of the likes of the US and UK are over on a sustainable basis. "They still have to withdraw their stimulus packages and I think that will see economic and property weakness resume. In other words, I think there will be more buying opportunities to come offshore for a while. But now is probably not a bad time."

"If one is heavy on domestic property, buying overseas may be something of a way of diversifying one's portfolio. But be careful. Our economy and property market is more in sync with the world than it used to be in the isolation years and the rest of the 1990s. So that may not be such a good diversification."

He suggests that people looking to diversify portfolios should rather consider an asset which follows a very different cycle to property either at home or abroad. – Eugene Brink

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