SA Residential Property- a safe haven for uneasy investors
A steady growth of buy-to-let investors and a renewed interest in property as an asset class are among the clearest trends now evident in the South African residential property, says Bill Rawson, Chairman of the Rawson Property Group.
The JSE Securities Exchange, he said, has proved surprisingly resilient (at the time of this interview the share index was again above 4,000), but there is now concern that it could become more volatile in the coming year.
If this happens, he said, it would be in response to the growing concern that the country is being poorly governed and lacks dedicated leaders who understand what an emerging economy needs.
Factors that show evidence of the unsatisfactory state of affairs currently prevailing, said Rawson, include high unemployment, which remains at roughly the same level seen for the last 19 years, strikes, which are eroding investor confidence not only locally but overseas, high levels of unsecured debt, a drop in manufacturing output, the difficulty in finding markets for our exports which have to compete with those from high productivity, low labour-cost countries such as China, corruption, which continues to go unpunished, a disappointing growth rate, still hovering below 3% and the likelihood of a further downgrading of our economic status by the major rating agencies in the next few months.
This type of uncertain scenario, commented Rawson, always leads to people looking to property – and that, he believes, is exactly what is happening now. This, he said, is understandable in view of how well property — especially residential property — performed in the last ten to 15 years.
“In the Rawson Property Group we have investors who, for example, bought units in Parklands for R250,000 which have appreciated to R750,000 in 12 years. We have also seen rents rising at a rate of 7% to 8% per annum and excellent returns being achieved on brand new units from the day of handover. What is more, the rent increases seem likely to continue.
“While it is almost certain that the spectacular rises in property values are now a thing of the past (and we have to acknowledge that many of those who invested from 2007 to 2009 have had to accept quite severe losses) it is also fair to say that price stabilization, right across the board (even in the upper bracket houses), is now the trend. If, however, investors are concerned about South Africa’s position and are looking for a safe haven, residential property is quite clearly the place to be.”
Asked to what extent an investor should commit to property, Rawson said that figures from First World analysts such as Knight Frank indicate that high net worth individuals worldwide have 25% to 30% of their assets in property. This, he said, is widely accepted as a good level – although there are many others, himself included, who are content to invest as much as 80% or 90% of their wealth in property.