Is there ever a wrong time to invest in residential property?
'There are people in our industry who would claim that, provided you are taking a long term view, there is never a bad time to buy,' says Bill Rawson, Chairman of Rawson Properties, 'and', he adds, 'by and large I would support that view'
Nevertheless, says Rawson, history will show that the first half of 2010 was a particularly good time to get back into the residential property market - almost as good as the 2004-2006 era.
'There are,' he says, 'four factors working in favour of the buyer right'
These are that:
- sellers have at last become realistic and are accepting lower prices or taking their homes off the market;
- todays prices are on average 20% down in the metropolitan areas and 50% down inn the coastal and country areas compared to the boom period of 2007;
- values are, however, at last starting to move up. At the moment this is only at a 2% year-on-year rate, but this rate is likely to increase to between 5% and 8% before the end of 2010; and
- the shortages of stock (caused at least partially by a lack of new development) will push prices higher still in the second half of 2010 and 2011.
Asked in which areas the best deals and the greatest growth potential probably exist, Rawson placed at the top of his list Parklands and Table View.
Here, he says, well built three bedroom homes with ± 120 m2 (?) of floor area are currently available at R750,000 - but are capable of producing rentals of between R5,000 and R6,000 per month. This, says Rawson, means that it is often possible for the buyer to cover his full bond costs within 24 to 36 months of purchase, provided the interest rates remain low.
Rawson also tipped the Northern Suburbs, particularly Brackenfell and Durbanville. Prices here, he says, are as much as 30% below todays replacement values, a sure sign that they will begin to move up rapidly.
Demand, says Rawson, although still frustrated by the banks tight policies on bonds, is now particularly strong in the R300,000 to R800,000 bracket and, in fact, is also still much in evidence up to R1,5 million. Thereafter, he says, sales are still taking place but at a slower rate.
Taking these factors into account, Rawson Developers in 2010 will, says Rawson, be focusing on the five projects that they currently have in the pipeline on the sub R1 million market and most of the units will be compact sectional title units suited to the upwardly mobile black buyers and other emerging property owners.
Perhaps, however, adds Rawson, the best opportunities for buyers are likely to be found not in any particular area but rather in houses in reasonably good areas requiring renovation. Quoting as one example, Rawson mentioned a large old Muizenberg home on the market through the Rawson Muizenberg franchise. Rawson says that anyone prepared to put a year or mores part-time effort into this home (or on many similar homes) could probably add between R1 million and R2 million to its value.
'When I was younger,' says Rawson, 'many couples worked two or three nights a week and part of their weekends on old homes - and reaped the rewards with good sales prices. The opportunity to do this again is, I believe, here right now and those with a little ready cash for renovations should move in fast.
'Also offering good buying chances, says Rawson, are the many properties now under threat of repossession.
'It is tragic to see the prices at which some people have now to sell their homes - but for buyers, of course, this is a bonanza, the like of which will not occur again soon'
Asked if and when 2007 prices will return, Rawson says 'not for a very long time to come'.
'As long as the banks have to abide by the National Credit Act criteria, which are still resulting in a 40% rejection rate (as high as 70% in some areas), no boom will materialise'
This, he adds, should not be taken as criticism of the National Credit Act. 'Although it could be less stringent its overall effect has been beneficial'
Rounding off his message for 2010, Rawson says that those who do invest in property should try and stay there.
'The gratification of a quick in-and-out profit after a year or two should be avoided. We had a case in this company where some 40 years ago a magnificent home on one acre with five bedrooms, staff quarters and a swimming pool was sold for R50,000. Today it is producing a rental income of over R20,000 per month'
He himself, he adds, is always reluctant to sell any unit in his property portfolio built up over the 30 plus years that he has been in property.
'In the few cases where I have sold it has usually been to buy into commercial property'
For further information contact Bill Rawson on 021 658 7100 or email bill@rawsonproperties.com.
