People reading the business and property pages of South Africas newspapers could pick up differing views on the prospects for residential property, says Bill Rawson, Chairman of the Rawson Properties Group.
'Recently,' he said, 'we have had the economists of Absa and Standard Bank expressing opinions that appear to be widely divergent. The Standard Bank review says that year-on-year January house price growth has declined from 18,5% in 2006 to 6,9% this year. They predict that waning investor confidence and a more 'constrained' economy brought about by higher interest rates will slow down the housing market but they anticipate a soft landing with a pick-up towards the end of the year which will put growth rates into the higher single digit figures.
'Absa, however, reported average year-on-year growth of 10,1% - well above that of Standard Bank'
How should these statements be interpreted?
Rawson points out that the fairly small differences in the statistics can probably be attributed to the different measuring systems used: Standard Bank work on a median price system (which means that half the properties sold were more expensive and half were less expensive than the price quoted), while Absa work on the average of the total purchase price of houses in the 80m² to 400m² category, priced at R2,7 million or less in 2006 (Absa do, however, smooth the data to give the most accurate results).
'Both banks claim that their system is the best,' says Rawson. 'It is, however, interesting to note that the Western Capes Residential Property Price Ranger (RPPR) figures are also different. Their most recent report is very bullish about the Cape and puts year-on-year growth at 27,3%. It also records an increase of 11,8% in the number of units sold' The RPPR figures are calculated according to data submitted by agencies subscribing to the service.
What does Rawson himself predict for the year ahead?
'Judging by the performance of our franchise group over the last two to three years, I think Cape residential property can look forward to a 10% growth year-on-year from now until 2010. Ian Fife, the Financial Mail property economist, says that a shortage of development land, construction skills and materials (exacerbated by 2010 preparations) and the relentless growth of the black middle class will push house prices upwards for a solid five years.
'I agree completely with this view and, like Fife, I believe that those buying now are doing so at the peak of the interest rate cycle. This means that from now on, prospects and prices can only improve. Time and again weve seen the more gloomy prophets of doom proved wrong. By the end of this year, those who are currently pessimistic will be proved to have been completely out of line'
