The year past saw residential property buyers having to come to terms with a 20% increase in interest rates and a significant drop in unit sales. Many investors in residential property, therefore, began either to cut back or in some cases to bale out.
'One of the questions that I am now most frequently asked,' says Bill Rawson, Chairman of Rawson Properties, 'is, 'Should I continue to invest in residential property '“ and if so, in which categories' '“ and I almost always reply that now is the time to avoid expensive property buys and put your money into low cost residential units.
'For the investor seeking a long term safe haven with minimum worries residential properties in the R2 million plus bracket are still a viable option '“ but for the man looking to maximise his current returns, the place to be is quite definitely in the R300 000 to R1 million bracket'
Almost all homes in this price range but particularly those in well protected new developments, said Rawson, are appreciating at a rate that is almost double that of the more expensive homes. What is more, they can often attract rentals large enough to cover 60 to 70% of the monthly bond repayments.
Although the market has lost some of its steam, the current Bull Run on property, said Rawson, is likely to continue because the South African economy is still well managed.
'We have now grown accustomed to growth rates in excess of 4% and to seeing the inflation rate kept within the 3 to 6% target bracket. We tend to forget that prior to 1994 this economic scenario had not been experienced for a very long time in South Africa and now that the government is committed to a R400 billion injection into the countrys infrastructure, it is not unreasonable to expect that residential property will continue to benefit from the improved economy.
'The current average residential property growth rates of between 8 and 12% will almost certainly continue through to 2010'
Investors looking for an alternative avenue which is nevertheless property related should, said Rawson, seriously consider the top three or four listed property loan stock companies.
'Companies like Redefine and Growthpoint which have spread their risk across the commercial, retail, industrial and residential fields are in a good position to benefit from the higher rentals now being obtained in the non-residential sectors '“ and with Spearhead now part of the Redefine group and Mike Flax responsible for Redefines development and leasing, this company is very definitely worth watching'
