The property marketing sector will look back on 2007 as the year in which 'normal conditions' took over from the previous 'boom scenario', says Tony Clarke, MD of Rawson Properties.
'Prior to 2007 we saw annual price increases as high as 30% in some areas, said Clarke. 'Last year they dropped to between 16% and 18% initially and they are now settling at around a level of 9% to 12% - although some areas are showing considerably higher figures. At Rawson Properties we are predicting that price rises will continue at the 6%-12% level for two to three years'
The despondency that affected some property investors midway through last year, said Clarke, was largely unjustified.
'If you take the high sales figures prior to the implementation of the National Credit Act and couple them to the lower figures that followed, the upward trend in the graph for this year is still clearly evident. High sales were recorded up to September as the pre-NCA rush was processed. Then there was a fall off - but prices are still very definitely in an upward cycle despite slower sales'
Addressing himself primarily to the very large group of regular Rawson Properties investors as well as to certain potential first time homeowners, Clarke warned them not to be led astray by recent advice urging people to disinvest and/or opt for renting.
'If you take a long term view, property has always proved itself to be a very sound investment,' he said. 'At Rawson Properties we have investors who bought apartments five or six years ago and who are now looking at a 370% increase in their propertys value, i.e. from R230,000 to R850,000. Obviously from now on such spectacular rises will no longer be possible, but value increases will certainly remain above 9 %'
Clarke said that whenever, as now, the JSE Securities Exchange begins to show signs of volatility, a certain percent of investors return to property for the simple reason that it has three great advantages: it qualifies for gearing from the banks, it produces rental returns and it is not as affected by economic swings as other investment channels.
'These advantages often outweigh the sometimes faster value rises of shares, ' he said. 'Our belief at Rawson Properties is that now is as good a time as any to invest in property provided that buyers are prepared to hang in there for at least five years (selling in a shorter time often results in much of the profit being eaten by commissions and Capital Gains Taxes) and are prepared to budget on an interest rate of 15% - 16%'
This figure, added Clarke, may seem overly cautious to some, but on a long term investment of this kind he believes that it is unwise to take risks.
Clarke also advised investors to consider seriously the growth potential of units on the city outskirts and in rural towns.
'Right now it could be a wise move to spread your risk over two small homes at, say, R500,000 each in a country village rather than to own one CBD or prime area property worth R1 million. The annual capital gain will be much the same but the chances of earning higher rental returns in the cheaper brackets are likely to be better'
