Among his friends and business associates, says Bill Rawson, Chairman of the Rawson Property Group, there are several who have invested in residential properties overseas in the last year or two - especially in Europe and the UK.
There is, says Rawson, a certain logic in this as many European homes are still at low price levels (for example: Spain’s house prices are down by 24.3%, since the fourth quarter of 2007).
“Any home purchase in the southern half of Europe is likely to represent good value at the moment,” said Rawson.
Nevertheless, he says, such purchases, will, he believes, be financially unsatisfactory because European growth prospects in the foreseeable future are dismal.
“Such homes can, of course, provide good holiday accommodation and, in the event of the rand destabilizing, could gain significant value. However, what they really represent is a bolt hole and they provide another choice to the owners - should the SA economy go bottoms up. From a financial point of view they are very definitely a long term prospect.”
Rawson drew attention to the “Home Truths” article, published in the 12th of January 2013 issue of “The Economist”, which, he said, shows that South African home prices, in 2012, performed significantly better than those of 85% of the world’s developed countries.
“South African homes increased in value by 5% year-on-year in 2012. Only Hong Kong (with a 21.8% growth rate) and Austria (with 10.1% growth) performed better. Nine of the 18 countries listed in the survey saw their homes lose further value in 2012, the worst being: Spain with a 9,3% drop, the Netherlands with 6,8%, Ireland with 5,7% and Italy with 4%.
Less encouraging news for the SA residential investor, said Rawson, is that since the first quarter of 2007, again according to “The Economist”, home prices have risen by only 12, 2%.
“Here again, however, we look fairly stable in comparison with such front runners in housing as the USA (whose homes, although now at last appreciating in value, have devalued by 20,5% since the first quarter of 2007) and Japan (whose homes have lost 14,2% since late 2007).
John Loos, FNB’s property economist, has predicted a slower 2,5% South African home growth rate for 2013. This would mean that in real terms, South African homes will lose value in the coming year.
Rawson, however, says that although this may be true of the market as a whole, it hides the fact that in the lower priced brackets, particularly those priced below R1 million, increases of up to 10% are still being seen annually.
“I am closely in touch with many reputable estate agents,” said Rawson, “and the general consensus among the vast majority is that the market is now on a recovery path and that Loos’ forecasts could prove overly pessimistic.”
Particularly significant in “The Economist’s” survey is the fact that South African residential property is still undervalued by 5% on the price to rent ratio index. This means that SA property investors can look forward to further significant rental growth as well as steady capital growth, says Rawson.
“The fact that South African rentals are well above average, in relation to the global figures, suggests that capital values must continue to rise.”
