The collapse of African Bank and African Bank Investments Limited has in many people’s minds reinforced the relative security and simplicity of property as an investment.
This was said last week by Bill Rawson, Chairman of the Rawson Property Group. Rawson was talking to a group of investors at Rawson Developers’ new Claremont sectional title development, ‘The Beaumont’. Here the construction team is now working to achieve an ahead of schedule completion with initial handovers before the December shutdown this year.
“What you see here,” said Rawson, “is what you will get. The great advantage of a property investment is that it is relatively straight forward – most people can understand it without difficulty. You are not putting your funds into the hands of a fund or asset manager or analyst who may or may not be reading the stock market and the economic scene correctly – and who will charge you a monthly management fee whether or not your assets increase in value.”
“I am not saying,” added Rawson, “that there is no risk in property investment — obviously that can never be true. However, the risks here are more easily understood and assessed: the investor himself can inspect, see, touch and handle the ‘product’ from which he hopes to benefit (along with all the fixtures and finishes that will go into it).”
This fact always was and always will remain, said Rawson, one of the chief reasons why the ordinary man-in-the-street should invest in property and should endeavour to see that it comprises at least 30% of his asset portfolio.
The second main reason for the wisdom and popularity of a property investment, said Rawson, is that such investments are often quite easily geared with bank finance.
The third reason is that in the major urban areas demand from tenants now exceeds supply, ensuring the owner of on-going leases.
For the record, those who bought in the earlier stages of ‘The Beaumont’ development, i.e. close to the launch or within six months of it, can often now resell their units, should they wish to do so, at a 30% to 35% mark-up.
Asked whether he has any advice on whether to opt for a residential or commercial investment, Rawson reminded his audience of what he has said previously: commercial units, being bonded for a maximum of only 11 to 12 years, are burdened with more expensive repayments, but, can also usually also get higher rentals, giving 2 to 4% higher returns on investments than is possible for residential property.
While that can make commercial property attractive, said Rawson, it has to be remembered that finding a tenant for such properties is far harder than finding a tenant for a residential unit. In South Africa’s big cities and their suburbs right now, he said, there is seldom any difficulty in finding tenants, but in the commercial and industrial fields tenants are still elusive.
