“The old adage — ‘the best time to plant a tree was 20 years ago, the second best time is now’ — is just as true when it comes to buying property.”
This much quoted statement, said Tony Clarke, Managing Director of the Rawson Property Group, is particularly valid at the moment for a whole range of reasons.
Listing these, Clarke said:
1. The US economy is now recovering slowly but steadily and this, in the long run, bodes well for South Africa because, like that of almost all other countries in the world, South Africa’s economy is heavily influenced by the USA’s economic performance.
“In the short term, prospects for South Africa may look a little dismal because the current FED tapering period is now in action. This, I believe, will lead to high interest rates in the USA, which will then again attract investment overseas. As we are already seeing in South Africa, funds are steadily being drained from the emerging markets and taken back to the USA. Like other emerging countries, South Africa will suffer from this, but in the not too distant future we will all benefit from the USA’s improved ability both to step up imports and to invest more abroad as they always did previously and the local housing market will benefit from this.”
2. There is no need to be over-concerned about the possible rises in South Africa’s interest rates.
“At the Rawson Property Group all our experience goes to show that interest rates are not a prime factor influencing home sales. What does affect them is the country’s economic conditions, its ability to provide employment and the on-going need for housing. South Africa’s anticipated 2,6 % growth rate for 2014 is nothing to write home about – but it should be sufficient to keep the housing market alive.”
3. Demand in many house price categories now exceeds supply, ensuring that year-on-year house price growth remains not far below 10%. It will also, said Clarke, ensure that rentals continue to rise at around 7,5% per annum, i.e. above the inflation rate.
“Anyone buying a property right now is, therefore, acquiring an appreciating asset,” he said.
4. Conversely, house price growth in recent years has been low enough to ensure that South African homes are still eminently affordable and in many cases are still at 2010 levels. A recent report from Absa shows that in the small house category (80 m2 to 140 m2) the average price is now R764,000, in the middle bracket (141 m2 to 220 m2) the average price is R1,4 million and in the top bracket (221 m2 to 400 m2) it is now R1,710,000. By European or USA standards these prices are ridiculously inexpensive, especially those in the upper brackets, said Clarke.