Those negative thinkers who seem almost to revel in finding reasons to be pessimistic about South Africa’s residential property should do as he has recently done and make a trip through France and Northern Italy, says Bill Rawson, Chairman of the Rawson Property Group. A visit of this kind will show just how well South African property is doing in comparison to that of certain European countries.
“In many of the rural areas that I visited, but particularly those in Northern Italy,” said Rawson, “I came across quite substantial three, four and five bedroom homes which were standing empty – they could not be sold or rented. Often, I was told, the children of the family who had grown up there had moved to the urban areas to find work and were extremely reluctant to come back and, in many cases, the homes were deteriorating fast as a result of being left empty.”
From discussions that he had with certain Italians, said Rawson, it was clear that in the last 12 to 24 months, many property sellers had had to halve their prices, e.g. from 80,000 € to 40,000 € – and on the rare occasions that buyers were found they were as often as not unable to obtain bank finance. Similar situations, he was told, are being experienced in large parts of Greece, Spain and Italy.
Returning to South Africa after such a trip, said Rawson, had shown him just how successfully our residential property has weathered the global downturn.
“My return coincided with the Absa Home Loans July report which showed that middle sector South African homes (by far the largest category) had continued to experience growth of 8,5% to 9% since September 2013. Admittedly, as the report reminded us, the general economic growth for the year ahead is now predicted to be only 1,5% and prospects for further significant house price growth are therefore very limited. Furthermore the likelihood of rising interest rates towards the end of this year will also dampen the market. Nevertheless, even if house price growth drops to 6% in 2015, as Absa predicts, it will remain slightly ahead of inflation and in the current conditions I consider this wholly satisfactory and acceptable.
“At the Rawson Property Group we are continually propagating the message that residential property is a sound long term investment and the latest Absa figures, in my view, confirm this. The only proviso I would make is that investors should, if possible, put their money into areas where rents are rising at 8% to 12% per annum and where the banks are still approving anything from 50% to 90% of the bond applications. In short, therefore, here in South Africa we have a great deal still to be grateful for and a visit such as I have just made underlines this very strongly.”