Throughout South Africa there is a new interest and a flurry of activity surrounding residential property – and the prospect of making profits from it.
Property publicity in some of the big centres is now as effective as it is for certain retail goods – particularly motor cars.
The advertising and related information dissemination has created the impression that there is no safer or better asset class. I have no problem with this – indeed it is a belief I support – but in some people’s minds it has also led to the idea that property is a field where quick profits can now be made.
That has very seldom been the case, even in the boom years of South Africa.
I am often asked for a ‘hot tip’ in the property sector but there are simply no tips that are hot enough for certain investors. The property market is currently controlled and governed by the banks and until they free up a great deal more on their lending to this market, it is incapable of experiencing another boom.
Where, then, do the best property prospects lie now? And where do I, a dedicated property investor put my money?
In the last two decades shrewd investors have looked around the country, surfed the internet and consulted their agents to find new sectional title developments in the lower price brackets which are being launched at the time – but which may take 18 to 24 months to be completed. These are usually sold at prices that are competitive, even by today’s standards, but will be even more so by the time the development is handed over and full payment becomes due.
In most cases the buyer has only to put down a 10% deposit. This is a small price to pay for a unit which, by the time it is handed over, may already have increased in value by 10 to 15%. This is especially likely if it is in the right price bracket and in a high demand area. What is more, such projects will, I am absolutely confident, continue to appreciate in value at a rapidly increasing rate over the next few years.
As our Managing Director, Tony Clarke, has recently pointed out in another statement, another factor which is so easily overlooked by the investor buyer is that, initially all profits are being made on the bank’s money – not on what the investor has paid in. This is an unusual and unique feature which makes property investment so satisfactory and attractive and it is this factor which has enabled many Rawson clients to build up big portfolios despite initially having very few resources.
At Rawson Developers, they have clients who have bought into seven, eight or even more developments over the years and are the owners of multi-million rand portfolios today which have proved largely recession proof so far and are increasing annually in value of at least 6% and in many cases 8%, 9% or 10%.