Ig­nore ‘re­ces­sion’ talk - buy real es­tate

George Herald - Private Property - - Property News -

South Africa may be in a "tech­ni­cal" re­ces­sion, but a closer anal­y­sis of the fig­ures re­leased by Stat­ssa this week shows that the econ­omy is ac­tu­ally head­ing in the right di­rec­tion and that the con­struc­tion and real es­tate sec­tors are among those per­form­ing best.

That's the word from Berry Everitt, CEO of the Chas Everitt In­ter­na­tional prop­erty group. He says that prop­erty buy­ers and in­vestors should be ig­nor­ing the cur­rent neg­a­tive sen­ti­ment about South Africa's eco­nomic fu­ture and pur­chas­ing more prop­erty as soon as they can.

"The real es­tate mar­ket is cur­rently de­scribed as a 'buy­ers' mar­ket' be­cause sales are slower over­all and prices are static or only grow­ing very slowly in most ar­eas. Buy­ing is ex­actly what in­vestors should be do­ing now, not sit­ting on the fence wait­ing to see what ev­ery­one else is go­ing to do.

“In prop­erty, as in any other eco­nomic sec­tor, fol­low­ing the crowd is a bad idea, be­cause by the time gen­eral sen­ti­ment turns pos­i­tive, prices will usu­ally al­ready be mov­ing up­wards quite rapidly and much of the op­por­tu­nity to max­imise gains will be lost."

And that turn­around, he be­lieves, is only a few months away.

"The fig­ures re­leased by Stat­ssa this week show that GDP de­clined by 0,7% in the sec­ond quar­ter of this year, com­pared to a de­cline of 2,6% in the first quar­ter. This means that the econ­omy was al­ready do­ing bet­ter in the sec­ond quar­ter, de­spite the ef­fects of the VAT and fuel price in­creases that took place in those months. In ad­di­tion, the year-on-year fig­ures show a GDP in­crease of 0,4% in the sec­ond quar­ter com­pared with the same pe­riod of 2017, which is min­i­mal growth but at least pos­i­tive.

“Now we are al­ready two-thirds of the way into the next quar­ter and if those pat­terns con­tinue, we could tech­ni­cally be in pos­i­tive ter­ri­tory by the end of Septem­ber."

Everitt says he ex­pects the re­cov­ery to be bol­stered as the re­cent for­eign in­vest­ment com­mit­ments ob­tained by Pres­i­dent Ramaphosa be­gin to flow and the eco­nomic stim­u­lus mea­sures soon to be an­nounced take ef­fect.

"We are also look­ing for­ward to the in­vest­ment sum­mit to be held in Oc­to­ber and to hear­ing what the fi­nance min­is­ter has to say about pol­icy go­ing for­ward in his mid-term bud­get speech."

Mean­while, he says, it is in­ter­est­ing to note that the fi­nan­cial, real es­tate and busi­ness ser­vices sec­tor, which ac­counts for 20% of South Africa's GDP, grew by 1,9% in the sec­ond quar­ter, and that con­struc­tion, which ac­counts for an­other 4% of GDP, was up by 2,3%. "This puts into per­spec­tive the much-re­ported fact that agri­cul­ture, which ac­counts for 4% of GDP, de­clined by 29,2%. In ad­di­tion, prop­erty in­vestors need to keep in mind that South Africa still has a sig­nif­i­cant struc­tural short­age of square me­ter­age to ac­com­mo­date our grow­ing pop­u­la­tion, and that there is high and ris­ing de­mand for de­cent rental hous­ing close to city cen­tres and other em­ploy­ment hubs be­cause of the ris­ing cost and in­con­ve­nience of trav­el­ling to work."

Is­sued by Chas Everitt In­ter­na­tional

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