IT’S A BUYER’S MARKET

If you have cash in hand, now’s the time to ignore negative sentiment about the country’s economic future and buy property before prices start moving up again

SOUTH Africa’s dismal economic performance is nothing to celebrate, but for buyers with cash in hand, the situation could still present good opportunities.

In addition, figures released by Statssa last week reveal that the construction and real estate sectors are among the best performing, says Berry Everitt, chief executive of the Chas Everitt International Property Group.

For this reason he says buyers should “ignore the negative sentiment” about the country’s economic future and buy 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. So buying is exactly what investors should be doing now, not sitting on the fence waiting to see what everyone else is going to do.”

Everitt says in property following the crowd is a “bad idea” because by the time general sentiment turns positive, prices will usually already be moving upwards quite rapidly. Much of the opportunity to maximise gains will then be lost. And that turnaround, he believes, is only a few months away.

“Property investors need to keep in mind that South Africa still has a significant structural shortage of square meterage to accommodate its 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.”

Quoting Warren Buffet, Seeff’s Andreas Wassenaar says: “The most common cause of low prices is pessimism – sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.”

And South Africa, Wassenaar says, is at the “low ebb of a market characterised by pervasive pessimism”.

“The smart money is taking advantage of this by buying aggressively.”

During a recession, unemployment increases and spending power declines, and in the world of real estate, says Adrian Goslett, regional director and chief executive officer of Remax of Southern Africa, this translates into a buyers’ market where the supply of properties outweighs the demand from buyers.

“Unable to afford the costs of a mortgage, more properties enter the market, with some falling claim to bank repossession and distressed property sales. There are also fewer buyers on the market during this time as many simply will not be able to afford the costs of purchasing property. While this does not spell good news for sellers, buyers who have planned for the possible recession will be able to purchase property at much lower prices.”

FNB’S August Property Barometer shows that 14.7% of properties on the market by the second quarter of this year are being sold due to financial pressure. This is up from a multi-year low of 11% in the third quarter of 2014.

“Understandably, this motive should increase in significance in a ‘downturn’ and vice versa in better economic and property times,” says FNB property analyst John Loos.