Investors turn to property
THE INVESTMENT potential of property is beginning to look decidedly more positive this year, says Gerhard Kotzé chief executive of ERA South Africa.
Kotzé says the market has “definitely bottomed-out” and “although there will probably be no fireworks in the next 18 to 24 months, the foundations are in place for a return to sustainable growth”.
In the third quarter of last year, gross domestic product (GDP) rose 0.9 percent after contracting for the three previous quarters.
In addition, the Reserve Bank’s leading indicator rose 4.2 points to 116.6 in October, following a 2.6point rise in September. This indicat o r c o mbine s s eve r a l measure s i ncl uding manufacturing hours worked, new building plans approved, vehicles sold as well as share and commodity prices, and is regarded by economists as a reliable forecaster of the economy in six to nine months’ time.
“Following these developments, economists are predicting that nominal house prices will rise by 10.8 percent in 2010, followed by 12.1 percent in 2011 and 12.7 percent in 2012.
“In nominal terms, house prices should rise by 30 percent or more over the next three years – a far cry from the huge annual increases we had at the height of the last property boom, but an indication of a healthier, more sustainable market.”
Kotzé says signs at the “coalface” already indicate the changing mood, with increased demand across the price spectrum. But there are still problems with availability of bank finance, he says.
“ Me a n wh i l e , i nve s t o r s h ave appeared on the scene again, often with cash offers, and the supply of housing stock is being steadily whittled away, setting the scene for the entry of more developers into the supply equation. However, their competitiveness with existing prope r t i e s c o u l d b e j e o p a r d i s e d by unwarranted increases in building material costs.”
He advises buyers to ensure any purchase is viewed as a medium-to long-term investment of five years or more.