Best in­vestors’ op­por­tu­ni­ties lie in houses in need of ren­o­va­tion

Weekend Argus (Saturday Edition) - - PROPERTY -

SOME prop­erty pro­fes­sion­als claim that, pro­vided you are tak­ing a longterm view, there is never a bad time to buy prop­erty, and I sup­port that view, says Bill Raw­son, chair­man of Raw­son Prop­er­ties.

Nev­er­the­less, says Raw­son, his­tory will show that the first half of 2010 will be a par­tic­u­larly good time to get back into the res­i­den­tial prop­erty mar­ket – al­most as good as the 2004/06 era.

“There are four fac­tors work­ing in favour of buy­ers right now,” he says. “Th­ese are that sell­ers have at last be­come re­al­is­tic and are ac­cept­ing lower prices or tak­ing their homes off the mar­ket; prices are on av­er­age 20 per­cent down in metro- poli­tan ar­eas and 50 per­cent down in coastal and coun­try ar­eas com­pared to the boom pe­riod of 2007; and val­ues are, at last start­ing to move up.

“At the mo­ment, this is only at 2 per­cent year-on-year, but this rate is likely to in­crease to be­tween 5 and 8 per­cent be­fore the end of 2010; and the short­ages of stock (caused at least par­tially by a lack of new d e ve l o p me n t ) wi l l p u s h p r i c e s higher still in the sec­ond half of 2010 and 2011.”

Raw­son be­lieves the best deals and the great­est growth po­ten­tial prob­a­bly ex­ist in Park­lands and Ta­ble View on the West Coast.

“Well-built three-bed­room homes with about 120m of floor area are avail­able at R750 000, but can pro­duce rentals of be­tween R5 000 and R6 000 a month.

“This means it is of­ten pos­si­ble for buy­ers to cover their full bond costs within 24 or 36 months of buy­ing, pro­vided the in­ter­est rates re­main low.”

Raw­son also tips the north­ern sub­urbs, par­tic­u­larly Brack­en­fell and Dur­banville, where prices are as much as 30 per­cent be­low to­day’s re­place­ment val­ues, a sure sign that they will be­gin to move up rapidly.

“Al­though still frus­trated by the banks’ tight poli­cies on bonds, de­mand is now par­tic­u­larly strong in the R300 000 to R800 000 range and also still much in ev­i­dence up to R1.5 mil­lion. Sales of higher prices prop­er­ties are still tak­ing place, but more slowly.

“ Ta k i n g t h e s e f a c t o r s i n t o ac­count, Raw­son De­vel­op­ers in 2010 will be fo­cus­ing on the five projects they have in the pipe­line on the sub R1m mar­ket and most of the units will be com­pact sec­tional ti­tle units suited to up­wardly mo­bile black buy­ers and other first-time prop­erty own­ers.”

Raw­son says the best op­por­tu­ni­ties for buy­ers are likely to be found not in any par­tic­u­lar area, but in houses in rea­son­ably good ar­eas re­quir­ing ren­o­va­tion.

He gives an ex­am­ple of a large old Muizen­berg home on the mar­ket through the Raw­son Muizen­berg fran­chise.

Raw­son says any­one pre­pared to put ef­fort into this home or many sim­i­lar homes for a year or longer could add be­tween R1m and R2m to its value.

S ay s R aw s o n : “ W h e n I w a s younger many cou­ples worked two or three nights a week and part of their week­ends on old homes – and reaped the re­wards with good sales prices.

“I be­lieve there is an op­por­tu­nity to do this again right now and those with a lit­tle ready cash for ren­o­va­tions should move in fast.

“Also of­fer­ing good op­por­tu­ni­ties are the many prop­er­ties now un­der threat of re­pos­ses­sion. It is tragic to see the prices at which some peo­ple now have to sell their homes – but for buy­ers, of course, this is a bonanza, the like of which will not oc­cur again soon.”

Raw­son be­lieves 2007 prices will not re­turn for a very long time to come.

“As long as the banks abide by the Na­tional Credit Act cri­te­ria, which are still re­sult­ing in a 40 per­cent re­jec­tion rate (as high as 70 per­cent in some ar­eas), no boom will ma­te­ri­alise.

“This should not be taken as crit­i­cism of the act. Al­though it could be less strin­gent, its over­all ef­fect has been ben­e­fi­cial.”

Raw­son says prop­erty in­vestors should in­vest for the long-term.

“The grat­i­fi­ca­tion of a quick inand-out profit af­ter a year or two should be avoided.

“We had a case in this com­pany where some 40 years ago a mag­nif­i­cent home on one acre with five bed­rooms, staff quar­ters and a swim­ming pool was sold for R50 000. To d ay i t i s p r o d u c i n g a r e n t a l in­come of over R20 000 a month.

“I am al­ways re­luc­tant to sell any unit in my prop­erty port­fo­lio built up over the 30 or more years that I have been in­volved in prop­erty. In the few cases where I have sold, it has usu­ally been to buy into com­mer­cial prop­erty,” says Raw­son.

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