Best investors’ opportunities lie in houses in need of renovation
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.