'Investors coming back into the property market'

The relatively greater stability and simplicity of property is pulling buy-to-rent investors back into the market, whilst the fact that there are still many units for sale will keep the prices down for the time being.

That's against the background of the JSE Securities Exchange continued volatility and probable further drops as a result of the Eurozone/UK financial problems.

"Currently," said Greeff Properties CEO, Mike Greeff, "I estimate that investors rather than owner-occupiers now make up 2,5% of our sales - and I am sure that this percentage will increase in the next two years to ±15%. At the peak of the property boom this figure was as high as 25%."

The big attraction of property, said Greeff, ("People have been saying this for centuries"), is that it enables the buyers to see exactly what they are getting and to have a large measure of control over the investment.

"It goes without saying that this is not the case when you invest in shares," said Greeff. "What is more, if you have spare cash you can improve the property or add to it in many ways to increase its profitability. You can even, and this has happened quite a lot recently, demolish it and rebuild it, in the process often doubling its value."

Asked if he can justify a previous statement that property is on the whole far more stable than shares, Greeff said that over the last recession very few Cape precinct homes dropped in value - if they did, it was by only a few percent.

"In the last 20 years there have, in fact, been only two periods in which house values fell noticeably and both of these were relatively short lived."

In the late 1990s inflation was soaring, interest rates rose to 23% and unemployment reached totally unacceptable levels. Not even property could bear up under economic conditions of that nature. Similarly, in 2009, after a really spectacular boom, we also saw a drop mainly in the northern areas of the country, but it did not last long. There are now already signs that a slow, unspectacular recovery will take place throughout this year.

"With our economy's growth rate now predicted to come close to 3% and with housing very much in short supply throughout the country, the prospects for good returns on property, particularly in the lower bracket, can only improve and this, I believe, is the reason why we are seeing more investors coming back into the market."

Posted at 11:11AM Jun 09, 2010 by Editor in Residential  |