A steady growth of buy-to-let investors and a renewed interest in property as an asset class are among the clearest trends now evident in the South African residential property market.
The JSE Securities Exchange has proved surprisingly resilient (with a share index again above 4 000) but there is now concern that it could become more volatile in the coming year. If this happens it would be in response to the growing concern that the country is being poorly governed and lacks dedicated leaders who understand what an emerging economy needs.
Factors that show evidence of the unsatisfactory state of affairs currently prevailing include high unemployment, which remains at roughly the same level seen for the last 19 years, strikes, which are eroding investor confidence not only locally but overseas, high levels of unsecured debt, a drop in manufacturing output, the difficulty in finding markets for our exports, which have to compete with those from high productivity, low labour-cost countries such as China, corruption, which continues to go unpunished, a disappointing growth rate that is still hovering below 3%, and the likelihood of a further downgrading of our economic status by the major rating agencies in the next few months.
This type of uncertain scenario always leads to people looking to property – and that is exactly what is happening now. This is understandable in view of how well property – especially residential property – has performed in the last 10 to 15 years.
For example, the Rawson Property Group has clients who bought units in Parklands for R250 000, which have appreciated to R750 000 in 12 years. During this time, rents have risen at a rate of 7% to 8% per annum and excellent returns are being achieved on brand-new units from the day of handover. What is more, the rent increases seem likely to continue.
While it is almost certain that the spectacular rises in property values are now a thing of the past (and we have to acknowledge that many of those who invested from 2007 to 2009 have had to accept quite severe losses) it is also fair to say that price stabilisation, right across the board (even in the upper-bracket houses), is now the trend. If, however, investors are concerned about South Africa’s position and are looking for a safe haven, residential property is quite clearly the place to be.