2011: A Good Year To Invest In Property

Private Property South Africa
Peter Gilmour

If you have access to cash or financing, there has never been a better time to invest in the property market than now. Even though house price growth during the second half of 2010 slowed down significantly, the worst seems to be behind us and 2011 promises to be a good year for property investments. An average house price growth of 2,6% was reported at the end of 2010, which is a significant year-on-year drop that has been largely accredited to various factors, including slow economic growth, job losses, stagnant consumer confidence and fewer interest rate cuts than 2009. According to November figures released by Absa, in real terms small houses (80m² to 141m²) reported a y/y growth of 1%, while medium-sized houses (141m² to 220m²) reported a 0,3% decline, and large houses (221m² to 400m²) reported an even bigger decline of 2,7%. These results are fair as a slow and steady recovery was predicted and different market sectors are expected to have different recovery patterns. However, economists predict that although home values started at a very low level in 2011, prices are expected to gradually improve during the course of the year on the back of low interest rate forecasts and real economic growth, which is expected to pick up to almost 4%, an improvement of 1,2% compared to that of 2010. This should improve employment levels and household income and reduce the level of household debt.The property market is currently stabilising after the upset caused by the recession, and over the next 12 to 18 months, I believe that although the market will improve marginally, it will follow a rather flat trajectory, ready for a steady climb from the middle to the end of 2012 and going forward. Essentially, what this means for potential buyers, is that all the right conditions are currently in place and the time is ripe for investment.There are four main reasons why the best time to buy a home is now:Low prices: With an oversupply of stock versus demand, we are definitely in a buyers market. Those who are in a position to buy property should certainly make the most of the current prices, as long as it is seen as a long-term investment. There are also a host of distressed properties on the market which offer buyers exceptional terms and great value for money.Interest rates remain at a 30-year low: Home loan interest rates are currently lower than they have been since 1974, and I predict that they will remain stable within the narrow 9% to 10% band for the most part of 2010. This makes the option of homeownership even more attractive and more affordable.Buy-to-let makes good financial sense: Property rentals will remain a popular choice for many during 2011 as access to finance remains a challenge for many. The reality is that rentals remain the only option for those who don’t qualify for a bond, those who are saving up for a deposit in order to qualify for a home loan or those who are looking to down-size in order to regain their financial footing. This means a high demand and good returns for those who have invested wisely in buy-to-let properties.Availability of distressed properties to purchase:More and more distressed properties are being released to the market by the four major banks, which gives property buyers a great opportunity to purchase a home at below market value. In some cases purchasers who are investing in a distressed property receive assistance with transfer and bond costs and also obtaining mortgage finance from the banks.Looking at the current conditions holistically, those who can afford to invest in property should make hay while the sun shines. The market has hit a plateau and general economic uncertainty during the recession has translated into the fact that buyers have more options, more stock to choose from, more time to do their research and to assess the affordability of the property they intend to purchase. With this in mind, and if you have done all your homework and can afford it, seriously consider buying a property now and you will be happy you were bold, yet prudent when the opportunity showed itself.

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