Real Estate Roulette

Private Property South Africa
Lea Jacobs

Experts have been telling us for years to buy in a downturn if we want to capitalise on an investment. They are right of course; buying at a lower price is important for those who want to make a profit. However, is it the only consideration home buyers should be taking into account? If truth be told, it is not only when you buy, it's where you buy that really counts.

Generally speaking, first-time home buys tend to be practical decisions and the only criteria the buyer looks for is getting a roof over their heads for the lowest sum of money possible. From there on, things become a little more complicated as the urge to live in a better area that fits in with their social needs and improving finances grows. The cycle has then begun and from there on in, the average Joe will continue to improve his lot by reinvesting in bigger and better properties until he retires. He will of course make money over the years, but buying and selling in the same market means that the homeowner seldom makes any real profit on the deals - he merely finances his next purchase.

The savvy investor may well have started off in exactly the same way, but in contrast, soon realised that a good buying decision would make him a great deal of money. Owning one home is not enough for this type of individual and he will soon start investing in what he considers to be lucrative markets and, more often than not, will start to make 'real' money fairly early on.

Then there are those who, while unwilling to become investors per se, manage to turn a profit (and an extremely decent one at that) every time they upgrade. What's their secret? Is it science or art, or perhaps a bit of both?

It seems that crystal balls, a solid gut instinct and keeping a firm eye on what is happening in provincial and local government and general business trends is definitely a step in the right direction. The North Coast of KwaZulu-Natal is a case in point. The sleepy coastal towns and villages that dot the Indian Ocean coastline were primed for success long before the shopping centres and business parks started popping up. Umhlanga, with its large tracts of agricultural land, was more than ready for the developmental explosion and, given that central Durban was fast becoming a no-go area for big business, was ideally placed to fill the gap. Those who realised this, and who weren't out to make a quick buck but were prepared to sit back and wait patiently for the boom were not disappointed.

Ask anyone who has invested in a Ponzi scheme and they will tell you that the 'quick buck' scenario seldom happens, or works out as planned. It's exactly the same in the property market. Yes, the odd investor may have a lucky break and make a great deal of money in the short term but this is the exception, not the rule.

Of course there are also cases where people have bought property waiting for the boom and years later are still sitting with a 'worthless' property. The King Shaka Airport, situated close to Ballito, is a prime example of this. First mooted in the early ’70s, there were undoubtedly investors who rushed in, thinking they were going to make a bundle of cash. Naturally there were major opportunities there, but, given that the airport was only built some 40 years later, these initial investors had an awfully long wait.

So it seems if you wait too long to invest, you miss the boat. If you hop on the boat too early, you may well need a life raft and if you do nothing but sit back and wait for your ship to come in, you'll end up with very little.

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