South Africa’s been a solid place for property investment since the 1994 elections. But, is this still true in light of the global instability? Well, let’s look at the positives and the negatives, and see why SA’s crucially positioned in the property investment arena.
In the October mini budget, Manuel gave a glimmer of good news for residential property sellers as high interest rates put a lid on volumes and prices. According to the minister, government remains committed to spending money on housing and infrastructure. This bodes well for property investors. Improved infrastructure creates demand and increases the value of properties in these areas.
With interest rates set to come down, Manuel’s dedicated to bring inflation back to the targeted band of between 3% and 6%. In his February budget, Manuel said that a fiercer global financial storm than anyone could have imagined had arrived – but that South African policymakers had put plans in place to try to ensure stability until the thunder passes. So far, we’ve weathered the international collapse fairly well and are in a good position to offer ample returns to long-term property investors.
2010 World Cup – The long-term benefits are clear
In 18 months, the biggest sporting event in the world – even bigger than the Olympic Games – will be hosted here in South Africa. According to property expert, Gert Coetzee, preparations for the World Cup have already transformed the infrastructure of the cities where games will be played. Properties around these stadiums will see their value increase. These include Soccer City and Ellis Park in Johannesburg, King’s Park in Durban, Free State Stadium in Bloemfontein and Green Point Stadium in Cape Town.
According to Lloyd Cornwall, Managing Director of Pin High Property in South Africa, our country’s already made a name for itself in the global property market. He added that property here is still undervalued but continued investment in the lead up to the World Cup will balance the market once again.
Not only are the skylines of our cities changing, the influx of international investors and visitors to the country in 2010 is set to bring a massive cash injection into SA. The Business Day reported that property investors will be reaping the benefits as the demand for housing and rental property increases. Even though the World Cup will only last for six weeks, the massive improvements to the infrastructure will last decades.
The 2009 General Election – Free, fair and lucrative
Since South Africa became a democracy, our elections have been praised as free and fair. Government doesn’t expect next year’s election to be any different. It’ll once again affirm our democratic status to the world. A peaceful election process will attract international investments and increase the popularity of living in South Africa.
Fast-growing middle class
Investors tend to forget that we have the fastest growing middle class in the world. Professor John Simpson of the UCT/Unilever Institute revealed an unprecedented movement in South Africa’s property market this year. Statistics show that the growth from the emerging black middle class isn’t limited to first-time buyers, but also comes from existing property owners who’re moving up the ladder and establishing themselves in the middle class.
The combined spending power of the emerging black middles class is currently sitting at R180bn. If you compare this to the growth of black buying power 15 months ago, it accounts for over half of the buying power in the country.
The negative factors
Rampant crime – A double edged sword
High levels of crime means an increasing demand for secure complexes and neighbourhoods. The demand for security currently exceeds supply. The positive is that it adds a few extra capital growth points to your investment properties in secure complexes.
The National Credit Act (NCA)
The NCA might be the worst blow ever handed to our property industry. SA Home Traders reported that we now have about 50% fewer estate agents than we did in June 2007, when the NCA was implemented. Property sales have all but come to a standstill and people are finding it terribly difficult to finance their homes with the stringent loan requirements implemented since the birth of the NCA. But, the introduction of the NCA has also protected us from ending up in the same sinking ship as the US and the UK. Its implementation has brought excessive borrowing and frivolous spending under control.
Interest rates – Staying up or coming down?
Elevated interest rates definitely played a role in slowdown in the property market coupled with the NCA. Many investors have found it difficult to afford their bond repayments and have resorted to selling. But, this isn’t anything new and those in the know advise investors to have plans in place to counter rising interest rates before this happens. The good news is that it looks like interest rates are coming down.Food and petrol prices are already falling, and 2009 might see interest rates come down by as much as 3%, assuming the rand doesn’t fall any further. This will bring much needed relief to consumers and homeowners.
The outlook for 2009 is looking more positive. It’s clear that now is the time for investors to plan their next move. Investing in property now presents you an opportunity to cash in on the expected boom in property prices over the next couple of years and pick up a property while prices are under pressure.