Still many positives

However, it is important to retain a balanced perspective rather than become mired in negativity, as a downturn in the property cycle presents opportunities for certain sectors of the market, says Laurie Wener, Pam Golding Properties’ MD for the Western Cape, operating in the Cape Town metropolitan area.

“Even at a market downturn’s lowest ebb there are positive or potentially beneficial aspects which inevitably emerge, which can be capitalised on by those with vision and the financial means,” she says.  “Rather than continually fuelling negative sentiment and eroding future outlook, we should be reminding consumers of the longer-term opportunities which arise in the market, and encouraging them to take advantage of these”.

“Fortunately, South Africa is not in as dire a situation as some economies.  For example, while our banks have been compelled to apply stringent fiscal policy they have remained solvent and able to provide loans - albeit on a more limited basis.  Bear in mind that access to finance or cash is not an issue for everyone, which is borne out by the fact that consistently, in recent years over half of Pam Golding Properties Western Cape region’s transactions have been cash sales.  In addition, and on a further positive note, we have recently seen an upsurge in high end sales, a sector of the market which generally is able to sit out recessionary trading conditions. This includes luxury properties sold by PGP for R35 million, R27 million, R18.7 million, R18.5 million, among others, in sought after suburbs of Cape Town. Furthermore, we are seeing the return to our shores of international investors, particularly along the Cape’s Atlantic Seaboard.”

Wener says it is evident that there are many people – more than is generally appreciated – who have a relatively high level of assets, who are still generating income and enjoying job security.  “For those who require and qualify for a mortgage, interest rates are at their lowest level in several decades, enabling them to gear their property purchase.  However it’s important to do so conservatively, allowing for contingencies such as future increases in interest rates.

“Property remains a sound long-term investment vehicle with the potential for sound capital growth over the medium to long term (five to 10 years or more).  Property ownership remains one of the primary measures of wealth in our society, and should not be overlooked just because the market is not currently bullish.  While the pre-2007, heady days of speculation are behind us, astute investors are still diligently taking advantage of the market, conservatively but actively making sound acquisitions which afford good value for money in relatively recession-proof areas such as Cape Town’s Southern Suburbs and Atlantic Seaboard.  Those with the means to purchase and retain their acquisition for an extended period, do so with the least risk and the best opportunity for sound capital growth,” she says.

“Currently there is a wider than ever selection of homes to choose from at very competitive prices, and this may well be the rare opportunity to secure a home in the prime area to which you have always aspired. Renovations and redecorating can always wait till later if desired. Bear in mind that selling a home and buying another in a relatively short time frame, i.e. under the same market conditions, helps protect against the effects of market fluctuations.”

High activity in rental market.

Wener says discerning investors are well aware of the current high demand for rental properties.  “Rental markets remain excellent. Effects of the recessionary environment, such as general negative sentiment, lack of cash liquidity and job insecurity, coupled with a desire to liquidate assets and reluctance among corporates to tie up capital in residential property, contribute to a sustained high level of activity and good returns in the rental markets. This is further boosted by returning expatriates, most of whom seek rental property – at least initially i.e. before purchasing property.”

She says well-positioned, lower-priced, multiple units will produce higher rental yields than single, higher-priced properties. Ultimately, these tend to facilitate quicker and easier conversion of the fixed asset to liquidity, and are generally easier and less costly to maintain. However, higher-priced properties can also present sound investment opportunities as a prime situated, high value, luxury home will eventually yield substantial capital growth.

Wener adds that there is currently a wealth of investment opportunities available along the Cape West Coast, from Cape Town through to Langebaan.  “Investors taking a longer-term view on investment propositions are advised to consider the wide selection of holiday homes and vacant erven in this region, as prices are currently extremely competitive, with significant potential for growth. Many of these properties are located in pristine areas of great natural beauty which are also easily accessible from the city, particularly as infrastructure is developed - making these viable alternatives for permanent residence as well as leisure use.”

Retirement options

For those looking further ahead, retirement facilities have changed significantly in recent years, and are no longer reserved only for the elderly and infirm.  Wener points out that there are a number of well-run, attractive complexes offering outstanding facilities and a wealth of activities for residents to enjoy, keeping them active and alert into their golden years.  The factors driving purchase are different for this market, she says, as there is more to consider than capital growth.

“The most popular purchase option in these complexes is a Life Right, which is not an investment in itself, she says.  “However it does offer those on fixed incomes the opportunity to secure their future, buying the right to live in their own chosen home for the rest of their lives, in exchange for a once-off capital cost.  Levies and maintenance costs are heavily subsidised by the owners of the scheme, thus protecting the retiree’s capital and limiting erosion of his/her disposable income.  The earlier one purchases a Life Right the better, the less costly it will be and the sooner the beneficial financial effects will come into play.  In fact, the entry threshold for many of these schemes is now as low as 50 years of age,” adds Wener.

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