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Always look at property in the long term - a short term view will create false impressions

The last few years have seen detailed property statistics flood into the media at a pace never before experienced in South Africa, but as these usually focus on the latest fluctuations, not the big picture, they have often create misunderstandings and misconceptions. This was said recently by Bill Rawson, Chairman of the Rawson Property Group.

“A little knowledge is a dangerous thing” is never truer than in interpreting property figures, said Rawson, and property economists can add to the confusion by drawing different conclusions from roughly similar data, which are then dramatised by the press.

“Comparing what is happening now to a year ago,” said Rawson, “can make a balanced stable market look like a disaster. Similarly, what is happening now can look like a boom compared to a year ago.”

“The public tend to look at quarterly and year-on-year analyses and become optimistic or pessimistic as a result, however in property the truly relevant figures are those that cover a period of eight years or more.”

Short term forecasts, said Rawson, often do not take into account such factors as regional trends (e.g. the Cape winter, which traditionally depresses the market), the six month lag before a change in interest rates is felt (a 0,5% rise or fall will increase or decrease sales by 5 to 7% a year later) and the changing patterns in buying (e.g. the Y generation, born after 1970 will typically change houses in two to three years of the first purchase, immigrants within four years and families between five and seven years).

However, he added, if you look at the long term statistics in South Africa, all of these variables are accounted for.

“The spectacular rise in sales and prices, from 2003 to 2008,” said Rawson, “was followed by the slump of 2008 to late 2010 but since then the sales figures show that the market is slowly coming back to life. Currently the market is less active than before but it is also more stable and, therefore, more sustainable.”

Three years from now, said Rawson, economists will most likely be saying that the steady, albeit slow, growth period was better for the SA property market than the previous boom.

The underlying message, he said, is that in property, there are few seriously bad times to buy if you are taking the long view.



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