South African residential property is still undervalued

Bill Rawson, Chairman of the Rawson Property Group, recently had some advice for those in search of a house, but determined not to pay higher than ‘true market value’ – however that is assessed.

“I have myself on several occasions paid high for a property, especially where I could see a real value and where the seller was obviously in a position to hold on for a high price, even if it meant he had to wait a year or two.  The good news, however, is that within two or three years (sometimes less) on most of these high priced properties the market did, in fact, catch up and the price paid then began to seem reasonable.  Furthermore, from there on the value of such properties has usually increased steadily because, having been carefully chosen, it does have certain merits which are widely recognised.”

“The second fact that should be borne in mind,” said Rawson, “is that despite much talk of the revival in property values (which by and large is true), South African home prices are in my view low, especially in relation to international market prices.”

Certain of the Cape Peninsula’s outlying precincts, said Rawson, (he mentioned Fish Hoek, Noordhoek, Kommetjie, Bloubergstrand and Durbanville), still offer excellent value for money.

“I believe that prices in these areas right now are set to rise by at least 10% per annum over the next five years.  With interest rates still at affordable levels, it makes no sense to delay a property purchase, even if you do have to go a little above what you consider to be its true market value.  In Cape Town, or for that matter certain Johannesburg outlying suburbs, I maintain prices are still exceptionally reasonable and although demand has picked up we are not yet in any way in a price bubble situation.”

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