On the balance of probabilities, the property market is bound to improve now
Category Blog
We all know that the South African residential property market is largely driven by sentiment - a pendulum that swings both ways.
It was therefore heart-warming to note, in a recent BizNews piece by London-based Alec Hogg, that Europe's biggest asset manager, 200-year-old Schroders, still has its investment eye on South Africa.
So much so, that our country is listed by Christopher Wyke, Schroders' Emerging Markets Bonds veteran, as one of his "Magnificent Seven".
Schroders, says Wyke, has been steadily increasing its exposure to SA bonds.
I believe it is this kind of steadily growing interest that will push the balance of probabilities toward an increasingly attractive investment environment. The environment for investment is improving day by day slowly. There are so many small positive indicators....
- Petrol price will drop which will take some pressure off the consumer.
- Tourism will improve at this time of the year especially as Cape Town has moved out of its severe water crisis.
- Commitments to invest in South Africa are increasing, from abroad and from local corporations.
- South Africa remains incredibly cheap now with the rand so undervalued.
- Property is the cheapest in decades.
- Sound leadership and management is being introduced through ongoing political and other changes.
- There are billions of Rands in the private sector (banks are flush) ready to be invested once green shoots emerge.
- Goldman Sachs, one of the world's most profitable banks, has now opened in South Africa.
Lowest prices
Recent home buy/sell prices have seemingly been at their lowest level since the start of my 35-year career in marketing predominantly higher-end residential real estate.
However, indications are that this low-price scenario is now well poised to change. The green shoots of a turnaround are clearly beginning to take hold. Activity is improving. The market now 'feels' fractionally better as the sales flow gathers momentum - albeit slowly at this stage.
Underpinning this process is a combination of sentiment-building factors. They include:
- A current president who is a process-driven person with a history of doing things
- A new-look political leadership that, although perhaps not exactly pristine at this stage, is nevertheless seemingly geared to manage, responsibly, the plethora of issues and challenges it faces. Not least of them is the controversial land reform issue, which most opinions suggest will be handled responsibly without damaging the economy
Buy opportunities abound
Another positive factor is that our country - and, not least, the homes market - is at last coming to grips with the detail, and sheer magnitude, of the financial and reputational damage that has been caused by the notorious 'State Capture' conspiracy.
It was - and remains- a financial tsunami that virtually blew South Africa off the global financial/economic radar screen. It certainly impacted negatively on home buy/sell activity and sentiment - with a knock-on detrimental effect on home values and sales.
All this has created an unbelievably ripe/cut price environment to buy property.
Black Friday has existed in the homes market for some time now. Right now, buy opportunities have seldom been better for home seekers and buy-to-sell investors.
Author: Ronald Ennik
