Affordable Housing market still offers a good bet
The huge demand for housing in South Africa in the low to moderate income level, combined with declining rates and relative political and economic stability, continues to drive investment in the affordable end of the market
And the medium term outlook for property in SA remains positive, despite global economic turmoil and its impact on emerging markets.
This is the view of Soula Proxenos, Managing Director of International Housing Solutions (IHS). The company manages one of the largest non-Government housing funds in South Africa, the R1,3 billion South Africa Workforce Housing Fund and already has a number of housing projects underway and more in the pipeline.
Proxenos, who is based in London but is responsible for I H Ss global and SA operations, acknowledges that much of the sheen has come off emerging markets, but argues that these markets are not necessarily alike and are responding differently to the economic recession.
If we look at the so-called BRIC countries Brazil, Russia, India and China it is readily apparent that Brazil is holding up reasonably well, Russia is in terrible shape and India is overheated and correcting sharply while being impacted by large high-profile scandals. As for China, we are all holding our breath as it increasingly assumes the role of engine to the worlds economy, its fate is ultimately ours too, she says.
In South Africa there are a number of fundamentals in place which
favour continued growth in the affordable housing segment.
In addition to the huge gap between demand and supply, SA is relatively
politically stable and has a transparent and good environment for doing
The UK market has been hit more negatively and subjected to a much slower recovery than the US market, where the agencies - Fannie Mae and Freddie Mac - fund very large portions of the mortgage and development markets.
Proxenos says that South Africas finance system most closely resembles the UK debt market.
However, IHS operates on an equity funding basis in partnership with developers rather than on a debt basis, thereby sharing the risk and reducing the developers exposure.
Proxenos says that the immediate future of the residential real estate market in SA will depend on the banks continuing to lend for construction and end user finance. She believes that the current short term downturn offers good opportunities over the longer term.
In the medium term the banks will be back to business as usual. When that happens, investors and developers who have taken advantage of the opportunities in the current dislocated market will reap the benefits, she concludes.
Article from: www.eprop.co.za