How platinum boosts property
Property markets in platinum-mining areas are benefiting from the economic spin-offs of the boom in the price of the precious metal.

According to Gerhard Kotzé, CEO of the ERA property group, numerous centres along the platinum arc of the Hans Merensky Reef, which extends roughly from Rustenburg through to Lydenburg, are in line for the benefits either directly or indirectly as the platinum price soars.

“The boom has created demand for all manner of goods and services, and in turn, it is generating the need for commercial and industrial space, warehousing, and of course, residential property.

The multiplier effect

“The economists are fond of calling this the multiplier effect, meaning that for every $10 an ounce that the platinum price increases, there is an incremental boost to the platinum mines’ profits.”

As a result, more spending power is vested with the mines, which in turn translates into increased money in circulation in the macro economies of these towns. This boosts employment creation and growth in personal wealth among entrepreneurs, businessmen and the man in the street.

“And none of the economic activity that this all generates could be supported of course, without housing in all its forms, from entry level properties to up-market mansions.”

China's demand

The downside is that property markets in these areas are however sensitive to the platinum price, but currently that dependency is working in favour of the market with prices in “platinum towns” generally escalating.

As for the platinum prospects, analysis indicates that the demand for the metal should remain strong, with the likes of China having developed an insatiable appetite for the metal.

Kotzé says: “Admittedly for some of these platinum towns good growth in property values has been off a low base, but for developers and investors that’s of little consequence and what counts is the good opportunities that have been generated."

No 'platinum mine'

However, he says that one has to be responsible about entering this market like any other market, as not everything will prove to be a ‘platinum mine’. In the same breath, where there are sound opportunities, good returns are possible, and there is certainly still good value to be had in these markets.

“Also, we regard today’s market in these areas as being balanced in terms of supply and demand. All it will take is a further boost in the platinum price to turn up the tempo further, although ideally what we need is a steady price at a higher level, so that we can avoid volatility in these markets,” says Kotzé.

Article from: www.iafrica.com