The investment potential of property is beginning to look decidedly more positive as we begin the new year.

That’s the word from ERA South Africa CEO Gerhard Kotzé, who says the market has definitely ‘bottomed-out’ and that although there will probably be no fireworks in the next 18 to 24 months, the foundations are in place for a return to sustainable growth.

He paints this picture against the backdrop of a fledgling general economic recovery, where, in the third quarter of last year, gross domestic product (GDP) rose 0,9% after contracting for the three previous quarters.

In addition, the Reserve Bank’s leading indicator rose 4,2 points to 116,6 in October, following a 2,6 point rise in September. This indicator combines several measures including manufacturing hours worked, new building plans approved, vehicles sold and share and commodity prices and is regarded by economists as a reliable forecaster of the economy in six to nine months.

“On the back of these developments, the economists are predicting that nominal house prices will rise by 10,8% in 2010, followed by 12,1% in 2011 and 12,7% in 2012.

“In nominal terms therefore, house prices should rise by 30% or more over the next three years. That’s a far cry from the huge annual increases we had at the height of the last property boom, but it’s an indication of a healthier, more sustainable market.”

Kotzé says that signs at the “coalface” already indicate the changing mood in the market, with increased demand across the price spectrum. “Problems remain in terms of bank finance availability and some sellers are getting ahead of themselves and beginning to over-price again, but these issues are manageable with the right professional input.

“Meanwhile, investors have appeared on the scene again, often with cash offers, and the supply of housing stock is being steadily whittled away, setting the scene for the entry of more developers into the supply equation, although their competitiveness with existing properties could be jeopardised by unwarranted increases in building material costs.”

He notes that some geographic areas and types of property will of course do better than others in the coming year. Accordingly, buyers are advised to do their homework well and ensure that any purchase is viewed as a medium to long-term investment (five years or more).

Article by: www.era.co.za