Cape residential property - where is it really going?

One of the things that surprise him most about the current property scene in South Africa, says Mike Greeff, Chief Executive of Greeff Properties, is that some of the principals and spokespeople give the impression of knowing exactly where the market is heading.

“For my part,” he said, “I am ready to admit that right now I am less certain of the next 18 months than I have ever been, the current situation being completely fluid.

“The plain truth is that at this point we do not yet know how much more the USA economy will decline and whether its current downturn will become a recession nor do we know how seriously this could impact on South Africa. We cannot at this stage be sure how seriously the Eskom outages are going to reduce the GDP nor can we say how distributionist and socialist the future SA government might be. In addition we do not know if the serious crime situation will be improved or become so serious that the current high rate of emigration will increase even further. Above all, perhaps, at this point in time we cannot say exactly how Zimbabwe will turn out.”

All these factors, said Greeff, make him reluctant to venture into predictions on the property sector.

However, he said, certain statements can be made with total confidence. These are that:

1. South Africa is highly unlikely to enter into a major recession even if consumer spending, as predicted, drops by a further 15% and interest rates rise by another 0,5 or 1%.

2. Cape Town property will remain an excellent buy for the simple reason that not only is the area beautiful but it is hemmed in by the sea and the mountains and for this reason there will never be enough land to satisfy all, (including the many new buyers now coming south from Gauteng) – and as Cape Metro is reluctant to widen its municipal boundaries the shortage of land will not be solved in the short-term.

3. Cyclical up and down swings have always characterized the property sector – and will, says Greeff, continue to do so – but the current downturn is no worse than previous lull periods.

“The one prediction that I am, therefore, prepared to make is that the so-called levelling off phase will eventually give way to an upswing and I expect this to take place before the end of 2009 by when economists tell us we can expect interest rates to be on a downward path. Even at the current levels, however, the market can continue to perform satisfactorily – we are a long way off the disastrous 2001/2002 period when rates hit 20% plus.”

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