Property returns: "expect 60% in 3 years

It won't be long before the residential property market turns the corner, says real estate player.

Falling house prices and rising inflation may make you feel queasy about bricks-and-mortar assets. Don't despair: it won't be long before prices start turning the corner and heading up again.

That's the message from Tony Clarke, managing director of Rawson Properties, who believes you can expect a 60% capital gain on your property by 2011.

His comments follow warnings from estate agency bosses like Lew Geffen, chairman of Lew Geffen Sotheby's International Realty, that sellers reject todays offers at their peril (click here for that report). Geffen believes the property market is faring much worse than Absa's House Price Index figures suggest.

The Absa House Price Index, released last week, shows house prices still rising, but at a relatively modest 8,7% year-on-year. When you take the rate of inflation into consideration - CPIX is around 9,4% - the real return in February was slightly negative (-0,3%).This is the first time since June 1999 that real year-on-year growth was negative.

Geffen said earlier this week that sellers should "forget about trying to achieve last year's prices."

The market is "in a classic downward spiral of an indeterminablelength, especially if interest rates are raised further in the coming months", he said

But Clarke is more optimistic about the current market downturn.

Referring to Standard Bank's latest Residential Property Gauge, which records a decline in year-on-year growth of 5,2% for March and shows no year-on-year growth in February, he said there is no "cause for alarm".

The figures are also not a reason for holding back on house purchases and residential property investment, he said.

Neverthless, Clarke said: "Some of the people with whom we deal have come to expect the 2000-2006 boom to last for ever."

But, he said, "anyone who has been in the real estate sector for some time will know that ‘right-sizing' always occurs at some point - and was certainly due here after six years in which the average growth rate was 16%".

"This phenomenal boom greatly increased the wealth of existing property owners but a readjustment was absolutely essential now if property was not to price itself way beyond the reach of a substantial section of the population, especially those buying at budget entry level prices.

"For this reason we can in fact welcome the adjustment now taking place."

Shrewd property investors "have always accepted that property is a long-term investment and that slow growth periods inevitably give way to upsurge phases".

Clarke expects the upswing to become evident early next year. He expects residential property to grow by 60% on the current value by 2011.

"I definitely do not want to be accused of trying, in typical estate agent fashion, to talk up the market - but I have to admit that I get irritated by the panicky, doom and gloom reports one sometimes reads," emphasised Clarke.

"Residential property has always been a stable long-term investment. At Rawsons we have sufficient faith in South Africa to believe that we will see significant property growth, albeit on a smaller scale, taking off within the next 12 to 15 months."

Do you agree with Tony Clarke that the residential market is taking only a small breather? Tell us, below this article.

10 April 2008 Shrewd property investors "have always accepted that property is a long-term investment and that slow growth periods inevitably give way to upsurge phases".Tony Clarke, MD Rawson Properties Tony Clarke, Rawson Properties, Lew Geffen, Lew Geffen Sotheby's International Realty, Absa House Price Index, Standard Bank, Residential gauge, residential, property, prices, seller, buyer, capital gain, 2011, investors 10 April 2008

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