A new apartheid: property wealth

Who will be to blame for people being excluded from the property wealth creation wheel now?

Often, when I hear white people whinging about the "new" South Africa, I have a burning urge to ask them to speed up their packing. I find the negativity tiresome and they are blind to the many advantages they have enjoyed under a black government that has embraced all, regardless of shameful past behaviour.

Not least of all these people seem to be overlooking the fact that they have been allowed to enjoy healthy, and even world-beating, returns in the residential property market.

I'd like to think these opportunities will continue, though the draft land expropriation legislation that is far advanced in political echelons is an obvious threat.

Journalism is traditionally a poorly-paid profession, yet even in these circles there are many instances of individuals having amassed a small fortune in property over the past 10 to 15 years.

I am aware of several journalists who are financially independent, so they don't actually need their jobs, thanks to slowly acquiring and holding property - through the good times and bad.

In one instance, we are talking about someone owning dozens and dozens of units.

These average salary earners haven't been particularly fussed by the bubble talk or concern at the other side of the spectrum that South Africa may be going to the dogs and that it therefore would be foolish to spend money on residential real estate.

One former colleague, who could easily have retired by now, told me: "I buy property. I don't sell it." He has never worried about timing his purchases particularly. Instead, he has bought and lived in a property for a while before renting it out and moving on to his next purchase. This way, he has not felt any financial pain in the early years when home loan repayments look scary.

It's a similar strategy to a newspaper photographer I know, who cottoned on at the start of her career that buying property, living in it and then buying again while taking on tenants, can be a smart approach.

I have also come across people with other jobs that don't lend themselves to making big money - at least not the honest way - and they have done so honestly by slowly amassing a property portfolio.

For example, a 30-something policeman attached to a specialist detectives' unit once revealed to me that he was so bitten by the property bug that he had snapped up at least 10 on auction. He urged me to start doing the same.

He had great tips. If only I had listened to him then. It was the late 1990s and property owners could barely give their homes away at a time interest rates were soaring giddily towards 25%.

I have no doubt he must be a very wealthy man, who doesn't toss and turn at night wondering whether his rental income will pay all the bills. He made sure he was cashflow positive from the start, and that was long before US author Robert Kiyosaki of Rich Dad, Poor Dad fame became a household name in South Africa.

Read The Citizen newspaper, that police detective told me, for details on auctions. And only buy where the property has secure parking, he emphasised.

His reasoning was that people who rent probably only have a car for an "asset" and therefore will opt for accommodation where they can keep this valued possession safe.

There was a whole lot more stuff he told me. It was all common-sense, really, though he of course had patience and discipline to stick to his plan.

This week Erwin Rode, a property commentator with a less optimistic view about the asset class than other of his economist colleagues, told Seeff Properties' clients at an exclusive briefing in Cape Town that people are probably best off staying out of the residential sector for many years.

His number-crunching shows that there is a very long residential cycle in South Africa, of between 17 to 20 years. "So, twice in your working life you have the opportunity to buy property there," said Rode, of Rode & Associates Property Consultants, pointing to the bottom of the property price trough and then to the peak where you could sell to maximise your profit.

"If it is not too late, I'd advise you to get rid of your house. Get a cottage in Clifton and rent rather than own," Realestateweb.co.za reported him as saying.

Those who take this advice at face value and decide to rent for the foreseeable future rather than becoming property owners should reflect on recent concerns outlined by prominent black activist and business figure Mamphela Ramphele.

In her new book, she notes that white colleagues, including political liberals who supported the struggle, enjoyed property wealth in the 1990s to a considerable extent thanks to the apartheid legacy.

She may have a point.

But as the next property cycle turns it cannot be white people who must take the full blame for those who inevitably will lose out on the wealth that real estate creates over time.

People are more equipped than ever, with investment information and advice in abundance and credit within relatively easy reach for those who are sensible with their money. We must make our own decisions and stick to our strategies, sizing up comments like those from Erwin Rode in the context of our own personal financial picture.

As Realestateweb visitor Branson said, in a posting under the article: "Rent for 10 years.......
I would love to get more muppets...to rent my buy-to-lets for 10 years and in so (doing) create my wealth. I wouldn'nt have to worry about finding tenants for that period to pay off my bond. Lekkaaa innit........"

Someone who called themselves "Sad" alluded to another stark reality of staying out of the property market, saying: "I lost my house...And I can tell you it's not fun. I just could not make the payments anymore. My biggest problem now is finding a house to rent. I can't find a 3-bedroom house in this area (close to school for the kids and my work) for under R8 000!! Which I can't (afford)."

I'm assuming, of course, that our politicians come to their senses and throw that scary land grab law out of the proverbial window or radically revamp it. This is because it wipes out property rights we have come to love and expect in the "new" South Africa.

If politicians ignore concerns about land expropriation in its current incarnation people like Ramphele will surely have mostly the new order to blame for ordinary people, many of whom are ruling party voters, being excluded from the residential property wealth creation wheel.

There is a new apartheid in town: it's that divide between rich and poor. When it comes to property wealth, us ordinary folk don't have to be excluded.

Article by: Jackie Cameron - www.realestateweb.co.za