SA property not expected to follow European downturn

Pessimists who believe the South Africa residential property market will follow the now almost universally predicted European and United Kingdom downward trend for the next year and see decreases in the value of their homes are almost certainly wrong, says James Wilson, property development director or Cape Town-based AMDEC.

“Since the change in government and the its pursuit of a First World economic system, we have seen a marked change in the investment mindset of the average reasonably affluent South African,” said Wilson.

“A decade ago a fairly large proportion of these people regarded property as a high risk investment, likely to give a low return. Many of them invested in liquid easily tradable assets like Kruger Rands and JSE equities – but that attitude has now largely disappeared and the majority of middle class South Africans have come to realise that the appreciation on the average property today is excellent and probably in excess of the JSE. Hence the move back to property, which, I believe, will continue into 2006, albeit at a slower rate.”

A second factor boosting property values, said Wilson, is the considerable sum being invested in all property, but particularly, Cape property by expatriates.

“From the latest Residential Property Price Record and other figures,” said Wilson, “it seems clear that the 3,2 percent of total Cape residential sales attributed over the last two years to so-called foreigners includes a fairly large number of expatriates – and the indications available to us are that this process will continue. Many of those living abroad have said they intend to return, if only for their retirement.”

However, adds Wilson, the most powerful and most encouraging reason for the huge upswing in property values over the last three years has been the emergence of a fast growing middle class who, rightly, perceive property ownership to be the foundation of all personal wealth.

“Right now,” said Wilson, “the really flourishing market is in the R100 000 to R500 000 category. This is good news for SA because it indicates that we are seeing the creation of a large, stable, property owning middle class, many of whose members now come from the previously disadvantaged sector. A strong middle class has always been the foundation on which successful economies are built and the fact that this is taking place here in South Africa – and is particularly visible in Johannesburg – is just the sort of change economists have been hoping for.”

Article from: www.rodneyhayter.com