Rawson stands by his assertion: South African property is still a better bet than almost any overseas buy
In a recent hard-hitting statement, Bill Rawson, Chairman of Rawson Properties, disagreed radically with other high profile people in the South African property sector on the question of whether to use the increased offshore allowance - now up to R4 million per person - to invest in property overseas. Rawson said that he would not advise investors to follow the overseas route.
Rawson s view was that, taking the low returns of First World property and the dismal prospects for significant capital growth into account along with the difficulties frequently encountered with foreign legislation and foreign agents, the South African property market is still the right place for all except the most sophisticated South African investors to be.
Asked to comment further on this, Rawson this week said,
Firstly lets accept that it is always wise to have part of ones portfolio - I would say up to 40% - in property, whether this is local or offshore.
South Africans looking at overseas opportunities then have to ask themselves:
· Will the likely increases in South African municipal rates be so high that they cut seriously into the returns and detract from South African property values?
· Is the current strength of the rand in relation to euros, dollars and pounds so advantageous that it would, in fact, be a pity not to be buying overseas right now?
· If the rand remains strong would you still be in a position to sell at a profit?
· Accepting that the rand could always go on one of its rollercoaster rides, are you wiling to pay the extra cost for rand protection in case this happens? If not, do you appreciate that both your deposit and monthly payments could have risen 10% to 20% between the time of signing and eventual handover of the cash?
· Looking at overseas prospects generally, do you foresee the European and USA economies recovering and if so in what period? Some have said that a full recovery will take at least a decade.
· Do you believe that the inefficiencies and corruption in South African national, provincial and municipal administrations are so serious that they will damage the economy irretrievably or do you think, as I do, that South Africa is just riding out these difficulties and that so long as we have a vigilant press and a strong opposition in parliament the negative factors will be kept sufficiently under control?
Rawson said that European and UK property, although a safe bet, is currently giving only 2% to 3% returns whereas South Africas residential property returns are usually in the order of 5% to 10%, while commercial properties are giving 7% to 12%. Furthermore, he said, capital growth rates in all sectors of South African property are likely to be once again above 8% by the end of 2010.
Even allowing for a higher inflation rate, he said, it seems to me fairly clear that the local product is preferable to that of foreign countries - and it is worth noting that some 150,000 expatriates seem to agree: almost weekly we receive requests from South African expatriates looking for property buys back here in their homeland and many of these people now have several South African properties in their name.
Article by: www.rawsonproperties.com