In a downturn residential landlords fare better than those in other property stock

A fundamental fact about the property market has become clear in the current near-recessionary scenario, says Bill Rawson, Chairman of Rawson Properties: in tough times the residential investor is often in a far better position than the owner of commercial or industrial property.

“This,” said Rawson, “was brought home to me forcibly in a meeting with a national property landlord who reported that he currently has nearly 20 industrial complexes vacant and that many of these properties have been empty for two years or more.”

The main objections to residential property, said Rawson, are that it currently gives only a 5% to 6% return. However, he pointed out this is similar to what investors receive on thoroughly reputable fixed deposit accounts at their banks and, on average, over any ten year period residential property will appreciate by ± 10% per annum - “which is more than can be said for many JSE stocks”.

More importantly, however, said Rawson, residential property is seldom without a tenant for more than two or three months because demand here continues to be very strong.

Rawson said that in view of the relative security of this type of property investment it is possible that major landlords, including some of those listed on the JSE, will reweight their portfolios in favour of bigger residential components. This, in turn, could help residential developers to get out of their current low activity phase, he said.

“The residential developers urgently need a boost not just for their sake but because construction is the major employer of manpower in the country.”

Article by: www.rawsonproperties.com