Hold on to your properties, do not sell, value rises are on the horizon, says Rawson MD
Tony Clarke, MD of Rawson Properties, says that he was surprised recently to find, on attending a business person's lunch, that there are still Cape investors who fear that a further 20% to 30% drop in property prices is possible and who are therefore actually disinvesting from property.
I simply cannot see on what information such opinions can be based, he said
Clarke's advice to every Cape property owner is, Hang on to your property investments for another 18 months if you can possibly afford to do so.
My feeling, he said, is that we are now are at the bottom of the value graph and that further extreme falls are unlikely. From the next quarter onwards I see home prices keeping pace with the inflation rate. I do not, of course, expect growth in real terms until December or January but I am convinced that home prices will now stabilise and hold their values.
Three factors, said Clarke, should be borne in mind. These are, firstly, that disinvesting is expensive, the costs being so high that they are seldom in today's market compensated for by the returns from other asset classes.
Secondly, he said, the banks appear at last to be regaining their appetite for lending.
This will gradually stimulate the housing market. Although it will not have an immediately noticeable affect, 12 to 18 months from now we will, I believe, be in a totally different ballpark.
The third factor is the 2010 hype which Clarke believes will be far greater and create far more optimism than most people currently realise.
Already the excitement is building up. By next year it will come close to euphoria and this will benefit us all.
In the current scenario, added Clarke, it is absolutely imperative that local government does not start raising municipal rates and taxes. These, he said, for the foreseeable future should be linked very directly to current market values and not over-used as a means of taxing the middle classes to pay for services in disadvantaged areas.
Although I can see the logic of this, he said, the middle-class housing sector simply cannot afford higher rates until the growth rate improves.
Article by: www.rawsonproperties.com