Property's plateau
The property market is currently teetering on a plateau... but it won’t fall off, an expert says.

Instead, expect the market to take up its surge again next year — making it key for you to get in on the act as soon as possible.

So what are the risks facing the market? Well, according to Berry Everitt, MD of the Chas Everitt International property group, you need to keep in mind the overall prospects for the national economy, and equally important, the economy in the area in which the property is situated.

Cheery South Africans

While the US may be facing a recession, in SA, economists remain upbeat about economic growth, following on from SA’s GDP growth of 5.1 percent in 2006.

According to economist Mike Schussler, following on from the MasterIndex survey of Consumer Confidence released recently, although South Africans may have seen a slight slowdown in economic growth, the reality was that the economy was still in a record-breaking growth phase.

This in turn has been supported by the high level of optimism shown by South Africans.

He said, “South Africans are maintaining a high level of consumer confidence despite bad news courtesy of record-high petrol, food and electricity prices, political tensions and, of course, the absence of the Cricket World Cup in South Africa’s trophy cabinet.”

A looming recession?

But even if there was reason to be less upbeat about South Africa, Everitt says that it won’t impact on the whole country.

“Even when the country is in a recession, certain areas will boom because, for example, a new industry has moved in, or foreign tourists have discovered its attractions. Conversely, some areas will not do as well as others even when the national economy is growing strongly, as is currently the case.”

But how do you get in on the action? Everitt says now is the time to hunt for good investments, that will put you ahead of the wave.

He advises that beginners should start small, buy with a sizeable deposit and ensure that sound tenants will continue to pay off the mortgage.

It 'can't fail'

“Property investment can hardly fail if the investor is satisfied with the rental return. Then, if higher interest rates or unexpected personal circumstances force a quick sale, the selling price will not be a critical issue. And if there is a big capital gain, that's the entrepreneur's reward.”

But there are certain factors that you need to take into account, not the least of which is a clear understanding of the tax implications of the purchase of an investment property, both for your current earnings as well as from a capital gains point of view.

He says: “Much will depend on whether it will be a cash purchase or whether a new mortgage will have to be covered. And the investor should know what he or she plans to do with any proceeds of the investment.”

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