Divergence Prominent in Light of SA Property Market Future

Views Differ on Future of Property

According to a recent article published by Business Report, economists seem to have divergent views when it comes to the property market outlook. This came to light at a fractional ownership conference in Cape Town yesterday.

Property strategist at FNB’s home loans department, John Loos forecast an improvement in sentiment, saying that now is “probably as good as it gets” in terms of the best time to buy property before prices start to recover.

Erwin Rode, of property research company Rode & Associates, had a much more pessimistic view, saying that “a long period of stagnation lies ahead” and this could last as long as five years. “That means prices of houses will lag inflation. That is, if building costs go up by 8 percent, house prices will rise by 4 percent in nominal terms,” he said.

According to Rode, this is the result of people in developed countries having lived beyond their means and surviving for many years on borrowed money. Fractional ownership is governed by the same regulations as timeshare and although there are several different models, the main difference is that it is confined essentially to the very upmarket property. Rode hoped that this would continue to be the case and that banks would stay out of financing it.

Dirk Wilson, co-founder of fractionalownership.co.za and the conference organizer, said that fractional ownership differed from timeshare in that the investors gained a share of equity in the property and not just the right to occupy the premises or let it for a certain period. Fractional sales are said to be “doing quite well” considering the state of the property market, but more participants are needed in providing properties, which have dropped from 64 six months ago to just 34 companies at present.

There has been a great deal of interest in South Africa from overseas investors and buyers looking for properties available now and not in the planning stage, such as golf estates or near the beach. There have to be hospitality and leisure facilities of a high standard, such as room service and a spa. Fractional ownership is really an investment in lifestyle and thus comes with a certain standard of living.

According to Wilson, 74 percent of enquiries about fractional title investment properties in South Africa were from overseas, including the UK, the US, Australia and the UAE. Also, a large number of South African expatriates are interested in property investment here, but “not a whole house,” as he said.

The information in this article is courtesy of Audrey d’Angelo (“Economists give widely differing views on property”, Business Report, 22 August 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.