Off the back of the hugely successful Soccer World Cup, never before has South African been presented with such an ideal opportunity to promote the country to foreigners as a prime investment destination, said Dr Andrew Golding, CE of the Pam Golding Property group, speaking at the IPD/SAPOA Property Investment Conference held in Cape Town yesterday (29 July 2010). Dr Goldings address was on the changing dynamics in the residential property market.
We need to seize the moment, because if ever there was a time to present our credentials to the international community of investors, it is in the afterglow of such a resoundingly successful World Cup. For the most part, these foreigners will see South Africa as an opportunity and in return, will bring much-needed foreign direct investment and create jobs - potentially on a major scale - in a process which in itself may develop a momentum of its own and become a virtual self-fulfilling prophecy of foreign direct investment, job creation and ultimately GDP growth, he said.
From a residential perspective, Dr Golding said while the market has improved - in terms of number of transactions - by about 30 percent off the worst levels experienced during the recession, there is very little in the way of real house price appreciation and consumer demand remains dampened by restricted access to finance, which is also hampering developers appetite for risk.
However, he said that rather than take the view that the residential property market as an asset class is one to be avoided right now, allowing time to pass for the market to correct itself, it is at times such as these when astute investors capitalise on the situation by making considered acquisitions and achieving significant returns. He said the leisure market, which will clearly take longer than the primary market to recover, was a case in point where prime coastal property for sale currently presents a desirable investment opportunity.
Amid recent debates about the merits of residential property funds, Dr Golding said the current circumstances are favourable for investment in such funds as interest rates are at the low end of their cycle, inventory stock levels both in private and institutional hands are high and as a result the propensity for keen purchasing is good, potentially locking in early capital growth. The market is probably nearer the end of the down cycle than the beginning and in fact may have already begun to turn, while rental yields are likely to increase off their current low levels and capital growth of a reasonable nature over the next five to seven years is a real possibility.
Within the primary residential market, South Africas recent infrastructure upgrades have provided new transport nodes and created new residential development opportunities which probably present some of the best options currently available. With ever-increasing traffic congestion and a growing worldwide trend around the convenience of work, living and leisure within the same precinct, these transport nodes must be on the right side of the supply and demand continuum. With the new Gautrain station precincts clear examples of these, it is anticipated that this trend will only increase as these nodes become fully bedded down and the true value and convenience of these transport hubs becomes fully appreciated.
One interesting niche in the market that is potentially worth looking at, both from an individual perspective as well as collectively is the so-called uber-prime market the top end of the South African residential market which is in the region of in excess of R20 million per opportunity. While trading is naturally thin, the best homes in Cape Town, Johannesburg and Durban, ie the best of the best, are now beginning to compete both in terms of price and perception with homes of a similar nature in St Tropez, London, Paris and New York. These properties are competing with each other and in world terms are still under-priced and may represent buying opportunities for savvy investors, said Dr Golding.