Property will continue sterling performance

30-11-2001

Steady demand, stock shortages and the lowest interest rates continue to bode well for property as investment class – even to the extent of a continued outperformance of shares for the foreseeable future, says Peter Gilmour, regional director of RE/MAX Southern Africa.

In support, Absa's Housing Review shows an 11,9% increase in property values in the third quarter, while the latest Rode Report states that house prices continued to benefit from the lower interest rates, with lower-priced suburbs also starting to show real growth.

Gilmour says with low interest rates, bonds for investment properties can be virtually covered by rentals, and this gearing factor, as it is called, is more favourable than it has been for many years.

Rode's Report editor Dirk de Vynck says the exuberant growth in upper and middle-priced houses experienced after the Asian crisis could be at an end. Still, it is expected that houses in these price classes will continue to show real growth.

For those who had invested in flats, the latest Rode figures show mixed rental performance although growth was experienced in all the surveyed regions. Pretoria was the fron trunner in quarter 2001:3, with average nominal growth of 20,6%.

Gilmour says buying a second property has rarely been this easy. “You can choose your own investment and your tenant and how much or how little to spend on a property while raising finance is easy and the paperwork minimal.

“Capital gains tax is proving to be a non-issue in that it amounts to an effective 10% on the difference between purchase price and selling price after October 1st 2001 on a second property only, and the continued strong appreciation in values ensures the tax will be easily absorbed."