Residential property is the exception in a lacklustre economy.

With a projected GDP growth rate for the year ahead of below 3% and with the business sector largely negative about the government’s ability to manage the economy better, these days, says Bill Rawson, Chairman of the Rawson Property Group, I increasingly come across people with a gloomy view of South Africa’s prospects – particularly with regards property.

“In the comments for which I was asked on the recent budget and the interest rate situation I tried,” said Rawson, “to point out a whole range of plus factors and to show that property has been a shining frontrunner on the economic scene, giving consistently satisfactory performances. House price growth, it is now estimated, will stay above 8% for the coming year and rentals have risen nationwide by over 6% – with 9% plus being the norm in many of the high demand urban areas.”

There have, said Rawson, been commentators who have said that residential property is now overpriced and that the “price bubble” is about to burst.

Will the bubble burst?

“I do not for a moment accept this view,” he said. “While it is true that all consistent property rises eventually result in a bubble which in one way or another bursts, South Africa’s prices, I believe, will continue to rise for the foreseeable future because demand for both owned and rented property is so very strong at the moment; far stronger than the supply is able to meet. Right now in our group we have 13 000 properties for sale and I calculate that the majority of these have experienced at least a 4% year-on-year rise in value. Furthermore, if correctly priced, it is clear from our figures that they tend to sell within eight weeks.”

Properties at the top of the price bracket, especially those above R10-million, said Rawson, are still lacking buyers and in some cases have to be discounted by as much as 40% when sold. However, he said, even here there are signs of a renewed interest, some of it from overseas buyers who are definitely in the pound seats at today’s exchange rates.

The role of the private sector

In our economy, home ownership, said Rawson, has to be stimulated and encouraged – and private enterprise could and should play a part here, for example by making low interest rate housing loans available to loyal employees or by guaranteeing bond payments for such people.

“No government in the world’s history,” he said, “has ever fully caught up with the housing backlog without the help of the private sector.”

“Two factors,” said Rawson, “make the stimulation of home ownership vital. The first is that, although they today do form a significant part of the annual budget, our pension payouts still leave many people semi-destitute and on the brink of poverty. Secondly, in a country like ours where the inflation rate is said to hover around 6% and will almost certainly not go below 5%, a home is the one investment that can be relied on to outperform inflation and thereby compensate for a low level of retirement benefits.”

It is these factors, said Rawson, which make South Africa so very different from fully developed First World countries like Germany, where, he said, people can happily rent all their lives and still enjoy a well-provided-for old age.

“That is simply not possible here in South Africa and we have therefore to foster home ownership as a means of compensating for under-resourced retirements.” Private Property