Real Estate Investor Magazine South Africa December/ January 2018/2019 | Page 5

EDITORIAL VIEW
According to Tony Clarke, MD of Raw-
son Properties says that politics and the
economy are factors to blame for poor
national house price growth during 2018
- a situation unlikely to see any real relief
before elections in May 2019.
“Year-on-year residential house price
growth in 2018 has averaged at around
4.1%, nationally,” says Clarke. That’s be-
low CPI at 4.6%, which means prices are
effectively in a marginal decline. Proper-
ties have also been taking longer to sell,
spending around 17 weeks on market.
That’s a common trend in a buyers’ mar-
ket like the one we’ve experienced over
the course of this year.”
Some real estate markets are showing
similarities to 2007 prices especially in
the United States; in some places it is
even exceeding prices from a decade
ago. Does this mean we’re headed for an
economic crash? Billionaire hedge fund
manager Ray Dalio seems to think so
as he sees parallels between the United
States today and the 1930’s. He says,” the
next financial crisis will threaten capital-
ism and democracy because of the com-
bined effects of debt, pension and health-
care burdens. The wealth and opportunity
gap creates polarity and populism, and
less effectiveness of central-bank policies
that makes it more difficult to reverse a
downturn.”
He goes onto say debt, left unattended,
can mutate from benevolent builder to
malevolent destroyer. Rising income in-
equality is a stark reminder that just as
debt can devour, so can an economic sys-
tem. When that system works well for a
select few but sputters for the rest, resent-
ment and anger swells.
Johann Rupert, billionaire businessman
seems to support Ray Dalio’s theory by
saying that the world is showing very sim-
ilar signs akin to the 1930’s. People don’t
really realise the trouble that we are in. Be-
cause of US President Trump’s emphasis
on trade wars and populist approaches can
result in a major recession by 2020. This
can have a run over effect into South Af-
rica. While it is not all doom and gloom
it can also be filled with massive oppor-
tunities with a focus on growth, cash flow,
reducing debt and building a cash pile for
investment opportunities.
One of the best “investments” open to re-
duce debt for ordinary consumers at the
moment is just paying off the bond on their
own home or an investment property, says
Rudi Botha, CEO of BetterBond, SA’s
leading bond originator. On a R1m bond,
for example, paying an additional R800 a
month will enable you to pay off your home
in 16 years instead of 20 - and save more
“
than R300 000 worth of interest.
  “Equity is the difference between what
your home is worth to current buyers in
your market and what you still owe the
bank on your bond, and it is very useful
to build it up in case you ever need quick
access to a lump sum of money to cover a
medical emergency, or money to pay for
a child’s education or finance a buy-to-
let investment. You should just make sure
you have an access-type bond to enable
you to do so.”
“Sectional title properties and security
estates have definitely become the most
popular property types with buyers, and
have retained their value very well as a
result,” says Tony Clarke. “Student ac-
commodation and homes near business
hubs are also highly sought-after and
growing in value, as are retirement prop-
erties which are in pitifully short supply
here in South Africa.” Clarke says prop-
erty owners should prepare for continued
slow growth into 2019 – at least until
elections provide more clarity on where
the country is heading.
Successful investing
NEALE PETERSEN
FOUNDER & EDITOR-IN CHIEF
JAMES SUROWIECKI
“
A
s we enter 2019 the South Af-
rican Reserve Bank’s (SARB)
Monetary Policy Committee
(MPC) increased the key monetary pol-
icy interest rate – the repurchase, or repo
rate – by 25 basis points from 6,50%
to 6,75% per annum at the latest 2018
MPC meeting. As a result, banks an-
nounced that its prime lending and vari-
able mortgage interest rates will increase
from 10,00% to 10,25% per annum.
This trend of rising interest rates might
continue upwards going forward as the
Reserve Bank focus of inflation targeting
will continue and will weaken the market
demand.
The era of responsible
real estate investing
The financial crisis of 2008 was not caused by
investment banks betting against the housing market
in 2007. It was caused by the fact that too few investors
– including all of the investment banks – bet too heavily
on the housing market in the years before 2007
SA Real Estate Investor Magazine DECEMBER 2018/JANUARY 2019
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