Real Estate Investor Magazine South Africa Real Estate Investor Magazine - Dec/Jan 2018 | Page 7

EDITORIAL VIEW
Property a
safe haven
in any
economic
cycle
A
NAPOLEON
HILL
“
Positive and negative
emotions cannot occupy the
mind at the same time. One
or other must dominate. It is
your responsibility to make
sure that positive emotions
constitute the dominating
influence of your mind.
s we enter 2018 with renewed
vigour, it’s evident that South
Africa is currently at a tipping
point economically and with political
control vested in a very few hands. With
rampant corruption forcing rating down-
grades to junk, a weakening rand, immi-
nent interest rate hikes, highly indebted
consumers, and increasing government
debt - the question must be: How does
this impact real estate in the current
downward negative cycle?
History has shown that, in South Af-
rica, property is still a good investment
with growth rates that generally outpace
inflation during a positive economic
phase. We’ve seen this over the last few
years. This is especially true if it is your
primary home. Samuel Seeff reiterates
that there is nothing more important
than owning the roof over your head, as it
provides stability and a base upon which
to build a life and wealth. Despite tough
economic times, residential real estate
prices have increased in the last 5 years
by an average of around 53,7% in Cape
Town, 30,2% in KZN, Eastern Cape
26,6% and Gauteng 24,7%, according to
FNB.
Regardless of the state of the econo-
my, Seeff says there will always be people
who need to buy or sell for a variety of
reasons and there is opportunity in every
market. Every economy and property
market goes through cycles and it is al-
ways best to take a long-term view, he
concludes.
Countries like Zimbabwe, who re-
cently had President Mugabe forced into
resignation, have suffered financially over
a 37-year period with crippling effects
on their economy. Conversely, the most
sought after area in Harare is a suburb
called Borrowdale, where it is not un-
common to see 4 bedroomed houses sell
for around $650,000. Other countries
suffering under corrupt governments
such as Argentina, Venezuela and Turkey
have similar scenarios with little effect on
lowering property prices in prime loca-
tions.
South African REITs (Real Estate
Investment Trusts)  once again ranked
high among the country’s top companies
earning the most for shareholders.
Currently, there are 31 SA REITs listed
on the JSE, which represent a market cap-
italisation of over R422 billion.  Leading
the local listed property sector, and third
overall, Fortress Income Fund delivered
a compound growth rate of 47.53%.
However, it is those who are invested in
offshore properties that are delivering
the better returns. Companies operating
successfully in offshore markets, mainly
in Central and Eastern Europe, such as
Greenbay Properties, Sirius Real Estate,
MAS Real Estate and Nepi Rockcastle
continue to produce higher returns for in-
vestors. Read about some of those perfor-
mances in our Listed section inside.
I regularly source success principles
from investors around the world so that
we can share their successes when the
going gets tough. Here are four funda-
mental property investment principles
that we can use to our best effect in any
market: 1. Ensure returns in cash flow &
capital appreciation to build asset col-
umn; 2: ensure the asset is profitable on
its own; 3: ensure control of income, ex-
penses, taxes and debt; 4: make sure you
have a viable exit strategy. We give you
the best insight solutions for all of these
on an on-going basis.
Successful investing
NEALE PETERSEN
FOUNDER/PUBLISHER
SA Real Estate Investor Magazine DECEMBER 2017/JANUARY 2018
5
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