Real Estate Investor Magazine South Africa REIM February 2018 | Page 5

EDITORIAL VIEW
The year of
becoming
a problem
solver
S
MARSHALL
GOLDSMITH
“
People who believe they can
succeed see opportunities,
where others see threats
outh Africans are a resilient bunch.
As we enter 2018 with renewed
vigour, it is evident that South
Africa is moving in a far more positive
economic direction. This has mainly been
driven by the appointment of Cyril Ra-
maphosa as the new ANC President. Al-
ready, we are seeing corruption becoming
uncovered and there is a renewed confi-
dence in the Rand and in South Africa as
an investment destination.
Investors are always faced with new
macro-challenges to push them to their
limits. Capetonians are now facing day
zero – the day the City of Cape Town
turns off the taps. Come day zero, resi-
dents will be expected to collect their
daily 25-litre water quota at a public dis-
tribution point. We’re all hoping that this
is not the case, but should the day arrive
the social and economic impact could be
catastrophic. The impact on the real es-
tate market can be dire. Moody’s have al-
ready placed Cape Town on a review for
a downgrade due to the crisis.
Tony Clarke, MD of Rawson Property
Group says: “So far, we’ve seen little ev-
idence of the water crisis affecting Cape
Town property. Buyers are certainly more
water-aware, and looking for homes that
offer greater water security, but they ha-
ven’t been deterred from investing in our
city as yet.”
“If we take the middle-to upper-end
of the market, for example, I do think
sales will start to slow. Semigration – a
huge driving factor in this segment over
the last few years – is unlikely to continue
at the same rate until we resolve our wa-
ter situation. That means we’re not going
to have as many affluent Joburgers and
Durbanites driving demand for luxury
property, and prices could take a slight
knock in the short term.”
“There are two main factors that could
affect the entry-level property market,”
says Clar ke “the first is the likely influx
of people that we’re going to see coming
to Cape Town to look for work as our
outlying rural and agricultural areas take
strain. That movement would increase
the need for affordable rentals, and could
trigger increased demand for entry-level
homes from buy-to-let investors.
“The second factor is the effect the
lack of water will have on construction.
Far fewer developments are going to be
approved by the municipality, which cuts
down on the amount of new stock hitting
the market. That could increase demand
for existing entry-level units and push up
prices.”
The question is: Can we allow other
people’s opinions and thoughts to con-
trol our thinking? If you’re not in control,
2018 is the year to change that for good!
While property values still ride on
sentiment, the swings in house price val-
ues are far less volatile than, for example,
the share market. Even when the global
housing market crashed at the end of
2008, growth in local property prices
slowed down but actual property values,
on the whole, did not reduce much.
Property is one of the few asset classes
where banks are prepared to lend money
to investors and allow them to enjoy all the
benefits of capital growth. This leverage is
one of the most exciting reasons to invest in
property as it turbo boosts the return on the
actual cash invested by the buyer.
There are five main sources you’re
simultaneously paid as a real estate in-
vestor: 1. Capital appreciation; 2.Cash
flow from rent; 3. Tenant-made princi-
pal reduction; 4. Tax benefits; 5.Inflation
hedging. According to Gareth Bailey of
Pam Golding Durban Coastal, the trick
for investors is to find those sweet spot
properties with strong cash flow with the
lowest possible deposit.
Successful investing,
NEALE PETERSEN
FOUNDER/PUBLISHER
SA Real Estate Investor Magazine FEBRUARY 2018
3
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