South African Property Market Review

My Story – Ian Fife

I left journalism in my early 30’s and started a small publicity company. Most of my clients were in property. One day in 1977 I wrote a press release for estate agent Eskel Jawitz, based on careful research, saying that the residential market was moving into a boom and that prices could double in the next few years.

Jawitz rejected the story, saying it was too speculative. “Besides,” he added, “If I believed that, I would sell everything I had and put it into residential property.” I did believe it and thought his idea was great. Until then, it had never occurred to me that I should buy a property rather than rent.

The country was still coming to grips with the Soweto uprising of June1976 and the subsequent property market crash. There were great property bargains but I was penniless. Luckily, many owners and agents were more desperate to sell than I was to buy.

One agent quickly offered me a grand townhouse, 7 Greenoaks in West Street, Sandowne, then a posh residential area. The price was R40 000 and the agent said I could have six months’ interest-free occupation, pay the deposit after a year and take transfer in three years. It has three large bedrooms, 2 ½ bathrooms, three reception rooms and a private garden.

I didn’t have a clue what I was doing when I signed the agreement, nor did I bother to negotiate the price.

It was foolhardy. My wife and I gave notice at our rented accommodation and immediately moved in (with the help of a hired bukkie, much to the disgust of our posh neighbours) in April 1978.

We were happy there, though the back rooms were a bit dark because of a giant oak tree shading their windows. We could walk to the new shopping centre, Sandton City, and it was conveniently close to both our workplaces.

It was sheer luck that my timing was perfect: the market was just beginning to recover – fast. Seven months after we bought, the same agent brought an offer of R60 000. Again, I signed without arguing. We immediately put the R15 000 cash we got down on a three deposits on three properties: a townhouse in Alberton for R20 000, a flat in Berea for R16 000 and a Michael Sutton townhouse in Craighall park for R35 000 that became our next home.

Six months later, the Alberton townhouse went for R30 000 and the Berea Flat for R24 000. That was the end of my journalism and publicity. You couldn’t go wrong. The gold price was rocketing, to an eventual US$ 800/oz. But prices in Johannesburg were rising faster than everywhere else, with properties there up to twice the price of equivalent properties in Cape Town. I bought four large townhouses in Somerset West for R16 000 and sold them six months later for R30 000.

A commercial property client, Marke Markovitz, asked me to buy some extra units for him. This became a partnership and by 1980 we were buying blocks of flats, converting them to sectional title and selling them off.

We all thought we were very clever then, but the success had little to do with us. The economy was booming and real interest rates were negative, so the banks were paying you to borrow money. By 1984, prices had doubled and redoubled.

Nobody had bothered with a plan. After then prime minister P W Botha’s “Rubicon” speech, interest rates rose higher than 20% and the rand and market crashed. We were all in terrible trouble, having spent most of our money on high living, big cars and overseas holidays. If only I had held half the properties I had bought and started building a portfolio ….

Or even better, kept them all as investments. My average loan to value would have been about 50% and the rents on most would have covered the high interest rates of the mid-1980’s. That’s when I woke up to the meaning of investment and portfolio’s. By then we were in the boom and bust cycles of the volatile interest rates and a shrivelling rand, so it was hard to hold on to them.

The current market has the air of the 1980’s market, but there are many more investors in it today.