Newsletter - February 2007
2006 was another excellent year for investors in the South African property market - property
prices in the middle segment of the market rose by 15.2%. (We're confident that our developments
have comfortably beaten the average!)
2007 has started at a great pace. What does the new year hold for South Africa, for the property market, and for
you, the property investor? We've put together several articles that summarize many of the opportunities and
challenges that lie ahead.
On our own front, we've been working feverishly over the Christmas holiday to bring the best new developments
to the London market. With the launch of Palm Springs imminent (see details below), we're starting
off with a sure-fire winner!
Review of 2006
According to the latest ABSA House Price Index, released in January, 2006 saw a 15.2% house price growth in the
middle segment of the market, which is now at an average price of R 857,400. ABSA expects SARB to raise interest
rates by 100 basis points (i.e. 1%) in the first half of 2007. In spite of this, most of the top estate agencies
believe the market is healthy and expects growth to continue in the 12% to 15% range.
From our own perspective, we launched some excellent new developments in London over the course of 2006: Crimson
Square (launched in June) is set to benefit from the continuing regeneration and revival of the Woodstock
area; the new road infrastructure, offices and shopping centres in Sunninghill are making it an
increasingly attractive area for young professionals, which is bound to please our investors in The Kanyin
(launched in October); and Muizenberg's amazing growth statistics (47% growth in sectional title properties
over a year, and tipped to grow further) should bring a smile to investors in South Break, Aspect and Muizenberg
Beach Close (launched at different dates last year).
Property Market Outlook for 2007
The sectional title market is expected to be the fastest growing sector in SA property for the next 10 years. According
to Paddy Herbert: "SA's economic growth and rapid urbanisation have resulted in a drastic space shortage in the urban areas
which can only be solved by high density, multi-unit developments." More affordable properties continue to outpace the
growth of those in the higher-priced sectors, while developers in Cape Town find it considerably easier to find buyers
and investors for properties priced under or around the R 650,000 mark (see the Palm Springs information, below!). Bill Rawson identifies a trend of
developers now catering for the lower-middle and lower markets, building apartments as small as 20-30 square meters.
On the downside, regulations in the National Credit Act (due to come into force in mid-2007) are expected to make
it more difficult to get a mortgage grant, as banks become legally responsible for doing more detailed
credit checks.
Economic Outlook for 2007
How will the economic outlook play out this year? Will 2007 be a choice beteen feast and famine? A glass half-empty
or a glass half-full - according to Dr. Cees Bruggemans, Chief Economist at FNB. We are currently experiencing an
economic shift from consumer expenditure to fixed investment. Inflation is expected to stay within the government's 6%
target, allowing for another year of 5% GDP growth - as yet, no reason to despair.
John Loos, property economist at ABSA, expects residential property prices to rise by 85% between 2005 and 2010, based on
several economic factors, underpinned by a 6% economic growth rate. Now that's thinking big!
Launching This Month: Palm Springs
Palm Springs is a brand new development from one of the most reputable developers in South Africa. IPS is excited to be launching Palm Springs in London, on the same date as the local launch in South Africa - the 17th of February, 2007.
The Palm Springs development has been designed and priced with the investor buyer in mind. Priced to sell out quickly, with 2 bedroom apartments starting at only R 620,000, Palm Springs is a short walk to the beach, a 15 minute drive to the Cape Town CBD, and boasts stunning views of Table Mountain and the sea.
If you are interested in this development, please go online and book your place to attend the launch.
Bits 'n Bobs
In the latest "Ask The Expert" section of the South African Property Supplement (distributed in the UK), Scott Picken
was asked to explain the benefits of buying in an off-plan development. The article is reproduced here,
for those that aren't able to get a copy of the newspaper.
We also frequently get asked the question: "How much should I borrow when buying a property?". An interesting angle
on this question is offered by Neville Schaefer: as an investor, you should borrow according to your age.
Another option is to use an affordability calculator, one of which is available on our website.
Wishing you all the best for an exciting 2007!
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