One of the essentials of a free economy is home ownership. And in many ways the activity in residential property markets correlates with the strength of the economy of that particular country. But have recent developments in the property industry challenged this particular train of reflection?
The property in America for example is particularly interesting. Did you know that purchasing a rental type of property – especially a two-bedroomed apartment or town house is a far cheaper option than renting in 74% of the 50 largest cities in the States? This might sound like a paradise for investors and only a couple of years ago some of these cities were practically owned and run by investors. Prices rose in these cities and were pushed right up by a buying frenzy with easy cash pumping from banks that were simply overflowing with cash. Well – we all know what happened thereafter.
When the bubble did burst many lost fortunes and in many instances properties dropped to half the value at peak. But as with most burst bubble and boom cycles, these very same places are once again beginning to look rather attractive.
And for those not in the know some properties are so cheap that if you buy at the prices they are being sold at presently the rental income will cover 100% of the bond and more.
The point we are getting to here is that the same is beginning to apply to the South African market.
Many reports are now suggesting that there has been a mind-set change that will fundamentally disrupt the property markets around the world for a long time to come, brought on by aggressive house price corrections that have overwhelmed many developed countries.
If the average person has lost all faith – property prices would stay flat for many years to come creating a very disagreeable investment position.
Some rather interesting facts have surfaced. According to a survey almost all South Africans still have faith in property, and as many as 74% believed that buying a property is a good investment, even in the uncertain economic climate we are presently experiencing.