This may surprise many but, says Lanice Steward, Managing Director of the Cape estate agency Anne Porter Knight Frank, the current uncertainties in global economics have resulted in a significant shift of assets to property.
The German newspaper Frankfurter Allgemeine Zeitung, says Steward, reported recently that over the last half year 12% of the assets belonging to the country’s individuals (as opposed to those belonging to companies) had been reinvested in property. This, says the newspaper, makes good sense because residential prices are still well below their 2007 peaks but rentals continue to rise.
The next generation, says Frankfurter Allgemeine Zeitung, will very definitely not be property owners. The current circumstances are making renting the only option open to them.
Steward commented that this is, of course, good news for landlords but bad news for those who see personal savings as the bedrock of any economy. (The Chinese today are investing close to 30% of their individual incomes)
Knight Frank, Anne Porter Properties’ UK associates, in their 2011 Wealth Report based on a survey of 5,000 of the world’s richest individuals, reported that there is an ongoing capital flow from the West to Asia-Pacific destinations (a 30% increase in one year) and that a very healthy percentage of this is going into property. While Middle Eastern properties had lost between 30% and 50% of their value in the recent crunch, cities like Hong Kong, Singapore and Shanghai, where prices can be as high as R60 000 per square metre, are still attracting a steady flow of investors.
Steward has in more than one statement recently said that with South African inflation running at ± 6% (i.e. out of the Reserve Bank’s target bracket), with prices of residential property now ‘very reasonable’ and with rents still rising between 7% and 10% per annum there can be no better time to shift assets into property.
“We have clients”, she says, “who, concentrating on more affordable low priced units for which there is still a strong rental demand, are steadily building their property portfolios. What is more, in most cases they are able to use bank finance and it goes without saying that, if an investor can secure a 5% to 7% return on a R700,000 to R1,5 million property on which he has laid out only a 10% or 15% deposit he is in a very strong position.
“Those who compare asset classes frequently forget that property investors are generally able to gear up far more extensively than other investors for the simple reason that the banks are still inclined to see bricks and mortar as less likely to lose value than more nebulous, intangible assets such as Securities Exchange shares.”
Related posts:
- THE KNIGHT FRANK WEALTH REPORT SHOWS THAT THE ULTRA-WEALTHY WORLDWIDE STILL FAVOUR PROPERTY AS THEIR NO 1 INVESTMENT
- Existing bonds can help with investment
- Stimulation of the property sector is the key to achieving significant economic growth
- Property as an investment option
- South Africa ranked sixth as ‘safe property haven’
