'No easy money in property'

2010-05-14 16:39

Sun City - If you want to make easy money, avoid the property sector. That’s the message from delegates at the South African Property Owners Association's (Sapoa's) national conference in Sun City.

A panel of speakers, consisting of leaders of some of the country's largest listed property groups, said the era of exuberant investment as it occurred a decade ago is over.

"When the upturn comes, it will be stronger than we are used to," said Mike Flax, managing executive of listed property company Redefine. "But [the industry] will be more wary and more conservative."

According to Flax, the recent recession has put paid to opportunities to make "easy money", as was the case in the last couple of years.

The panel voiced its concerns over the possibility of stagflation as rental growth remains stagnant.

During the February and March reporting season, the biggest listed property companies – Growthpoint and Hyprop - reported distribution growth of 5% and 6.5% respectively.

According to Frank Berkeley of Nedbank Corporate Property Finance, these results will remain flat for the rest of 2010. "We're close to the bottom, but not really on the upside yet."

Norert Sasse, CEO of the R23bn strong Growthpoint Properties, said now is not the time to enter into any form of speculative developments.

"This spectre of stagflation is just against the fundamentals of putting a property development together," said Sasse.

The economy lost 171 000 jobs in the first quarter of 2010, according to Statistics SA. This, combined with Greece's debt troubles, is adding to industry fears of a double dip.

According to the panel, the sector's fundamentals have weakened.  Sasse said he distrusts numbers coming from the retail industry. "Malls would rather keep their shops occupied, and are accepting less for monthly rentals."

"You can't find [tenants] for love or money, especially in shopping centres."

During the February and March reporting season, Growthpoint, Redefine and Hyprop – all retail-focused and representing about R61bn of the R112bn property market - reported vacancy rates of 6%, 9% and 4.5%.

SA Corporate, with a portfolio consisting mainly of small community shopping centres, reported an 8.6% vacancy rate for the year ending December 2009.

The type of investor looking at the property sector should be at least 10 years from retirement, said Erwin Rode of Rode & Associates.


  • Kick - 2010-05-15 14:59

    I would say wait for the market to crash and no-one keen to come near property before you buy. Are we there yet? NO People are still considering property as an investment... stay away and wait for extreme negativity which is still some way off.

  • Bertram Balie - 2010-05-15 19:11

    What does this mean for a person who is planning to buy after July 2010? Is there a possibility of property prices rising and will I loose out.

  • josy - 2010-05-18 14:27

    there are no balances of profit from the builder to the seller or the buyer. a builder can make 50k for a 260k house but the seller "the bank" then makes 360k from that 260k. as if the builder is not aware of what 's worth of the building he built.not all the money that the bank uses to finance ar from reserve bank but all transaction they say ar guided by treasury lending rates.i wish failure in this.

  • capitalGains TaxBad - 2010-05-20 09:40

    Inflation can double prices over a few years. Suddenly you will have to pay capital gains tax even though your value of the property has not changed, only the amount (ie. the money you paid for the property was more valuable than the money you received when you sold the property). So, even though it feels that you made money, you actually lost out.

  • Jaco - 2010-05-21 08:36

    Any investment where somebody else is typically paying half your investment for you, will always be winner. Location, homework and timing. At least it cannot half its value in a month like stocks.

  • Willem - 2010-06-06 11:11

    @Jaco - at last someone who talks sence. Any investment where somebody else pays it for you is sensible. Keep you RA's - I'll keep my property who other people are paying for me.

  • Paul - 2010-06-22 20:22

    The maximum capital gains tax that an individual will pay will effectively be 10% of the gain (assuming individual is in 40%, and the inclusion is 25% of the gain). and on top of that, if the property purchased is a taxpayers primary residence then there is a R1.5million exclusion from the gain. and if you think about it, your property gains will probably be much higher over the years than your interest income, which you pay tax on if it exceeds R21000 per annum. So you are not really loosing out

  • Ruben - 2010-07-13 17:22

    What did the "Richest man in babylon say"? If you pay yourself first, and let your gold grow and using that growth to create more "children" you are well on your way to becoming rich. Economics teaches us to "compete" which creates negativity. Science of getting rich teaches us to create regardless of environment...

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