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May 27 2012 11:21
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May 27 2012 13:09
The oversupply of golf estates has claimed another victim.
Johannesburg - South Africans are overly fixated on owning a house, according to property economist Erwin Rode.
According to Rode, this fixation is politically driven and puts
financial institutions under pressure to create solutions for
households that cannot necessarily afford a home of their own.
He said the situation causes rental accommodation to be pushed
into the background, whereas rental is the ideal option for prospective
buyers until they can afford their own home.
In other countries large proportions of the population rent their own accommodation.
There is nothing wrong with renting until one can afford one's own home, said Rode.
In Germany, he said, between 60% and 70% of the populace rent
their accommodation. This indicates that they do not invest in roofs
over their heads, but in assets that generate an income.
He said it is now cheaper to rent than to buy and that the
residential market will not be a good capital investment for the next
five years.
To illustrate this, he uses the example of an investor who buys a middle-class house at market value and lets it out.
The expected net return will be only 4%, he said. In contrast, an A-grade office could produce a 9% net return.
He said the five-percentage-point difference shows that houses are extremely expensive.
For a house's return to rise to 9%, prices will need to fall or rentals to increase significantly.
- Sake24.com
For business news in Afrikaans, visit Sake24.com.