New Outlook for Property

By Coert Coetzee

Things are continually changing in the property market. Let's take a look at a few things, both old and new.

In 2003, my seminars hit the property scene with a bang. Thousands of ordinary people suddenly became property investors. And on top of that, they were following the Treoc method of buying and holding. This meant that stock was permanently removed from the market. So stock was low and demand high. The result was that values went through the roof. The property landscape of a city like Kempton Park, which I always used to single out at the seminars as my favourite investment spot, was altered permanently, to the amazement of agents in the area, who still today don't have the foggiest idea what caused their prosperity.

Then the Soccer World Cup was awarded to South Africa, and we were hit by a wave of positivity like never before. Everyone - even foreigners - now wants to own a piece of our land. Everyone who can is buying properties. Demand is rising much higher than supply. The supply is low, because thousands of Treocians are taking properties out of the market permanently!

To crown it all, South Africa's middle-class is growing at a fearsome rate. The middle-class need houses, and they're now discovering that houses are too expensive to buy and it's difficult to get bonds. So they simply have to rent. We're not complaining, because the sustainability of the Treoc Way is dependent on a strong tenant demand - and the demand is strong! To tell the truth, it is stronger than ever!

Last year, the implementation of the new credit act changed the property scene drastically. The credit act is one of the reasons that rental demand is so strong. It is now far more difficult than ever before to buy a property in your own name. But if you buy according to the Treoc Method, you'll find that it's easier than ever before to get bonds; and the Treocians are flourishing. Wise estate agents are starting to bring their clients to our seminars so that we can teach them how to buy properties from these agents easily, using the right trust structures. Foolish estate agents are trying very hard to sell properties in the old way, and they are closing down one after the other, because the new credit act is very unfriendly towards conventional methods.

Then interest rates started to rise, and panic set in. An alleged fraudster was elected as president of the ANC and a black cloud of depression fell over the country. And as if this cloud was not black enough, on top of that Eskom switched the power off too. And property growth dropped to a low of 9.1%.

Now one again hears talk everywhere of people wanting to leave the country. Please stop all that negative talk and pessimism. Despite all the hardships we still have a very strong economy and one of the best Ministers of Finance in the world. Everything that comes down goes up again, and in all probability we have now reached the bottom turning point with respect to capital growth, as well as attitude. There's no better time to buy than now.

The only reason that our properties are not already worth double what they are now, is because we have active property developers in our country who are providing new stock faster than Treoc can take it out of the market - but that party for developers is now over. Eskom has put an end to the developers' party. Most of the new developments have been halted, and very few are going to be approved in the next few years. There is quite simply not enough electricity for them. The supply of new stock is therefore decreasing, while demand is still rising. Values and prices are soon going to go through the roof. That means lots of capital growth and lots of tenants. By the way, Clive Bydawel, Managing Director of Treoc Property Exchange and our buyer's agent, selects the new developments that he makes available to our club very carefully, in order to prevent us buying in developments that will later be cancelled.

I saw in the Beeld of 29 February that Jacques du Toit, economist from Absa, writes that property will cost 60% more by 2012. Thank you, Jacques, that proves my point - but I think it is going to be a lot more.

Happy House Hunting!