Positive factors make this a good time to invest in property

Nevertheless, the advice to invest in property has never been more appropriate than it is at the present - and those who ignore it will, in the next three to five years, look back with regret.

Several interlinked factors make property investment right now totally logical and suitable to the man in the street, especially if he has limited means and is not in a position to take big risks.

Property prices stabilising

Perhaps the most important reason for confidence in the property sector at the moment is that property prices, after dropping across the board for almost 24 months, are now stabilising and straight-lining.

Further drops are not on the cards and almost all reputable South African surveys now predict growth at inflation-beating levels, i.e. 6% to 9%.

Equally encouraging is the fact that interest rates are at their lowest levels in many years and could well drop further now that the Consumer Price Index is coming in at sub-5 percent levels.

Investors are now often paying half what they did each month on their bonds in the boom era. Despite the huge savings now possible, some people are nevertheless still holding back from investing in property.

Easier bonds

Then, too, the whole tricky business of applying for a mortgage bond is now becoming less daunting, especially for investors with a proven income stream.

Almost all the Rawson Property Group franchisees are reporting that the banks are now more open to suggestions and more flexible in their approach this year than previously. This, incidentally, also applies to their attitude to developers - we are getting more favourable rates than before and there is a new respect for those developers who have managed to keep going and achieve fast sales despite recessionary conditions. Residential lending is, I believe, set to increase and take its place once again as part of South African banks' core businesses.

Conditions for buy-to-let investors are also now favourable

Since the implementation of the National Credit Act and the cutback on home loans, the demand for rental accommodation has risen exponentially - and this has been strengthened by the slowdown in development. Rawson Properties MD, Tony Clarke, has recently shown that with a nett return countrywide to landlords of 5.7% on residential property (after all costs and tax deductions), the return is better than is being achieved in some 30 of the world's leading centres, where very often returns are below 3 percent.

Strong rental demand

This demand for rental accommodation is particularly strong right now in high-density areas that are seen as feeder suburbs for tertiary educational institutions. In Cape Town, this applies to Rondebosch, Claremont and Rosebank; in Stellenbosch many of the CBD peripheral areas fall into this category; in Joburg, rents in Auckland Park and Braamfontein have benefitted greatly from their being close to the University of Johannesburg and to Wits University; and in Durban much of the CBD is now achieving record per metre square rentals because of the large tertiary education population there.

Where new developments are still coming on stream, developers are finding that more competitive material and equipment price costs are enabling them to cut prices. Developers who do their own construction and other services have a further advantage as there are no independent builders trying to make an "extra" profit out of the development.

In real terms, new developments like Rawson Developers' "The Rondebosch" and "River Song" complexes (both in Rondebosch) are offering lower prices per square metre than those we launched two-and-a-half to three years ago.

It is noteworthy that in Knight Frank's global survey of 5 000 high-nett-worth individuals, most with US$100 million or more in assets, over 30% of their assets were in property.

If property works so well for the very rich, it can surely work for less affluent people. It remains the safest, if one of the least spectacular, of all asset classes - and it is one of the few where gearing is not only allowed, but also in fact encouraged by banks.