Sorry for the delay but I've been enjoying the fresh mountain air of the Drakensberg for the past 10 days. Normal posting will continue but here's an open thread anyway...
19 comments:
Bean Counter
said...
Lamb to the Slaughter # 1:
Went to the bank today, a 20-something bloke in the info queue behind me steps up and say, "Hello, I'd like to talk to someone about repossessed properties." The woman behind the counter eventually led him to a consultant and that was that.
He didn't even know who to ask for. Just, "Hi, I want to go into massive debt buying an asset I don't understand that is about to lose 30 percent of its value."
Where do you get this number from? Or are you just one of those people that just keeps hoping property is going to crash? and in the meantime it never does. (and IMHO i don;t with it will crash unless the interest rate sky rockets...) I can understand why you might not think it's the best investment not for big returns...but loose 30%? I think not...*shrug*
Yeah I agree that it is NOT likely that prices will crash unless interest rates sky rocket. And rates will stay low simply because raising rates will raise the rand (ANC doesn't want that) and reduce consumer spending. Current demand is weak - higher rates will kill the economy.
My prediction remains a flat housing market with limited growth and an ongoing buyers market for the next few yrs. But don't expect spectacular crashes. In fact buying a bank repo will get you a nice immediate discount.
Andrew, you're a newby here, check out the old posts for why 30 percent is likely. And since we're speculating about each other, are you one of those people that thinks the 250% rise between 1999 and 2007 was normal? No, Jules, it won't be a crash - we moved on from that scenario about a year ago.
@Bean Counter - Just because I am a newby to posting doesn't mean I have not been reading this blog for a while...:)
RE: "250% rise between 1999 and 2007 was normal" No I don't think it was normal. But I still do not agree with your 30% drop. If anything I think the house prices will stagnate for a longer period of time to slowly adjust the prices over time.
I do know however that all the people I know that have been "scared to buy property" because they think it will crash don't own property and will never own property. It's always too expensive, and to be honest I've never spoken to a single person that says that they bought a "cheap" property.
The bottom line is, If the guy going into the bank has cash built up, then go ahead and throw in some offers at these repossessions.
Bean Counter- be glad there are still people out there thinking prices will be flat. If they were all thinking like we are it would be a concern.
The rest of the world have had major corrections in prices. Why the hell would SA be immune?
You cant give homes away in the US. 12 months ago I sold my 2 bed place in Chelsea, London. There had been a upswing in house prices in 2009 and I decided to cash in as I figured prices would soon turn down again. I sold at 30% below the 07 highs. Others like mine are still on the market and their asking prices are now lower now due to the new down turn..some half of their 2007 peaks. Granted these are all +£500k but there cheaper areas are all reflecting the same picture.
If this is happening in London what makes anyone think we wont get hit. Something will trigger the first jolt in prices..once that happens it will snowball.
THERE IS TOO MUCH SPECULATION AND PRICES WILL COME DOWN.
Agree 100% with Anon. I did the same with my overseas properties when returning to Cape Town.
I worked for THE premier investment bank on Wall Street and "retired" at the ripe old age of 35. In those short 10 years it was quick to see that the easiest and most lucrative returns are made in over speculated markets. tech in 2000/housing in 2007/ oil in 2008. SA's housing boom falls into the speculative category.
SA speculative? SA is now or will be decently priced soon (taking sheriff auction prices as market prices, not newspaper listings). Have you been to Nigeria or Ghana? You ain't seen nothing yet...
I assume you did not buy property when you came back to Cape Town then? So do you suggest renting until this correction happens before buying property again?
Andrew- I returned in 2006 and bought a place in Bantry Bay. In Jan 2009, out of the blue, someone knocked on my door and asked me to sell. He paid R1 mill more than I paid. I really thought it was a wind up but he was serious and I accepted.
Yes we been happily renting ever since. I just don't see value at current prices..when they correct i'll get back in. The guy who bought from me is trying to sell as he wants to move back to Holland. Its now on for R2.5 BELOW what he paid and still no takers.
An apartment comparable to mine has just been sold for the price I paid three years ago, not a great investment in any one's book. However, I live in my unit and as a tenant I'm making out like a bandit. As interest rates have gone down, my "rent" is half of what I would pay on the open market. Overpriced townhouses in far flung suburbs with horrendous traffic will lose 30%, the rest of us, those who bought in conservative suburbs with good schools will not be dropping our prices anytime soon.
@Anon: "Overpriced townhouses in far flung suburbs with horrendous traffic will lose 30%, the rest of us, those who bought in conservative suburbs with good schools will not be dropping our prices anytime soon."
Sure, because somehow the laws of economics don't apply in "conservative suburbs with good schools" (at which, by the way, they still don't teach economics).
Perhaps buyers in the green and leafies aren't quite as overextended as the McMansion dwellers, but you're still going to feel the burn. And by saying you're not going to drop prices, you're proving your ignorance of supply and demand. News flash: you don't get to decide what a fair price is - the market does that.
@Anon - I always find it so odd how so many people believe that the entire Cape Town population works in the CBD. The whole of Cape Town gets up in the morning and drives to town, leaving the suburbs dead and ghostlike? I work and live in Durbanville, which to some might be classified as a leafy. I don't for a minute think that the value of property here is immune to decline. In fact, if the recent boom has tought us anything, the leafies are where people want to live, boosting their value. While the new suburbs (Parklands?) is where the babyboomers wanted to invest, as they are far from leafy, cheap, but good BTL prospects (at the time). So ask yourself which side of the boerwors curtain has increased the most over the last 15 years? Remember that Cape Town is now being seen as a last resort to the usual whity prophets of doom. Or as a "lifestyle" choice for the young and stupid. They are moving in droves to this town, quite possibly as a last leap to Europe. Either way property in the Mother City has not been cheap compared to national standards, and the recent boom pretty much means they cannot afford a cent more than what they sold for in Germinston, or Vereeniging. That won't get them a 4 bedroom in Newlands I'm afriad, so Belville and Tableview it is. In other words, your suburb, the one that you won't drop your prices for, will soon be prospected by a very niche market only. German and Dutch holiday homes, I'm certain Europe is doing so well that they are lining up to buy these. Combine that with the flats creeping slowly in, miles away from the sea, and the potential loss of WP Rugby, you just might be wrong.
The Elephant/Dark horse in the room is proposed national legislation that will do away with provinces. If that Act is promulgated and signed into law, then the ANC can finally wrest control of the Cape from the DA. If that happens - prices in CT will take an initial dip, but never to the current extent of other provinces up north. And why you ask ?
Simple - our demographical makeup is still more desirable to Gauteng whitefugees than their current Gauteng demographical makeup.
Cape Town will always be more desirable if you are prepared to sacrifice career opportunities and high income for a distinctly more peaceful,and, a relatively unfortressed lifestyle .
Anyone read the article in Businessday on the rebound in the propery market? Here's a copy of the first paragraph: "JOHANNESBURG — The property market recovered further in September when a growth rate in the median property price of 8,3% year-on-year was reported, Standard Bank said on Friday."
???? I was under the impression that the market was dead? I'm sitting in Canada right now so I have no idea of the reality on the ground. I'm planning to move to CT in 3 yrs time and was assuming prices would be flat...
Not only is Europe and Poms doing extremely well and roaming the world snapping up properties but they will be even keener to buy at the weak exchange rate we have at the moment.
You must learn to distinguish between Management of Perspective Economics and Economic Fact.
Do yourself a favour and log onto the SARB website, download the Money and Banking pdf from the Quarterly data report. Check the figures for yourself and then ask are prices rising in this economy?
Mortgage volumes are down more than 50% and calculations do not take this into account. Secondly even if it were true that there was an 8% rise it actually means flat because this is not inflation adjusted.
Rather put your money into commodities or productive land until residential property investment is a contrarian one, most likely after 2020. Sheesh I have made 8% net in silver over just the last 2 months lol.
I've just found this blog... wow. I share similar sentiments about longer term trends. Nice to know some people think in the same way. It's usually quite difficult to convince any civilized people that house prices don't always go up.
Having said that not all areas move the same way, and am looking at 3 bedroom flats in the CBD. Of course I understand the premise of renting until prices trough, but market timing is also difficult.
It's interesting to see that income/price ratio has been increasing in the UK over the last 30 years (structural trend?).
Other things that may make SA different to Spain/USA/UK... We primarily export commodities to China, so we may be set to ride that wave for some time, even if they have periodic set backs. That should strengthen our currency and make us richer.. (although make foreigners less likey to purchase, unless they are speculating).
I've seen people say things on this blog like the next time to buy is 2020? I've never seen a bear market in housing last 10 years. The UK's last serious decline was from 89 to 93 and it took you to roughly 98 to make your money back in both real and non-real terms. BUT the decline was only 4 years.
Please share your thoughts... am I crazy to entertain the idea of buying? I guess those same people would be desperately rushing to sell existing properties even with the current buyers market because they see further decline.
Gold earned in dollars has done well, Gold earned in rands hasn't done so well recently. Property and other real assets in SA might be good bet when priced in dollars. If you're buying to live, doesn't it make sense?
19 comments:
Lamb to the Slaughter # 1:
Went to the bank today, a 20-something bloke in the info queue behind me steps up and say, "Hello, I'd like to talk to someone about repossessed properties." The woman behind the counter eventually led him to a consultant and that was that.
He didn't even know who to ask for. Just, "Hi, I want to go into massive debt buying an asset I don't understand that is about to lose 30 percent of its value."
Sukkuh.
"Lose 30 percent"
Where do you get this number from? Or are you just one of those people that just keeps hoping property is going to crash? and in the meantime it never does. (and IMHO i don;t with it will crash unless the interest rate sky rockets...)
I can understand why you might not think it's the best investment not for big returns...but loose 30%? I think not...*shrug*
Yeah I agree that it is NOT likely that prices will crash unless interest rates sky rocket. And rates will stay low simply because raising rates will raise the rand (ANC doesn't want that) and reduce consumer spending. Current demand is weak - higher rates will kill the economy.
My prediction remains a flat housing market with limited growth and an ongoing buyers market for the next few yrs. But don't expect spectacular crashes. In fact buying a bank repo will get you a nice immediate discount.
Andrew, you're a newby here, check out the old posts for why 30 percent is likely. And since we're speculating about each other, are you one of those people that thinks the 250% rise between 1999 and 2007 was normal? No, Jules, it won't be a crash - we moved on from that scenario about a year ago.
@Bean Counter - Just because I am a newby to posting doesn't mean I have not been reading this blog for a while...:)
RE: "250% rise between 1999 and 2007 was normal"
No I don't think it was normal. But I still do not agree with your 30% drop. If anything I think the house prices will stagnate for a longer period of time to slowly adjust the prices over time.
I do know however that all the people I know that have been "scared to buy property" because they think it will crash don't own property and will never own property. It's always too expensive, and to be honest I've never spoken to a single person that says that they bought a "cheap" property.
The bottom line is, If the guy going into the bank has cash built up, then go ahead and throw in some offers at these repossessions.
Bean Counter- be glad there are still people out there thinking prices will be flat. If they were all thinking like we are it would be a concern.
The rest of the world have had major corrections in prices. Why the hell would SA be immune?
You cant give homes away in the US. 12 months ago I sold my 2 bed place in Chelsea, London. There had been a upswing in house prices in 2009 and I decided to cash in as I figured prices would soon turn down again. I sold at 30% below the 07 highs. Others like mine are still on the market and their asking prices are now lower now due to the new down turn..some half of their 2007 peaks.
Granted these are all +£500k but there cheaper areas are all reflecting the same picture.
If this is happening in London what makes anyone think we wont get hit.
Something will trigger the first jolt in prices..once that happens it will snowball.
THERE IS TOO MUCH SPECULATION AND PRICES WILL COME DOWN.
Agree 100% with Anon. I did the same with my overseas properties when returning to Cape Town.
I worked for THE premier investment bank on Wall Street and "retired" at the ripe old age of 35. In those short 10 years it was quick to see that the easiest and most lucrative returns are made in over speculated markets.
tech in 2000/housing in 2007/ oil in 2008.
SA's housing boom falls into the speculative category.
SA speculative? SA is now or will be decently priced soon (taking sheriff auction prices as market prices, not newspaper listings). Have you been to Nigeria or Ghana? You ain't seen nothing yet...
@ Wall Street
I assume you did not buy property when you came back to Cape Town then?
So do you suggest renting until this correction happens before buying property again?
Andrew-
I returned in 2006 and bought a place in Bantry Bay. In Jan 2009, out of the blue, someone knocked on my door and asked me to sell. He paid R1 mill more than I paid. I really thought it was a wind up but he was serious and I accepted.
Yes we been happily renting ever since. I just don't see value at current prices..when they correct i'll get back in.
The guy who bought from me is trying to sell as he wants to move back to Holland. Its now on for R2.5 BELOW what he paid and still no takers.
An apartment comparable to mine has just been sold for the price I paid three years ago, not a great investment in any one's book. However, I live in my unit and as a tenant I'm making out like a bandit. As interest rates have gone down, my "rent" is half of what I would pay on the open market. Overpriced townhouses in far flung suburbs with horrendous traffic will lose 30%, the rest of us, those who bought in conservative suburbs with good schools will not be dropping our prices anytime soon.
@Anon: "Overpriced townhouses in far flung suburbs with horrendous traffic will lose 30%, the rest of us, those who bought in conservative suburbs with good schools will not be dropping our prices anytime soon."
Sure, because somehow the laws of economics don't apply in "conservative suburbs with good schools" (at which, by the way, they still don't teach economics).
Perhaps buyers in the green and leafies aren't quite as overextended as the McMansion dwellers, but you're still going to feel the burn. And by saying you're not going to drop prices, you're proving your ignorance of supply and demand. News flash: you don't get to decide what a fair price is - the market does that.
@Anon - I always find it so odd how so many people believe that the entire Cape Town population works in the CBD. The whole of Cape Town gets up in the morning and drives to town, leaving the suburbs dead and ghostlike? I work and live in Durbanville, which to some might be classified as a leafy. I don't for a minute think that the value of property here is immune to decline. In fact, if the recent boom has tought us anything, the leafies are where people want to live, boosting their value. While the new suburbs (Parklands?) is where the babyboomers wanted to invest, as they are far from leafy, cheap, but good BTL prospects (at the time). So ask yourself which side of the boerwors curtain has increased the most over the last 15 years? Remember that Cape Town is now being seen as a last resort to the usual whity prophets of doom. Or as a "lifestyle" choice for the young and stupid. They are moving in droves to this town, quite possibly as a last leap to Europe. Either way property in the Mother City has not been cheap compared to national standards, and the recent boom pretty much means they cannot afford a cent more than what they sold for in Germinston, or Vereeniging. That won't get them a 4 bedroom in Newlands I'm afriad, so Belville and Tableview it is. In other words, your suburb, the one that you won't drop your prices for, will soon be prospected by a very niche market only. German and Dutch holiday homes, I'm certain Europe is doing so well that they are lining up to buy these. Combine that with the flats creeping slowly in, miles away from the sea, and the potential loss of WP Rugby, you just might be wrong.
SuckerJack
The Elephant/Dark horse in the room is proposed national legislation that will do away with provinces.
If that Act is promulgated and signed into law, then the ANC can finally wrest control of the Cape from the DA.
If that happens - prices in CT will take an initial dip, but never to the current extent of other provinces up north.
And why you ask ?
Simple - our demographical makeup is still more desirable to Gauteng whitefugees than their current Gauteng demographical makeup.
Cape Town will always be more desirable if you are prepared to sacrifice career opportunities and high income for a distinctly more peaceful,and, a relatively unfortressed lifestyle .
Anyone read the article in Businessday on the rebound in the propery market?
Here's a copy of the first paragraph:
"JOHANNESBURG — The property market recovered further in September when a growth rate in the median property price of 8,3% year-on-year was reported, Standard Bank said on Friday."
???? I was under the impression that the market was dead? I'm sitting in Canada right now so I have no idea of the reality on the ground. I'm planning to move to CT in 3 yrs time and was assuming prices would be flat...
SuckerJack,
Not only is Europe and Poms doing extremely well and roaming the world snapping up properties but they will be even keener to buy at the weak exchange rate we have at the moment.
Jules,
You must learn to distinguish between Management of Perspective Economics and Economic Fact.
Do yourself a favour and log onto the SARB website, download the Money and Banking pdf from the Quarterly data report. Check the figures for yourself and then ask are prices rising in this economy?
Mortgage volumes are down more than 50% and calculations do not take this into account. Secondly even if it were true that there was an 8% rise it actually means flat because this is not inflation adjusted.
Rather put your money into commodities or productive land until residential property investment is a contrarian one, most likely after 2020. Sheesh I have made 8% net in silver over just the last 2 months lol.
I've just found this blog... wow.
I share similar sentiments about longer term trends. Nice to know some people think in the same way. It's usually quite difficult to convince any civilized people that house prices don't always go up.
Having said that not all areas move the same way, and am looking at 3 bedroom flats in the CBD. Of course I understand the premise of renting until prices trough, but market timing is also difficult.
Does anyone have equivalent data to this for Cape Town?
UK housing market
It's interesting to see that income/price ratio has been increasing in the UK over the last 30 years (structural trend?).
Other things that may make SA different to Spain/USA/UK... We primarily export commodities to China, so we may be set to ride that wave for some time, even if they have periodic set backs. That should strengthen our currency and make us richer.. (although make foreigners less likey to purchase, unless they are speculating).
I've seen people say things on this blog like the next time to buy is 2020? I've never seen a bear market in housing last 10 years. The UK's last serious decline was from 89 to 93 and it took you to roughly 98 to make your money back in both real and non-real terms. BUT the decline was only 4 years.
Please share your thoughts... am I crazy to entertain the idea of buying? I guess those same people would be desperately rushing to sell existing properties even with the current buyers market because they see further decline.
Gold earned in dollars has done well, Gold earned in rands hasn't done so well recently. Property and other real assets in SA might be good bet when priced in dollars. If you're buying to live, doesn't it make sense?
The link I was trying to post.
http://www.moneymovesmarkets.com/journal/2009/5/26/are-uk-house-prices-close-to-a-trough.html
I also meant Gold bought with dollars/rands.
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