Pumping 2010 property profits

There is a lot of talk at the moment about the local property market starting to emerge from its slump. Let's face it, property owners and investors had it good for a long time in South Africa. They bought a property, hung on to it for a while, flogged it and made enormous profits. Investing in property was a no-brainer for those with cash or available credit looking to cash in. No more.

The property market has felt the recession keenly and the last year has been a tough one for property owners, particularly those who bought in the "boom times" and are now struggling to recoup what they paid for their properties.

The tide though, does seem to be turning, albeit slowly. As summer approaches and we enter the final quarter of 2009, the magical year, 2010 is almost upon us. Yes, WC 2010 is not far off; stadiums are receiving final touches, infrastructural changes continue apace and property owners are finally licking their lips at a possible big pay day come soccer time 2010.

But is this the reality? Should you be selling and buying something larger in anticipation of a world cup property boom? And will big money be made as well-heeled soccer lovers from around the world fall in love with Cape Town, Durban or even Johannesburg (stranger things have happened) and start snapping up properties still relatively cheap to them?

Well frankly, "no" is the only answer I can up with. While the WC will definitely have an effect on the market it doesn't necessarily translate into a mini property boom. Chances are many owners will expect unrealistic prices for their properties and price themselves out of the market.

Gavin Wright, owner of three Leapfrog franchises (Atlantic Seaboard, De Waterkant, and City Bowl) says." These are soccer fans coming here not property investors." He agrees that South Africa will of course benefit from the huge exposure an event of this nature brings and he also says many visitors do come here, fall in love with the place and land up buying property, "But only a very small percentage."

So sure, 300 000 people may arrive but there is no indication that they'll will be snapping up properties to go with the African curios they'll be lugging back with them. While the obvious rise in short term rentals might cause a few locals with available cash to buy properties and some speculators will definitely gamble on wealthy foreigners paying exorbitant prices for properties they probably don't need, the true impact is guess work.

France 1998
Many look back to the 1998 world cup in France and mention that Paris' property prices rose more than 55% over a one-year period. But that is Europe with a large wealthy population with quick and easy access. South Africa is a long haul destination, which despite offering good value for money for those with foreign currencies, is still a tiring flight. It is expensive to get here.

The more obvious answers lie in how we sell ourselves to a foreign market. Many soccer fans will be visiting us for the first time and might well fall in love and purchase some real estate. This happened in Sydney in 2000 when they hosted one of the best Olympics ever. They didn't just punt Sydney but marketed the whole of Australia as a desirable place to visit, play, live and own property.

The spending on infrastructure will automatically increase the value of properties in some areas and, like France in 1998, certain neighborhoods may be completely rejuvenated leading to massive price increases.

Opportunity of a lifetime

Instead of speculating on massive price increases on properties countrywide, it is more practical to look at what is happening in SA today. We have a relatively strong economy, a growing middle class and a unique and once-off opportunity to host hundreds of thousands of visitors in our spectacular country. Not too mention a captive audience of millions watching on TV. The beautiful game set in a beautiful country: who can resist?

In real terms it all boils down to what kind of show we put on. This will be South Africa's biggest marketing opportunity since 1994 and if we succeed in drawing the crowds and pleasing them while they are here, the spin-offs not only for the property market but for the entire economy will be huge. This means local players need to look a little further down the line, past the world cup, making sure that new infrastructure benefits South Africans long-term and that the billions spent on new stadia provide us with magnificent new facilities and not just expensive white elephants blotting our scenic landscapes.

Property in South Africa is still relatively undervalued in global terms, particularly now, and some will definitely get lucky come the world cup matches, but a massive short term boom in property prices is unrealistic and while the WC  may well be a good time to sell your property realistic pricing as always is crucial. Write to: news@realestateweb.co.za

*Property journalist Barry Washkansky is Realestateweb's newest contributor. Barry's first job was selling property in the Woodstock area of Cape Town where he sold to many a hippy, professor and first time-home buyer. He now sticks to writing, mostly about property, in particular auctions.

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Comments

 

responses to this article

Sanity at last Thank goodness someone is finally saying it like it is. 2010 soccer games are not going to give us all huge wads of cash or create a property boom. Sure, some people will make money but many more will lose money. How are all these visitors booking? by Purple Cow on October 07 2009, 16:46 Find this comment inappropriate? Report it

Realestateweb's new property valuation tools! I looked at the samples, not bad at all. Now I understand the sudden productivity and plethora of property related articles. Any chance REW will develop a property auction reserve price, actual sales price or withdrawn status . .more database for all SA auction properties? . .less by Tuscanite on October 07 2009, 17:12 Find this comment inappropriate? Report it

Property "We have a relatively strong economy, a growing middle class and a unique and once-off opportunity to host hundreds of thousands of visitors in our spectacular country." Really? How can we have a growing middle class as well an a growing poor . .more population, as measured by other statistics. Do you think that someone with a Std 8 education that works for the government and earns R8000 p.m is now middle class? The reality is that the glory days of the property boom are over. . .less by Mook on October 07 2009, 17:26 Find this comment inappropriate? Report it

WAT NONSENSE IS HIERDIE?? JULLE OUENS KAN LEKKER K** PRAAT AS JY VRYE TYD HET. by NW on October 07 2009, 19:46 Find this comment inappropriate? Report it

YOU MUST NOT DREAM Well, it might be true but the british pounds is loosing value, the dollar is loosing value big time. So yes few top properties will still go but don't expect any movement at all in the "daily" market. I think that someone has mentioned the crime rate. . .more Only 18000 murders a year. Countless rapes (that will become a norm soon). Did someone mention the potholes (except on the "private" roads- I mean TOLL roads!). Oh you pay on average 20 Euros for a super fast connection with illimited downloads. Hm! How much in south africa? Probably 10 times more!. A foreigner who will buy a property in SA. For what? to comes once or twice a year and refurbish it once or twice a year . Hm! don't people get rob in SA? Property tax, plus alarm response, plus maintenance cost, plus high internet fees plus high bank costs plus air travel (will cost 1000 Euro return soon from Europe), plus ,plus... YOU MUST NOT DREAM!!! . .less by Alex Wonner on October 07 2009, 21:37 Find this comment inappropriate? Report it

Jii is "correct" NW DIE MENSE KAN LEKKER hm!! Hm!!! Hm!!! PRAAT by Alex Wonner on October 07 2009, 21:39 Find this comment inappropriate? Report it

Wake Up! The author seems to think that the rest of the world is not in an economic downturn!!!! by Compadre on October 07 2009, 22:32 Find this comment inappropriate? Report it

Alex Wonner You must have a really miserable life, you cannot even dream. Why don't you immigrate if you are so negative about SA. You are so blinded by negativity that you cannot see how beautiful SA is and how much it has to offer.Yes there are problems by being . .more negative does not solve them. Positive attitude is 80% of success so I guess you have just not made it. . .less by GB on October 08 2009, 05:42 Find this comment inappropriate? Report it

very happy to bet the WC has zero effect on property valuations the best one can hope for is a month or two of higher-than normal rental. if you're happy to turn your home over to a horde of foreign football fans...... by charlie on October 08 2009, 06:26 Find this comment inappropriate? Report it

Alex Wonker (sp!) You sound like a miserable character. You remind me of my last German tennant actually; he complained because there was too much sun in the summer on his imported Swedish sofa. Then complained there was too much rain on his balcony in the winter. . .more Inbetween there were complaints about everything under the sun, and rain. He was a truly miserable character, and when the time came to renew his lease I terminated it. His misery is now some one else's problem. Our German friends all love Cape Town and many come to visit every summer. Some now own property here (Camps Bay is popular) while the others dream is to buy property here one day. Yes, Alex; THEY DREAM TO LIVE HERE! Perhaps tell them not to dream, hey? . .less by CT Landlord on October 08 2009, 08:56 Find this comment inappropriate? Report it

Property Hype!!! i dont see why the reason property prices would rise sharply next year 2010. Whats with so much hype about the expected property boom! The FIFA world cup is just a 1 month affair and thereafter once the tourist and the hype has ended, your bond still . .more needs to be paid. Its not like your property will be paid off in a months time with the income you going to generate from renting during the FIFA world cup. Some will make money, yes, but for the larger majority it doesnt make sense of all the hype. Dont follow the herd mentality!!! . .less by Basheer on October 08 2009, 09:09 Find this comment inappropriate? Report it

Is Alex South African? Doesn't he live on some remote island in the Atlantic? Or is that a different Wonner I'm thinking of? by Wonner watcher on October 08 2009, 09:21 Find this comment inappropriate? Report it

Eish CJ - Unfortunately we will not be renewing your lease beyond May 2010. We want to "cash in" on the world cup rental pool. Thanks for all the rent over the past 10 years & have a good life!! by CJs Landlord on October 08 2009, 09:27 Find this comment inappropriate? Report it

Groan "Property in South Africa is still relatively undervalued in global terms" What does this old cliche mean - that if you are paid a New York salary then houses in SA are cheap. Houses need to stay in balance with LOCAL salaries. Unless South . .more Africans are happy to live in the dreary hovels whilst all the good stuff is occupied by absent foreigners. Last time I checked (Economist magazine), on a "house price to local salary" basis, Sandton was actually the most overpriced place in the whole world. So don't give me this undervalued in global terms rubbish in your desperate attempt to ramp the market. . .less by CJ Says on October 08 2009, 09:29 Find this comment inappropriate? Report it

Talking of internet speed Got a friend in the UK - his internet speed is already 40 times faster than my ADSL. Now the local city authorities are laying cables in the sewers - will make his speed 200 times mine - and it will apparently be free !! by CJ Says on October 08 2009, 09:35 Find this comment inappropriate? Report it

Oh great, now they are laying cables in the sewers? Smart move. Because we don't need to take a dump in this new millenium. Will they never stop thinking of new ways to flush money down the toilet? :-) by Plumbers crack on October 08 2009, 10:01 Find this comment inappropriate? Report it

@Wonner watcher Is he not Willy Wonka's lessor known brother, who lost the Chocolate Factory and has been a miserable S.O.B. ever since? by Charlie from the Chocolate Factory on October 08 2009, 10:05 Find this comment inappropriate? Report it

CJ - You got it wrong The Economist was misleading....think about it & use you head..look into the numbers.....they were looking at the RSA average...not the average earnings of the northern suburbs....rich / poor much bigger discrepancy in RSA than the US....I suppose you are . .more still expecting central sandton prices to drop by 90%...time for u to go back to school. . .less by CJs Landlord on October 08 2009, 10:20 Find this comment inappropriate? Report it

Sunny views in Cape Town That's the ironical thing - people buy / rent in Cape Town after checking out the wonderful views from the big window over looking the ocean. They pay a big premium to get this. They soon discover however, that having blaring sun streaming in and making . .more the place a cooker and destroying the furniture is not so cool (groan) and they put up blinds and curtains to keep the sun out. Drive around and look up at the windows in these areas and they are all battling the sun in one way all the other. And they are never seen on that expensive balcony because 10 minutes in our ozone-free sunshine and they are cancer riddled toast. . .less by CJ Says on October 08 2009, 10:28 Find this comment inappropriate? Report it

Response to You Must Not Dream Crime and safety - there are stats and then there are stats: http://capeinfo.com/crime-public-safety by Bongo on October 08 2009, 13:19 Find this comment inappropriate? Report it

Tourists falling in love with Joburg? No, I don't think stranger things have actually happened. Well, maybe the fact that you can get spare ribs on a pizza, but that's about all. Great article, though. by Jansa on October 08 2009, 13:33 Find this comment inappropriate? Report it

@ CJs Landlord No, they were comparing salaries in that area - of course it might have bean misleading because I suspect the township Alex might be included in the area - but it is no more misleading than comparing SA house prices to overseas salaries as Barry above . .more tries to do. . .less by CJ Says on October 08 2009, 16:46 Find this comment inappropriate? Report it

Dreamworld? Am I living in a dream world? The reason I'm asking is because I earn MUCH more than any of my friends or family (in-laws...) in Europe. If I compare what the what a credit controller earns in Germany vs here, my analysis is that it's only about 10 - 15% . .more less than overseas. And that accounts for the majority of jobs that I have looked at. Yes, our blue collar workers earn MUCH less than their European counterparts, but the moment theres some form of degree or professional service involved, we are not that far behind. There are unfortunately a lot more factors at play than just saying we are "undervalued on global terms" - that is not enough reason for the market to suddenly rebound, but that sentence in itself is not that far off the truth. . .less by Bearded Bandit on October 15 2009, 16:54 Find this comment inappropriate? Report it

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