About Us	Search	Advertising

	Brought to you by:

In the past, I've spoken about the subtle everyday signs that an investor should recognise in their investment decision-making criteria. One of those signs was the amount of "junk mail" distributed at the height of the consumer boom. This has mysteriously dried up as the average consumer runs for cover under the threat of high interest rates. But among the items in my mailbox are property advertisements.

It was whilst studying these advertisements that I recalled some advice of Warren Buffet. Buffet is now the wealthiest US citizen having overtaken Bill Gates in the money stakes.

Warren says a person should never be embarrassed to ask too much or offer too little when selling or buying an asset.

If I look at the current asking prices of properties for sale, I think the sellers are taking Warren's advice very seriously. It would be interesting to know how many of these sellers are actually achieving their asking price as I am sure the buyers are also following Warren's advice.

Cape property auctioneer Rael Levitt believes unrealistic asking prices are the main driver behind the increase in the amount of people wanting to try sell their homes via auctions.

Property values affected by interest rates go up and down in the short-term just like any other asset. The average homeowner is very often not even aware of the change in value as he/she is not in the market.

From an investor's perspective, residential property is offering very little value at the moment. The average income yield (rental expressed as a percentage of the market value) is between 4-5 % (before tax) versus current bond yields of 10% and money market rates of 11%. The investor is effectively subsidizing the rental income by 7% in the hope of achieving a future capital return.

For these investors, I sincerely hope the current downward cycle is a shallow one.

Mark Williams (MComm) is a wealth manager based in Somerset West. He can be contacted on (021) 851-3746, 082 960 5926 or mark@synfin.co.za.

	Back to top
© Tel. (021) 853-0211 Fax. (021) 853-0234 2003 Somerset Press (Pty) Ltd on all information and photographs.