Bill Rawson said recently, “struck by the fact that across the board in all price categories, year-on-year price rises of around 10% and in the high demand metropolitan areas up to 20% are being achieved – as in the boom days of the South African property sector. This boom has resulted in a significant upgrading of their homes by the majority of Australians when they move and this, I discovered, is an almost universal trend, especially in the big cities.”
Asked what factors have led to this, Rawson said that the Australian government have shown remarkable determination to curb interest rate rises – and have, in fact, just decided to leave the rate at 2,25% (i.e. only 0,55% higher than recent inflation rates). In South Africa, said Rawson, any rise in interest rates is in his view would be misguided, not just because it makes home ownership more difficult when it should be encouraged but more importantly because it limits the country’s ability to create jobs and this has to be our top priority.
“The Australians to whom I talked regard their current 6% unemployment rate as a national crisis,” he said, “yet here we still sit with an official unemployment rate of 25% and an unofficial unemployment rate of 36%. This situation simply has to improve.” The Australian government has also made it easier than in South Africa for the average man-in-the-street to borrow from the banks in order to buy a home. Their credit act, he said, although by no means lenient, is not quite as strict as in South Africa.
“What intrigued me here,” said Rawson, “is that ample recognition is given to the tough reality that in a rising sellers’ property market of the kind that Australians, like South Africans are now experiencing, it will often be difficult for young couples and young families to buy a home. Wealthier parents are, therefore, encouraged by the banks to lend their children sufficient cash to get onto the property home owning ladder – and this is often done by subsidising and/or guaranteeing a bond that is larger than the young people would qualify for.”
In Sydney, said Rawson, the popularity of high rise sectional title CBD and CBD peripheral living is at an all-time high and this has led to a building boom to provide this type of accommodation. The less appealing aspects of living in a high density concrete jungle are mitigated in Sydney by many apartments having sea views and by the provision of excellent recreational facilities within the complexes, e.g. gyms, children’s playgrounds, restaurants, cafes and swimming pools. There is, said Rawson, the growing use of clever designed vertical gardens.
“If you think that South Africans have converted fast – which they certainly have – to green energy saving non-polluting concepts, let me assure you that Australia is still far ahead of us.” Another factor boosting the Australian property market, said Rawson, is that overseas investors – and particularly the Chinese – are encouraged to buy into Australian property. South Africa’s property market may be slowed due to the flippant statements that foreign property ownership will be restricted.
“Reports on the staggering growth of the Chinese investor class these days tend to be almost mythical but I was told that they now have 95 million US$ millionaires and a fairly high percentage of these hedge their bets by investing offshore – especially in Australian property. This obviously boosts the market.” With South Africa’s exchange controls about to be become more lenient, said Rawson, he is quite frequently asked if investment in Australian property is a good proposition.
“Rented residential property in Australia is achieving a return of 4 to 5%, i.e. ahead of the inflation rate, so obviously this is a sound if not spectacular market to be in. However, for South Africans the exchange rate makes it difficult to invest seriously on the same scale as the wealthy Australians are doing. One way round this problem, I believe, would be to invest in a property growth fund or a syndicate, the latter are proving very successful.”
