Despite high crime levels and a weakening currency, South Africa has taken its place as one of the world’s top emerging economies with a property asset base that is likely to continue its upward value growth path for the next five or six years. 

That’s according to Dr Iraj Abedian, senior economic advisor to the state president Thabo Mbeki and founding director of Pan-African Investment and Research Services, who was speaking at Elvey Security Technologies’ recent “breakfast of discovery” at the Rosebank Park Hyatt.  He said that as one of top emerging economies globally – in a matter of a just a decade – South Africa was increasingly being seen as a country with a more stable future.  This he attributed in part to the success of its new economic policy which had resulted in an improved risk rating that had lowered its cost of borrowing. 

Internally, while there was no doubt that the weaker rand, together with the impact of the price of oil, remained major inflation drivers, Dr Abedian said people’s incomes and their ability to earn meant that they could still service their mortgage and other debt.  This was good news since property ownership was an important asset class in terms of stability and predictability, he believed. 

Confirming that house prices were at record highs, he was nevertheless upbeat about the future.  He predicted that prices would continue to rise for the next five or six years, with a few exceptions, since he considered that the country’s assets had long been undervalued by global standards. 

His sentiments were echoed by Realty 1 International Property Group CEO Mike Bester, who said that despite obvious challenges, business and consumer confidence in the country’s economy were at all-time highs.  This was underpinned by ongoing activity in its property sector, where many economists predict value growth will average out at a healthy 12 or 13 percent for 2006. 

Further evidence of consumer confidence was apparent in the building sector, he continued, quoting recent data from Statistics South Africa, which showed that new residential building plans passed during the first half of 2006 had increased by 6,9% year-on-year to R12,4 billion. Although this figure was down by 6,5 percent compared with the preceding quarter, indicating that the residential property market was still slowing down after peaking during 2004, Bester pointed out that building costs had risen steadily in the last nine years.  This for him underpinned the likelihood of the construction industry continuing in a similar fashion going forward. 

However, Bester warned that growth in the building sector could be hampered by the country’s relatively low manufacturing capacity and lack of skills.  He added that any internal shortfall would be increasingly difficult to rectify in light of current global demand for raw materials.  A case in point was China, which according to Dr Abedian, was on track to triple its existing skyscraper number in the next few years.  This, said Bester, was going to place huge upward pressure on the suppliers of raw building materials around the world.  But, said Dr Abedian, South Africa could end up benefiting from the current commodity boom if its business sector started to think globally and gear up towards being able to produce five to six times more than its current levels.