Exciting Times

by Coert Coetzee
(Coert Coetzee is the Founder of the TREOC Group consisting out of different companies and trusts. He is an experienced Business Owner and Property Investor and shares his experience and secrets of many years.)
Edition no. 161 www.treoc.com


Exciting Times
By Coert Coetzee

During a recent seminar in Polokwane someone asked me what I think will happen with the economy if the current conditions continue. The short answer I gave this person was that it would benefit the Treoc investors, and I briefly expanded on why I think so. During a seminar there unfortunately isn’t time to go into the details of why I don’t have a problem with the current conditions. It’s not a question that can be answered briefly, and so I’ve decided to expand on it a bit more in this article.

Let’s first look at what the conditions are in which we apparently find ourselves at the moment:

The interest rate is sitting at 15.5%, which is the highest it’s been since 2002, when it peaked at 17%.
Petrol prices are higher than ever.
Inflation is sky-high.
Property prices have doubled in the past five years, but growth is currently sitting at less than 10% per year.
Salaries have not grown at nearly the same rate as houses in the past five years, and so fewer ordinary people can qualify for bonds.
Rental is currently showing an excellent 15% growth per year, but unfortunately the rent/value ratios are still low. This makes property unattractive for uninformed investors.
The country is suffering electricity shortages.
The credit act has neutralised a lot of potential property buyers, because expenses now count against you when it comes to affordability.
For the uninformed layman the factors mentioned above make the situation look very bleak indeed, but for the informed investor these factors indicate the most promising conditions in four years. Despite the hundreds of seminars we’ve presented, the majority of so-called property investors in South Africa are still not educated investors and don’t understand why the above-mentioned factors count in an investor’s favour. Let me give you the reasons:

All these “negative” factors contribute to more people thinking that they cannot afford their own properties.
Fewer tenants buy property due to the reasons above – and, of course, I never invite my tenants to the seminar. So they stay tenants for longer than they want to.
New tenants keep entering the market, because the middle-class is still growing at a phenomenal rate. The result of this is that the demand for rentals is outstripping supply – and that’s why rental is currently growing by 15% or more.
Fewer people are buying, because few people have the knowledge of an educated investor. This is causing prices to drop, creating a perfect buyers’ market for the informed investors. These are the best buying conditions since 2002!
The electricity shortage has put a damper on new property developments, causing supply to drop. When the market turns (as it has been doing for centuries already) and demand rises, we are going to have an enormous housing shortage, which will then cause the prices of houses to go through the roof.
Because of the credit act that was implemented last year, expenses in your personal capacity are now taken into consideration when you try to qualify for a bond. This has made millions of people “unfinanceable”. But if you buy using the correct vehicle – like a double-trust structure – you can qualify for more bonds than ever before. Serious investors all work with the right structures, and we are having a party right now!
But the market is changing, and one of the unique characteristics of successful investors is their ability to adjust to a changing market. A good investor must be able to read the market. At Treoc we invest mainly in entry-level properties, and here the petrol price plays a big role. Our type of tenant always likes to live as close as possible to their place of work, but now with the rising petrol price that’s becoming even more of an issue. So buy close to train stations or taxi ranks if you want to have an uninterrupted flow of tenants wanting to rent your property.

Something else to remember if you invest in my type of property is to buy close to primary schools, because a lot of our tenants have children at school. It’s ideal for them if the children can walk to school and back. Otherwise transport has to be arranged for the children, which costs money.

The ideal location for my type of property is therefore close to schools and places of work, or if that’s not possible, near public transport.

Enjoy the market; it’s a buyer’s paradise.

Happy House Hunting!