Apart from yesterday’s article on Yanis Varoufakis and his Dad, I also found this little gem on residential property investment. I’m renaming it:

Moneyweb author writes article about residential property with entirely misleading title

Apparently, “Metropolitan Areas Are Still King” when it comes to residential property investment.

I’m not sure that I’d class residential property investment as royalty exactly – maybe if you start with the assumption that present-day monarchies are mostly figureheads with no real power, although they have stylists and some people get unusually excited when they procreate in London hospitals.

Things written in the article to support the kingliness of metropolitan residences:

  1. FNB’s household and property sector strategist, John Loos, saying: “We started the year expecting a 8% to 9% average house price increase for this year, but now expect an average nearer to 5%.”
  2. CEO of Jawitz Properties, Herschel Jawitz, saying “If you look at the state of the economy, it is surprising that the property market is where it is… It is a good market to get into even if house prices are growing marginally*.” Also, his concern that future rates rises “will create affordability issues.”
    *Nothing like marginal growth to get one all hot and bothered under the investment collar.
  3. This line: “Latest figures from property data analytics group Lightstone shows that the annual national house price inflation in 2014 stood at 6.64%.” Which makes it, what, barely above inflation?
  4. Also: “The low value market with properties valued below R250 000 is the star performer, showing price growth of over 24%.The low value market is followed by the mid-value market represented by properties worth R250 000 to R700 000 netting growth of 8.1%. High-value properties valued at R700 000 to R1.5 million follows at 6% and luxury properties boasting a value of more than R1.5 million show growth of 5.9%.” Meaning that: all the real growth is in the properties under the R700,000 line.

 
In fairness – this is just capital appreciation. It excludes net rental yields. Which are, as of last week, “still muddling through”. Although that might be yet another somewhat misleading article title from Moneyweb (“Residential Rental Market: Still Muddling Through“), given that gross nominal rental yields in Johannesburg, Durban and Cape Town have shrunk in real terms .

My point is: compare those numbers to the ±27% return offered by the REITs industry in 2014…

The apparent conclusions:

  1. Moneyweb titles need some editing.
  2. If you want into property, don’t do it through your estate agent – do it through your broker.

 
And bonus: some of it you can do tax-free!

Although, caveat.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.