Last week a journalist asked me per email for my opinion regarding when the local housing market will recover. This is how I answered:

I’m flattered that you ask me when house prices are going to recover. I’m also surprised, though, because I’m not an economist – and if the economists can’t even predict correctly, then there’s no chance that I’ll be able to improve on that. But I am a property investor, and so I certainly have an opinion, which I’ll gladly share with you.

Firstly, you must remember that as a specialist long-term investor I approach and evaluate the market completely differently to the economists. For me, it’s about the return on my investment. So your question to me should rather be: when are returns going to recover again?

I specialise in entry-level houses in areas like the East Rand. The reasons why I specialise in certain types of houses and certain types of areas are very specific, and are handled fully in my books and courses. This then is the type of property about which I have an opinion. But before I give you my opinion, we must first look at the statistics. The statistics that I use are from ABSA’s quarterly reports for houses between 80 and 140m². You will find it on ABSA’s Website at this link: http://www.absa.co.za/deployedfiles/Absacoza/PDFs/Economic%20Research/Property%20Research/Quarterly%20Housing%20Review/2011/Housing%20Review%202011%20Q2.pdf

On page nine of the “Second Quarter Report 2011” you will notice that values in metropolitan areas outperform the national average in general by more than 17.8%. I only invest in metropolitan areas. Also keep in mind that these figures include all types of houses in a size category while I only buy townhouses in security areas. Therefore, beating the average by a conservative 4% is easy. The last column reflects my worst case scenario growth experience.