Warren Buffett is betting on property
2012/06/09

"Excess property stock is being sold, demand is increasing."

Buffett, who is the chairman and CEO of Berkshire Hathaway, said in his annual shareholders letter that although the housing market did not rebound last year as he had expected, 2012 would be a different stage and he is once again betting on the housing market to recover.

According to Buffett, many of the younger generations who felt times were uncertain, chose to stay at home with their parents rather than purchasing property of their own. Now that the property landscape is more positive, he predicts that younger buyers will spread their wings and enter the market. His market recovery analysis is also based on the fact that not as many homes have been built recently, which will result in supply not meeting the demand for housing. The buyer's market will slowly turn to a seller's market as excess stock from the recession period is bought and a new demand for housing grows steadily.

Even though the South African market will deal with different issues to the US, recent South African figures suggest that there has been an increase in demand for residential property during the first few months of 2012.

Although younger buyers are entering the market in South Africa, so are other buyers that were unable to in the past due to the unaffordable pricing of property and lack of access to finance. More realistic pricing, steady and low interest rates and buyers managing their debt and showing greater affordability are all having a positive impact on the transaction figures we are seeing. It is likely that this pro-cyclical behavior will continue as consumer confidence remains optimistic.

Local economists who predicted that 2012 would bring about further progress on the market recovery have so far been proven right as the property market sales figures continues to rise.

Just like the US market, excess property stock is being sold and demand for property is on the increase. The decreased market stock is a positive factor in terms of the market's recovery and is likely to begin an increase in property pricing in the future.

While many potential buyers might be waiting for more certain recovery before they purchase property, globally property markets are on an upward path.

It is during these recovery markets that buyers will be able to find the best opportunities.

SA Property Investor