The above graph (click to enlarge) shows the RSI (Relative Strength Index), a Momemtum Oscillator, of residential property pricing in South Africa from 1979 to mid-2008.Notice how the bottom-trend has been broken very recently, a sure sign of impending recession (at the very least in property values if not a wider trend).
There exists a strong downward momentum which may bounce back sharply, however there is no telling when it will rebound or how far it will drop before the bounce.
For those with money to invest, now is the time to snap up properties that are currently under-valued by as much as 40%. Buying at these prices to rent-out, delivers attractive rent-to-value ratios... plus when the market rebounds, capital appreciation will be superb!
I suspect we shall see our first of a series of interest rate cuts in February 2009 which could reverse the current trend, leading to upwards movement in property pricing. This will permit refinancing options to convert equity into hard cash to re-invest (possibly in more property).
While on the subject of graphs, here is another interesting one:
Any comment?
No comments:
Post a Comment