Kobus Kotze
11 April 2008
Windhoek — Fast food, lotto tickets, gambling games, etc are typical characteristics of today's society who seems preoccupied with instant results.
The trouble with our property market here in Namibia is not high property prices; the problem is our society's get-rich-quick mentality. In reality, property values tend to increase and decrease in cycles.
In some years growth may be nothing, while in others it may be as much as 40% or 50%.
You need to understand that cyclic events are just what the name implies - cyclical.
For short-term investors, the timing of these cycles is important, but for long-term property investors, these fluctuations even out.
The cyclic nature of the property market is very much related to the herd mentality of human nature.
Everyone builds when everyone else is building, buys when everyone else is buying, and sells when everyone else is selling.
To my knowledge, the problem that we are facing in Namibia with the present property market has nothing to do with unrealistic market prices; the problem is property owners who bought property with that typical "herd mentality".
They bought property because everyone was buying, because that is "a la mode".
When you buy property, you must first decide whether you want to buy for short-term gain or whether you are a long-term investor.
Why is this decision the crux of the matter? The answer is very simple! Short-term investors are a certain breed of people.
If you buy with short-term goals in mind you are actually a property speculator or trader and not an investor.
The rules for a property trader differ totally from the rules of a long-term property investor.
Property traders are people who must consider many fine points and more than likely, "reasonable" is not the operative word.
Everything must be judged; accurately down to the last detail and "spot on" would more aptly describe the conditions under which traders operate.
Property traders are people for whom timing is of the utmost importance.
Any little hiccup in the market (as we are for instance experiencing now) can play havoc with the trader's profits.
For the long-term property investor, timing is of little consequence.
For the short-term property investors, in other words traders, loans have to be flexible so that they can sell at short notice.
Traders are usually vulnerable to interest rate fluctuations, because they cannot fix interests, while long-term investors can look for cheaper, but less flexible loans where they can fix interest rates and remain insulated from wild fluctuations.
Right at the outset price is a real factor for traders that need to be considered.
Everyone loves a bargain (in Namibia it seems even more relevant) and when you buy and sell property, the initial price can make or break a deal.
When you are a long-term property investor, you only need to pay fair market value to achieve good growth and not necessarily bargain prices.
What is our property owners' and prospective property buyers', problem? The problem is definitely not the prices, but certainly our present homeowners' and prospective buyers' attitude towards property.
Homeowners who are in trouble with their bonds are people who bought property with the wrong mindset.
They bought somewhere in the past, because everybody bought and not because they knew for themselves why they bought.
They bought with a trader's mindset and not with a long-term investor's mindset, they copy the traders and not the investors, without knowing the rules of the trading game.
Remember, in the property business "all comes at the proper time to him who knows how to wait".
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