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South Africa: Not as Safe as Houses
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Business Day (Johannesburg)
COLUMN
3 July 2008
Posted to the web 3 July 2008
Johannesburg
WERE it not for the big miners' caning yesterday, the biggest faller in the top 40 could well have been Liberty International.
Its stock came under pressure after highly indebted UK group, Taylor Wimpey - Britain's largest home builder by volume - unveiled a grim trading update. Its share price lost nearly 50%.
Liberty International, essentially a shopping centre group, has almost no exposure to house prices. But the sector as a whole was hit so hard that Liberty went down with them.
It's often said that South African investors who want exposure to the foreign property market don't have to buy an expensive condo in Mauritius . They could simply invest in Liberty International .
The problem is the local property market tends to be influenced by the UK property market. Often, you might be jumping out of the frying pan into the fire. Unless there is a rand-hedge component, the utility of investing in UK property is cancelled . It's now drifting dangerously close to that terrible thing: negative equity.
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The Bottom Line is Edited By Edward West
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