Anyone commenting on the Greek debt crisis right now cannot know what the final outcome will be – but what is clear is that, with Europe set to endure a three to five year low or no growth period, the repeated advice by some to diversify property portfolios by going into Europe is looking “even less sensible” than when it was originally touted as a wise move. 

Asked for comments on the issue, Bill Rawson, chairman of Rawson Properties, said that it had to be accepted that the Eurozone could still collapse and fall apart.  If, he said, Greece is allowed eventually to default and leave the European community, Italy and possibly Spain and Portugal would probably follow and “Europe as we know it” would no longer exist.

“The plain truth,” he said, “is that the Greek tax collection system has been incompetent.  It has been estimated that over 80% of Greek businesses and 60% of its individuals are avoiding full tax payments.  At the same time the country has been awash with social benefits.  This is a recipe for disaster.”

How will this affect South Africa and the South African property market?

Rawson said that South African exporters would suffer because Europe, a major trading partner, taking 30% of our exports, will cut back on buying. 

In the property field, he said, Europe can no longer be seen as a safe haven – but South African residential property has much to recommend it.

“While the returns on this type of investment, he said, are not spectacular, they are reliable as demand for rental space is on the increase due to limited bank funding.  All property analysts now agree that SA’s residential rentals will escalate by at least 5 to 6% annually.  Capital growth on this type of investment is now almost keeping pace with the inflation rate and, with the backlog of sale-in-execution properties slowly being worked through, prospects for greater capital growth are slowly improving.”

In a statement made a fortnight ago Rawson said that he would increase his own property portfolio by 30% this year.

“With prices at their present levels,” he said, “that is a logical decision.  We have got to get the message across that, although prime big city residential space in Europe still commands high returns – if you afford it – for the average investor South African residential property is still a safe, steady asset class to be in.”