BUSINESS NEWS - Owners of all businesses, but particularly those which are small and medium-size, says Bill Rawson, Chairman of the Rawson property group, regularly ask him one question: "Is it a good idea to buy one's own premises or should I continue to rent?"
The answer, says Rawson, is almost always, "buy", and this is particularly true and appropriate right now, especially if the property contemplated is a residential building which has been rezoned to have commercial rights. The only proviso, he says, is that the deal should be seen as a long-term one, i.e. the buyer should plan to hold the property in his own name for at least five years.
"The very obvious major advantage of buying for oneself is that the bond rate will be fixed at a fairly low level and, right now in South Africa, the consensus of opinion among economists is that it is unlikely to rise before late 2013. Furthermore, when it does so, the general prediction is that it will probably not rise by more than 1% or 2%.
By way of contrast, commercial property rentals are rising steadily - an increase of ± 8% per annum is now almost standard and this means that five years down the line the tenant will be paying 50% more rental each month. These facts surely make buying a good proposition."
A client of Rawson Properties who operates in the distribution business asked him recently whether she should buy a rezoned residential building in the back streets of Claremont. As she does not need a high profile position for her business Rawson advised her to go for it - and he is perfectly confident, he says, that the advantages of the purchase will become increasingly obvious to her over the next few years.
Rawson did, however, warn that South African banks, now operating in strict compliance with the National Credit Act, will almost never issue a bond on a commercial building for longer than ten years. This in effect means that the buyer has to be able to pay roughly double what he would be paying each month on a 20 or 25 year residential bond.
If, however, the building was previously zoned as residential and has since been rezoned, it is quite possible, says Rawson, that the banks will consider bonding it on a residential basis - especially if the owner or a tenant lives in part of the building.
"This option," says Rawson, "is very definitely worth applying for where the premises, as is so often the case, were once upon a time a home."
Rawson has himself followed his own advice and now owns a major portfolio of buildings, many of which are now commercially owned but were originally residential buildings.
"Next year," says Rawson, "such properties will appreciate in real terms. However, property values tend to be cyclical and by 2015 I expect that we will again be seeing steady annual value rises. If you can possibly afford it, now is a good time to secure your own premises, no matter what sort of business you operate - after all, the monthly bond repayments on a business are tax deductible."