Cape Argus Thursday 30 October 2003

GRAHAM NORRIS
Property Editor

CAPE TOWN property executive Alyce Collins has accused some of her fellow realtors of encouraging clients to invest in foreign properties when the rand "was patently oversold and interest rates due for adjustment downwards".

"Thousands of South Africans have lost millions of rands after being persuaded by top real estate companies to invest off-shore when the rand stood at double digits against the dollar and every economist was being quoted as saying the rand was oversold, "Collins said.

She said that those investors who had fallen for this advice had in some cases lost nearly half their money.
"Worse still, the return these investors are getting on their foreign investments is considerably less than they could be earning in South Africa today had they chosen to invest in this country instead."

Collins said that what she really found disturbing was that while the agents concerned promoted their offshore properties as Ideal rand hedges, the real motivation had been fear.

"The underlying sell was to play on investors fears that it was unwise to hold disposable funds in South Africa because of the uncertain future, crime, schooling and any other fear they could think of, and to get their money out soonest and regardless of financial considerations, like forex rates."

Collins emphasised that her criticism was not a question of hindsight being 20/20 vision.

"Our agents were invited to sell syndicated commercial properties and Collins Properties was offered a shopping centre in the UK to sell to South Africans when the rand stood at 16 to the pound.

"However, we chose to listen to the economists and as we naturally had to take their advice. We are very pleased we did because in addition, we could not see interest rates moving any way but down.

"There is nothing in our training or experience that prepares property people to be forex experts and the investing public should be aware of this, but investors chose to be persuaded otherwise and have suffered heavy losses which I doubt they will regain for many years because every prediction from economists see only a relatively slow return to something below R10 to the dollar," Collins said.

She added that with interest rates declining, the attraction remained in South Africa.

"There is absolutely nothing wrong in hedging or investing overseas to spread one's risk and opportunities, but it is ridiculous to take such action without intelligent investigation of all circumstances," she said.

It was also a curious irony that while the agents were encouraging clients to invest in overseas property as a matter of urgency to "protect" the client's capital against so-called South African political and economic vagaries, they were simultaneously promoting foreigners to invest in this country because of the advantageous exchange rates and the "excellent investment opportunities the burgeoning South African property market offered investors", Collins said.

"I would enjoy challenging any South African who has invested in commercial UK property in the past tow years, to compare his or her returns and the present value in rand terms, of the investment, against the local experience, including returns and current capital values, or compare the capital gains in residential property in Cape Town over the same period and the current value of an original similar investment in the UK. I believe investors will be astonished to learn what they have lost by sending money overseas."

She agreed that if hedging was an objective, "then now would certainly be the right time to do so and we are looking at possibilities at this very moment, But this is now and that was then".

However, she stressed that "the steam has not yet gone out of the South African market and with interest rates sagging further, the trend will remain positive for at least another year.