Property investment is no longer a pursuit only of the wealthy as a variety of price points and offers allow more consumers to gain a foothold in the market.
Many are also able to take second mortgages and invest in property as a means of earning additional income and growing their wealth. With global stock market volatility, and South Africa’s historically low interest rate, property investment is growing despite the challenges, says Charles Thompson, director of the property developers the Devmco Group.
“Despite the lockdown, and the challenges that come with it, we have concluded sales to the value of R75 million since the beginning of level 3 just over two weeks ago.
“Although the economy has taken a knock in the wake of Covid-19, recent market activity has shown that there is still appetite for purchasing property. Consumers want to put their money into an investment vehicle that will yield positive returns – and property is it.” The stock market is too volatile and the idea of leaving money in the bank to grow is “quickly losing its appeal”.
“The yields just aren’t high enough and, coupled with the tax on the income generated through interest on your investment, you’re not left with much at the end of the day.”
A case study on a R3m property demonstrates that if one was to pay a 20% deposit on the value of the home (R600 000) a buyer would earn a 76% return – an R810 939 investment gain over three years, on their equity based on current interest rate, and an average capital appreciation of 7% a year.
“If one were to put that R600 000 into an interest-bearing account with a bank, one could expect a 15% return – R93 993 capital gain over three years, with an interest rate of 5%,” Thompson says.
With property remaining an attractive investment, savvy consumers will look to invest in key growth areas, like the Sibaya Coastal Precinct, which has achieved an average of 40% value appreciation over the past three years. These growth areas demonstrate robust long-term planning, sustainability and future-proofing, as well as offering a holistic lifestyle.
“People are looking to invest in property at this time but they want to be sure that their investment will yield favourable returns. Consumers can effectively spend less by investing better. Investing better means not blindly investing in property but researching what’s available and engaging with developers…
“The key factors to note when deciding where to buy include a clear and positive growth trajectory in terms of the area or precinct, the potential for good value appreciation and the provision of desirable and accessible lifestyle elements and then, of course, security.”
These factors, he says, along with buying from reputable developers who deliver on their word, will put investors in the best possible position. “In South Africa, we are fortunate that our interest rate is currently the lowest it’s been in almost half a century, and it looks to stay pretty stable for the next two to three years, so now is the time to get a home loan – it won’t get better than this.”