Property has always been a resilient asset class as not only do people require housing security but its value over the long term tends to go up.
In times of crisis especially, this physical asset is more favourable than investments in equity.
“Property has remained a good hedge against inflation in the long term,” says Russel Pearson, chief executive officer of Re/Max Address. “Homes are made of bricks and mortar in which you can live. You can’t live in stocks and shares where billions have been wiped off their values during the past month.”
He says South Africa’s property market has remained “very resilient” in downturns and usually bounces back sooner than most people think. In addition to value, property ownership gives people a sense of pride.
Therefore, while there will “definitely be uncertainty” among property buyers following the Covid-19 pandemic, Pearson says they should not be put off buying property.
“The best time to buy property would be right now, particularly those investors who are sitting on piles of cash.” There will, however, be a price correction throughout the market and any seller whose property is over-priced, as a direct comparison to well-priced homes, “will not sell anytime soon”.
“When we went through the last significant downturn (2008), buyers were always out there and ready to purchase, albeit off a lower selling base than before.” The Covid-19 crisis, like those before, will pass and when it does, you will still own your physical property which is a real asset, says David Sedgwick, managing director of Horizon Capital.
During the global crisis of 2008, he says commercial property prices fell by a far higher level than residential property – 30% compared to 2%, which showed that residential property prices retained their value better than commercial property.
The resilience in the residential property market is also driven by the fact that being forced to sell one’s home, especially at a big loss, is always the last resort, Sedgwick adds.
“Before this, people will cut back on all discretionary expenses, trade down their car, stop contributions to their pensions, rent out a spare room, borrow money from family, negotiate new bond payment terms and get a second job, if needs be.”
Echoing this, Tony Clarke of the Rawson Property Group says property is one of the most stable investments to have during a major economic crisis. “The biggest thing for new homeowners to remember is that even if money is tight at times, your property is a valuable asset that is worth sacrificing for.”
“Discipline is key from the get-go, so try to stay positive and take control over your finances. “Cut back on luxury items and take a careful look over all your monthly debit orders and expenses. Review each area and think about which items are necessities and which are costing more than they’re worth.”
Aspiring homeowners should cancel unused memberships, downgrade expensive cellphone contracts and close store accounts which encourage impulse spending, he says.
“You’d be amazed at how much money you spend each month out of habit rather than necessity – all that cash could be put to far better use towards your new bond.”
Clarke adds those who have already put all possible money saving measures in place could considering earning extra cash by monetising activities they love, such as cooking or writing.