It's not easy to decide how to grow your money, but real estate has been a sound option over the years
Property is often included in an investment portfolio as it has a low correlation with other assets such as bonds and equities, and so diversifies the risk, says Sandra Gordon, Pam Golding Properties senior research and market analyst.
“In the current environment, with heightened economic and political uncertainty both locally and abroad, and amid accompanying financial market volatility, making the right investment choices is a hot topic from boardroom discussions to casual dinner conversations.
“In good times and bad, investment in tangible real estate has proven a sound option on almost any measure, being regarded as having higher risk and return than bonds but lower than equities.”
Gordon says without detracting from the need for a balanced portfolio by geography and asset class, long-term investors in quality real estate have traditionally been well rewarded.
“Returns on residential property have two elements, namely a capital growth portion which historically has comfortably outstripped inflation and, for investors rather than owner occupiers, a rental component which is usually inflation-proof.”
However, not all property is equal. Certain locations and property types outperform the overall market at different times, depending on the demand for and availability of property in a particular market. An understanding of dominant market and lifestyle trends is imperative for a successful property investment.
“The growing appeal of property as an asset class is particularly visible in South Africa’s major metros, where private investors continue to pour billions into mixed-use developments and the government invests in major infrastructure projects. History has shown time and again, where there is economic activity and employment opportunities, there is a vibrant local housing market,” says Gordon.
“On balance, the housing market may be facing political and economic headwinds, but we believe numerous opportunities abound in the local property market for both savvy investors and homeowners.
“Whether you are buying property for the first time, looking at relocating with an eye on future investment potential, buying a leisure property, investing in a buy-to-let property which will enable you to maximise your income stream, or building up a property portfolio, you need to do your homework and get as much advice and information as possible from property professionals,” says Gordon.
Gordon will give an address at The Property Buyer Show at the Sandton Convention Centre from October 27 to 29.