Keeping your head above water

Timing will always remain the most crucial component of any property investment. Those who understand the dynamics of the property market will always have a distinct advantage over those who go with the flow waiting for the situation to improve and thus often missing the boat completely.

Adrian Goslett, CEO of RE/MAX of Southern Africa says that property cycles follow a predictable pattern and that property booms are inevitably followed by slumps before recovering. “Anyone who lives with the belief that the boom times will never end are deluding themselves and those with this mindset inevitably set themselves up for failure.”

He says that knowing when to invest will always be crucial in ensuring that a property portfolio, regardless of its size, remains profitable. “Over capitalising on any investment is never recommended and many have found to their detriment that buying at the height of a boom, when prices are at their highest, can prove to be a costly mistake.”

Unfortunately the “buy-to-let” sector of the market is often the hardest hit by property slumps and affects those who rely too heavily on income garnered from this form of investment. Goslett says that while property will always be a sound investment, investors should understand their limits, and slowly build a sound property portfolio, armed with the right knowledge, that virtually guarantees success.

“The wrong choices can prove costly and as has been seen during the previous slump, lead to over-indebted homeowners being forced to sell when market conditions are not favourable. Not being able to meet bond instalments and other financial commitments when times are tough can place the owner under considerable strain, however, there are steps that you can take in order to avoid financial disaster.”

Trying to predict when market conditions are going to change for the better or worse often proves extremely difficult for even the most knowledgeable economists. Property has never been a short term investment and anyone who is considering entering the property market needs to understand that although there have been cases where investors have made a ‘quick buck’ these cases are the exception and this form of investment should be viewed with caution. Goslett says investors need to err on the side of caution, assessing their finances to ensure that eventualities such as interest rate escalations, municipal rate hikes and the like are budgeted for.

Another area that all investors should consider is having a contingency plan in place should the tenant renting out the property either default on the payment or abscond.  “In an ideal world, investors should never have to rely on rental payments to cover the costs of the bond – and should be financially strong enough to weather a short term financial storm,” he says.

Goslett notes that anyone entering the property market should conduct a stringent assessment of all costs and obligations from the onset as well as furnishing a deposit to ensure that there is equity in the property that will cushion the owner in the event of a downturn.

“One of the positive aspects of the economic downturn is that South African banks have had to review their lending policies and although many would prefer the banks to be more lenient and grant more bonds, the days of irresponsible lending are well and truly over. Banks have also had to review their approach to defaulting bond holders. Although financial institutions are still foreclosing, they have adopted a far more lenient approach toward homeowners who find themselves in financial difficulty. This, however, is often a two way street and those who take evasive action and approach the banks as soon as problems arise often find that the banks are willing to make allowances,” says Goslett.

He concludes by saying that good old fashioned values of being able to manage your finances and debt, investing wisely armed with a sound working knowledge of how real estate market cycles fluctuate and knowing when and where to invest will undoubtedly prove to be a winning formula for all concerned.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 22 Feb 2018
      An excellent credit score is one of the most priceless assets a potential home buyer can have. This tool has the power to secure favorable mortgage and refinancing rate, influencing everything from the size of the loan repayment to the interest rate on the home loan.
    • 22 Feb 2018
      What do you do if you love your home’s location and the area, but the home no longer fits your growing family’s needs? Do you stay and renovate your existing home or find a home that meets your developing criteria?
    • 22 Feb 2018
      While every owner wants to sell their property at the best possible price, overpricing a home can be the kiss of death for a sale.
    • 21 Feb 2018
      Given the hand they were dealt, government has performed a delicate balancing act which it is hoped will serve to reignite confidence in investment in South Africa, regain our global credibility and satisfy the credit ratings agencies, says Dr Andrew Golding, chief executive of the Pam Golding Property group.
    • 21 Feb 2018
      The real estate mantra, ‘location, location, location’ remains a strong market influence regardless of the prevailing economy, with suburbs like Rondebosch enjoying the buffering benefit of being ideally situated.
    • 21 Feb 2018
      These days most buyers are using online property portals like Private Property when house hunting due to the convenience, up to date information and variety on offer. “The property portals have revolutionised the way buyers shop, but they do need to be cautious – viewing photos online is no replacement for viewing the property in person,” says Bruce Swain, CEO of Leapfrog Property Group.
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us