select
|

Good reasons for increasing popularity of property as a major asset/investment class

The recent recession through which South Africa has passed and the growing feeling that the JSE Securities Exchange after a five year bull run could be heading for a correction are two of the factors which have led to a sharp increase in the popularity of property as an investment and a marked increase in the number of buy-to-let investors in many of the Cape Peninsula suburbs.

This was said last week by John Weston, franchisee for the Rawson Property Group’s Bergvliet franchise.  Weston has been one of the most consistently successful Rawson agents in the group and at the end of their 2013 awards ceremony he took five awards and was ranked fifth nationally in competition with the group’s ± 1,000 agents.

“This year,” said Weston, “we have, in our franchise, seen a 35% increase in the number of buy-to-let investors.  Today they comprise roughly 18% of our clientele.”

Quoting a recent Financial Mail article, Weston said that property is the now the second most popular asset class with high net worth individuals, running just behind equities.  Equities now worldwide absorbs 26% of high net worth individuals’ resources, but an impressive 20% is invested in property.

“Analyzing what my clients are telling me,” said Weston, “it becomes clear that the reasons for property’s high ranking as an asset class today are, firstly, that here in South Africa it gives a satisfactory return (on average between 7,5% and 8% on residential property, with a 9% annual capital appreciation).  Secondly, property has proved to be one of the most stable of investment channels, despite the recent recession.  Thirdly, property gives regularly monthly returns, whereas many shares and financial markets only pay out once or twice a year.”

In addition to these factors, said Weston, property is one of the few assets that can be geared, usually through a bank mortgage.  This aspect, he said, doubles or trebles the investor’s return because these are based on the total value of the property not on the relatively small deposit and bond repayments for which the investor is responsible.

“This obvious fact,” said Weston, “is often overlooked by analysts, but, of course, it adds a completely new dimension to property investment.”

Many of those investors to whom he sells, said Weston, add regularly to their portfolios, thereby avoiding high tax payments because the returns or profits are reinvested in new properties.

This, said Weston, is very much in line with the advice regularly put out by Bill Rawson, Chairman of the Rawson Property Group, who has on several occasions advocated that serious investors should be adding one property, preferably a sectional title unit, to their portfolio each year.

The Zimbabwe property scenario, added Weston, gives further evidence for the wisdom of property as a long term investment.

“In Zimbabwe we have an economy operating on zero or in many cases negative growth.  Furthermore almost no development has taken place there over the last two decades.  One asset class that has flourished, however, has been property:  CBD office rentals in Harare have been rising by almost astronomical figures year-by-year and even residential property continues to appreciate despite an almost total lack of bond finance, the payments generally being US dollars and in cash.”

This scenario, said Weston, has been evident in a great many African countries, including those that have been through revolutions.

“Even in the most unstable countries,” he said, “if the investor has the patience to ride out the unruly period, it has been shown again and again that property will emerge from the troubles as valuable and as sought after as before.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK