HOW LOW CAN THE PROPERTY MARKET GO?
The property market is at an all-time low, but these lows aren’t what you imagine. Things are about to get better! Because when everything is low, it creates opportunities for property investors.
South Africa has experienced some lows recently, including the low GDP growth, rolling power blackouts, the business rescue of SAA, the anticipated Moody’s downgrade, and pressure on household finances.
However, the new century brings great opportunities for Africa because of the rising demand for its natural resources, the need for its workforce, and investors’ search for new markets, of which Africa is a market of over one billion people. South Africa is one of the most promising emerging global markets and is the economic powerhouse of Africa. It has world-class infrastructure, innovations, sophisticated financial, legal, and telecommunications sectors.
In short, it’s not all bad news. South Africa and Africa still offer fantastic investment opportunities. And the best thing about hitting rock bottom is that you cannot go any lower. The only way to go is up!
In one of our previous articles, Here’s Why I Am Buying As Many Properties As I Can (While Others Are Selling), we discussed the opportunity that uncertain times and fear create for wise and patient property investors.
Here are our five reasons why you should continue building your property investment portfolio in 2020 despite the lows.
1. LOW PRICES
The supply of investment properties is higher than the demand, which means it’s still a buyers’ market. This is wonderful news for first-time buyers and repeat investors. Sellers are ready (or even desperate) to sell, so investors can negotiate great deals.
Adrian Goslett, the regional director and CEO of RE/MAX of Southern Africa, says, “I remain confident in the local property market and believe that we are near the bottom of a downward cycle that is poised to start a long-term corrective journey as we head into 2020.”
2. LOW RISK AND VOLATILITY
Property in South Africa has grown consistently over the last 40 years. Sometimes it grew faster and sometimes slower, but property prices have continued to grow. Rental income has also shown very consistent growth over this period.
3. LOW INTEREST RATES
Property industry experts anticipate lowered interest rates for mid-2020, which means you will pay less servicing debt and enjoy an increased disposable income.
In the year before the end of November 2019, the number of home loan applications increased by 9,7%. In one of our previous articles, When Opportunity Comes Knocking, Open The Door!, we discussed the good news for property investors with this home loan approval growth.
The banks are also granting more affordable and easier access to home loans, which makes property an increasingly attractive investment option.
4. LOW RENTALS
Low rental prices help investors to acquire properties at low prices. Paul Stevens, the CEO of Just Property, also added the following: “On a positive note, I believe rentals will start to increase in the second half of the year. This presents savvy investors with an opportunity to take advantage of the buyers’ market now, with the cautious expectation of yields improving going forward.”
5. LOW RETURNS ON OTHER
Over the last five years, the JSE has effectively been flat. Even balanced funds used to save for retirement have struggled to stay ahead of inflation. However, property always seems to come out on top when your capital growth plus your net rental yield, which gives you your ungeared return on a property, is still much higher than returns on other investments.
Do not worry if the property market goes low; your property investments will continue to soar high!