Is it still worth investing in property in these uncertain times?
In our previous article, Your Property Plan Of Action During The Lockdown, we considered the current lockdown situation and how you should prepare yourself. Now we’d like to discuss the future.
For those who think everything is going to go back to normal after COVID-19 and the lockdown are unfortunately in for a nasty surprise. Things will never be the same again! We will feel the repercussions for a long time after this crisis; not just psychologically, but economically.
South Africa already had challenges to grow the economy before this crisis. Now, we don’t only have to grow the economy; we have to recover from this. Moody’s has also downgraded South Africa to sub-investment grade. However, it’s not all doom and gloom.
The people of South Africa are more united now than they have been for a long time, and our leaders are addressing the issues of the day. I believe this will continue even after the crisis.
Many economists across the globe regard the South African rand as one of the most undervalued currencies in the world. Therefore, we could see a significant strengthening of the rand once things stabilise.
But how does all of this affect the property market and property as an investment in South Africa?
The Reserve Bank’s decision to cut interest rates with 100 basis points was well received as this reduces bonds and thus shortfalls (or increases surpluses) significantly. Most economists expect further decreases in interest rates in the short-term to stimulate the economy, given that inflation remains intact.
There are currently significantly more sellers than buyers in the market as we were already in a buyer’s market where buyers had negotiation power. The economic repercussions of COVID-19 will push us further into a buyer’s market. Many people will have to sell their properties due to job losses, salary cuts or their businesses suffering. This will create opportunities for investors to acquire assets at very low prices and will extend the buyer’s market for quite some time.
Read Here’s Why I Am Buying As Many Properties As I Can (While Others Are Selling) to learn why you should acquire property aggressively in a buyer’s market.
However, always ensure you have cash on hand. Do whatever you can to improve your current cash situation and cash flow without jeopardising your credibility. If your cash flow is not healthy enough, you can use the bond payment relief that banks are currently offering. Things may get rough in the short-term and rent collection and occupancy may become more challenging.
If you want to learn how to get as much cash in your access bond as possible, read our article, Start Using Your Access Bond Today. We explained how you can keep cash in your access bond to save interest yet have the funds accessible. This may come in handy during these uncertain times.
In summary, yes these are tough and uncertain times, but it still is worth investing in property!