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Is Buy-To-Let Housing Really Dying?

THE INSIDE SCOOP ON THE PROPERTY INVESTMENT MARKET

We live in uncertain times, and the economic climate (and other factors) have some investors running scared. There’s no doubt that buy-to-let property investments have certainly had its challenges in the last few years.

There is currently an oversupply in rental stock, which pushes up vacancy rates and lowers annual rent escalations. South Africa’s vacancy rates are at a historical high of 8.1%, and annual rental escalations are only 3.57% according to the TPN Vacancy Survey for Quarter 4 2018. Property price growth has also been low at an estimated 4.2% annual growth according to FNB’s November 2018 data.

The problem that I have with so many investors’ strategies is that they are obsessed with “quarterly earnings” (short-term performance); whereas I take Warren Buffet’s approach to investing. I am not interested in what is going to happen in the next quarter, year or even two years. I look at the next 10 or 20 years.

Property is a long-term investment and, therefore, one should look at long-term statistics such as these:

  • According to Lightstone, the average annual property price growth has been 9.92% year-on-year from 2000 to 2019, and
  • The average annual rental escalation has also been significantly higher year-on-year from 2000 to 2019, according to Payprop, compared to current rental escalations.
Now, I can work with those figures!

In one of my previous articles, Here’s Why I Am Buying As Many Properties As I Can (While Others Are Selling), I focused on why you should use the uncertain and unfavourable economic climate to your advantage. It is this very uncertainty and fear that create opportunities to purchase properties from panicked sellers who have no regard for the intrinsic value and long-term economic worth of the properties they are selling.

Property is, and will always be, a basic need and the demand for property will continue to grow in the long-term. This means that property price growth and rental escalations will also continue to increase in the long-term. Therefore, my verdict on buy-to-let housing is to keep buying and building your property investment portfolio!

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