As market dynamics shift and economic uncertainties loom, Investec Private Banking explores whether property is still a good investment.

The rise in inflation globally has forced many central banks in leading economies to increase interest rates.

Locally, the South African Reserve Bank has raised rates to 15-year highs since it began tightening policy in November 2021.

The elevated rates have taken their toll on the property market, weakening demand and leaving many potential buyers nervous, fearing higher bond repayments.

But rates don’t stay high forever, and with the possibility of two interest rate cuts, is it time to reconsider property as an investment?

For July, it is important to take stock of the last few years. In the pandemic, we saw people under strain and selling their homes. Families started living together to combine income and expenses. And then interest rates started increasing.

Property is a good investment, as it will appreciate over time, allowing you to build wealth in the long term.

Even in tough times we know it’s a buyer’s market, which means there are more properties than there are buyers. This places more power in the buyer’s hands. They’re able to negotiate better. Sellers are more inclined to drop prices in these conditions to sell their property.

Investors can benefit from buying at lower prices. Due to market conditions, property sales and property growth have slowed down, which means investors buying now can buy in anticipation of interest rates dropping and property growth increasing. They will enjoy the appreciation of the property as the market turns.

As a result, the supply of these rentals is under pressure. Tenants are prioritising price over security and size, and fewer people are buying homes to own. For investors, the silver lining is that if you buy now, and the market turns, you will reap those rewards.

Location, location, location

There are multiple factors to consider. Are you in an area where there are thriving businesses? Are there job opportunities? Is the market active? What future developments are anticipated? On the other hand, what is the infrastructure like? How are the roads?

The Western Cape has obviously had a stream of buyers, and this has increased property prices to a level that’s higher than it was before Covid.  A four-bedroom property in Johannesburg or Pretoria is probably going to be a two or three-bedroom in Western Cape.

Are people tightening their belts?

In a pressurised economic environment, people will obviously look for opportunities to relieve themselves of debt. In the industry, there is a move towards buying traditional rental properties as investments. It offers more stability and predictability.

If you’re looking for growth, value, appreciation, wealth creation, and leaving a legacy, property is a great investment.

Article credit Is property a smart investment in South Africa? (propertyreview.co.za)