- REAL ESTATE
Property is referred to as real estate because you can see and touch it. Even if you buy off-plan, the land exists and the building will at some point, too.
In comparison, the only evidence of owning shares is a piece of paper or an email message. And you can never be sure of what’s going on behind closed boardroom doors.
As far as investments go, the property market is easy to understand. We all grew up in a home (i.e. a property) and are still staying in one. Are you as familiar with any other investment as you are with your home? I didn’t think so.
Of course, it’s wise to do some research before investing in property, but it isn’t rocket science. The same fundamentals apply to properties everywhere.
- INVESTMENT CONTROL
I struggle to understand how people can spend weeks planning a vacation but aren’t willing to spend even half that amount of time to take control of their investments. They’re willing to learn the ins and outs of a new city or foreign country but have no time to plan for their future wealth. The reason is simple: people don’t like what they don’t understand. Property investment is easy to understand and gives you full control over your investment.
There will always be a demand for land and housing in well-located areas where people want to live and work. Again, you can’t just buy anywhere, but well-chosen and well-located property is a good investment.
- THE FINANCIERS’ FAVOURITE
Banks and other financial institutions lend more money for property purchases than any other investment.
Property loans make up the biggest portion of every bank’s profit because property has proven to be the safest type of investment. Banks’ typical loan-to-value (LTV) ratio is 80 percent and higher, and interest rates are lower than for other types of assets.
What’s more, property is ideal for leveraging – taking advantage of your portfolio’s rising capital value to secure more loans, thereby increasing your holdings even faster!
- MULTIPLE STRATEGIES
Property is a more flexible form of investment than many people realise.
Different strategies – including long-term capital growth, cash flow, renovating for profit and developing – can be used for different financial situations and property types, and the banks offer different types of loans to suit the different strategies.
When it comes to property types, the sky’s the limit! Houses, duplexes, townhouses, apartments – there are so many options available. And that’s just on the residential market!
Locations and prices range from exclusive inner-city areas at the top end of the scale to regional and rural areas that offer great value for first-time buyers.
- TAX BENEFITS
Property is an important commodity in society, so governments encourage ‘bricks and mortar’ investment and development.
Tax benefits include deductible expenses such as the interest on loans, repairs, maintenance and management fees.
- GOVERNMENT ASSISTANCE
In South Africa, first-time homeowners are eligible for special one-off grants. There are also incentives for new and off-plan developments.
- SUPPLY AND DEMAND
Supply and demand are the key drivers of investment property growth.
Demand for rental properties is increasing, since South Africa’s population continues to grow faster than the supply of new housing. This puts pressure on property values and rental prices, forcing them higher.
The message for anyone with the means to invest in the property market is clear: buy now!
That being said, it’s important to buy carefully to maximise the financial return and minimise risk. Prices can be volatile in some areas, so it’s important to find out more about the area you’re looking into before buying. You’ll learn more about knowing your investment locations in the chapters to come.
In a nutshell, investing in property is a great way to achieve the lifestyle you want for yourself and your family.