Are you looking for new investment ideas and weighing-up whether property is still a good option? While it may not necessarily be too late to invest in real estate in South Africa, the current market conditions and the potential risks and rewards are something to consider before making your final decision.
According to a September 2022 report from property finance consultants Ooba, the average house price in South Africa almost doubled over the last 15 years, rising from R795 000 to R1 431 712. If these statistics are anything to go by, property should definitely be an investment option worth considering as other investment options could be unstable and unpredictable. Real estate is often considered a relatively low-risk investment compared to other investment types, such as stocks and bonds. But is it ever too late to invest in property?
Property will always require a significant amount of capital to get started, and it can be difficult for individuals without the necessary funds to purchase property without taking out a loan or getting investors involved. Many are still suffering or recovering from the Covid pandemic. Statistics by the South African Reserve Bank support this, showing household net wealth declined in the third quarter of 2022 as the increase in liabilities outweighed the slight increase in total assets. The report states that the ratio of net wealth to nominal disposable income decreased further to 332% in the third quarter. If you find yourself in difficult financial times, looking at additional property investments might not be the right option at this moment in time.
Lower interest rates and a buyer’s market generally indicate a good time for individuals to purchase property. While interest rates have started rising to keep inflation in check, they are still favourable for those with disposable income looking to invest in property. Low interest rates make it cheaper for individuals to borrow money, thus investing in the property market.
Another point to consider is age. Will it count against you if you are looking at property investments? Some say it may be more difficult to get a home loan as you age, but this would be more applicable to a first-time loan than loans for investment properties, as lenders consider much more than just your age. Credit history, income, debt, and property value would help them decide, so not even age should hinder your investment goals.
Are inflation rates hindering your decisions? Real estate has the potential to appreciate over time, which can provide a hedge against inflation. As the cost of living increases, so do property values, which can help protect an investor’s purchasing power over time.
It is vital to conduct thorough research on the local market and area to maximise the potential of real estate investment. Have a clear strategy in place, and remember to consult professionals like real estate agents, property managers, and financial advisors to help navigate the market and make informed decisions before investing.
