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Advantages of investing in property

12 Aug 2013

While the majority tend to focus on the negatives in South Africa, our European counterparts have to face far bigger woes and appear to be managing these challenges.

Property investment remains a good, safe, low risk option to grow your wealth. While investing on the stock exchange can realise quick, high returns, with high returns comes high risk, not to mention the constant management needed.

South Africans too, need to focus on fixing the future, says Shiraaz Hassan, commercial director for Asrin Property Developers. 

“We have found that throughout the economic recession, compounded by the fact that South Africa is 1 percent behind our target economic growth rate, the one constant factor is property investment and home ownership – this asset class has seen constant appreciation, despite ups and downs,” says Hassan.

For example, he says if we look at the SA property industry there are many positives to investing and working within this sector today.

“In our experience, property values between R600 000 and R1.5 million have been escalating at a fair appreciation value, at anything between 6 to 11 percent.

“The higher end properties are appreciating at a slightly slower rate, but appreciation is still constant.”

Hassan says property investment should always be considered with a long-term view as opposed to a short-term investment policy, since a good return on capital investment can only be realised after the first five years.

Property investment remains a good, safe, low risk option to grow your wealth.

While investing on the stock exchange can realise quick, high returns, with high returns comes high risk, not to mention the constant management needed, explains Hassan.

“While we are not economists, we do see ourselves as leaders in our field and understand the property industry; we understand consumer needs and affordability in terms of housing as well as what financial institutions would consider bankable or low risk. This knowledge enables us to secure and design a product which will meet the needs of consumers and lenders, resulting in us being able to obtain bank loans for our purchasers,” he says.

Home ownership is an intrinsic need, however, due to the very stringent banking policies we find many buyers have difficulty in securing the mortgage finance they require, he says.

“A concerted effort needs to be made to reduce the 70 percent household debt to income ratio and work towards saving and safeguarding our future, which brings us back to the security and stability home ownership offers.”

If R100 000 is invested as a deposit on a property, appreciation is between 6 to 11 percent, and you can invest in something worth R600 000 to R1 million rather than just the cash amount you have put away (by applying for a bond).

South Africans have never had a saving mindset, which Hassan says needs to change.

Many are still living above their means, and prioritising needs to be done on what to spend their incomes on each month.

Straight saving into a bank account may be a good start, but this is not enough because that interest earned is generally lower than the inflation rate.

If a person has invested R100 000 in a bank account, for instance, and the interest is 3 percent, with the current inflation rate being 6 percent, he has lost 3 percent over that year.

“If R100 000 is invested as a deposit on a property, appreciation is between 6 to 11 percent, and you can invest in something worth R600 000 to R1 million rather than just the cash amount you have put away (by applying for a bond),” says Hassan.

He says the most important thing is that if you can touch, see and live in your investment, you will generally feel safe in the knowledge that you have put your money in the right place.

“Looking after your investment yourself, by looking after a home, will bring the peace of mind that a) you are living in your investment and will not be paying towards someone else’s wealth through renting, and b) that you are working towards building your future as well as your family’s, adds Hassan.

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