Investors need an honest interrogation of their personal financial situation and have a clear idea of strategic exit timelines . They should also exercise caution when planning for a holding period that could be longer than expected . It is also possible to mitigate liquidity risk by investing in areas with rising demand and limited supply to ensure that they do not suffer a loss when facing the pressure to sell .
3 . RISING INTEREST RATE RISK
Rising interest rates are a reality here in South Africa , and they give rise to the risk that the potential for future inflation will cause the purchasing power of cash inflows from an investment to decline . To counter inflation risk , one should look at investing in assets that tend to increase in value over time , and have a growth component that enables them to outperform inflation over the long term . Successful property investors know that well-located South Africa real estate is a relatively secure and effective inflation hedge over time . Investors should be looking at areas where there are multiple growth drivers such as economic growth , jobs growth , and increasing populations .
Forewarned is forearmed Investing in real estate with the right knowledge , clear strategy and perspective can shift the risk-reward continuum in the investors favour . By practising prudence and diligence , investors can benefit from the relative safety , security , and low volatility of this asset class while avoiding undue risk .
Please note that the information provided is general in nature and should not be perceived as personal investing advice .
SA Real Estate Investor Magazine APRIL 2022 39