rate as other properties, demonstrates the fact that location and price appreciation go hand in hand. In this regard, it is advisable to consult a property specialist in the area / s of your choice who is backed by a reputable real estate agency.
Saving Property is relatively easy to understand, and is a forced saving as owners can’ t easily shirk bond repayments by, I. e. deciding to rather go on an overseas holiday. The same cannot be said for many other cashbased or flexible-contribution investments. It’ s also harder to splurge profits out of a property investment as it requires refinancing or selling the property. There are also potential tax benefits as the main expense, being the interest on the bond, is in some instances tax deductible.
By far, the most attractive characteristic of property investment is its ability to be leveraged. Simply put, leverage involves using the banks’ money to magnify the potential returns of property investment. For example, a purchaser may invest 30 % of his or her own money and the bank may finance the remaining 70 %, yet the purchaser benefits from 100 % of the returns on the property.
The fact that sales volumes during the Covid-19 pandemic have been very good indicates that many people still believe in property ownership as a solid investment in South Africa. Others also believe that it offers them sound capital growth prospects, potential regular rental income and security. Property investment tends to be more resilient with the upturns and downturns spread out over time, and forms an integral component of any welldiversified portfolio.
Covid has driven most of us to reassess priorities and make changes that reflect a healthier, more balanced lifestyle. As a result, some property investors who have means turned to larger properties with additional spaces to accommodate relatives and some relocated to more appealing areas. While some downsized to reduce costs, build wealth and grow an investment portfolio that stands the test of time and generates a passive income. Property is an asset class that is a safe bet, enabling investors to reap the rewards of both rental returns in the short term, and capital appreciation in the long term.
Rent or Buy? Those who are not in a position to raise sufficient finance to purchase their first home will naturally turn to renting. As renting may be cheaper in lower price bands than the bond repayments in the area in which they want to live. Additionally, renting does not incur additional expenses such as rates and taxes, maintenance and other related expenses that the home owner has. Another perceived advantage of renting is the flexibility and easier mobility that this offers, particularly in the case of those who may need to relocate for business purposes.
Conversely, owning a home provides security of tenure, as is the case when a lease agreement comes to an end where the tenant wants to stay on but the landlord decides to sell or use the property themselves. You might be renting in a certain school catchment area and then when your lease comes to an end you cannot find a property to rent in the area.
SOURCE Pam Golding
SA Real Estate Investor Magazine MARCH 2021 25