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