Is it still a good time to buy and sell property?
Category Newsletter: Article
History has shown that South African property is a good investment and even against a climate of weak economic growth, the market seems to be holding out well.
While there is no doubt that the country is in a challenging economic phase with growing concerns about political and economic stability, you should remember that people will always need somewhere to live.
That means there will always be buyers who want to invest in property and you will always have people who need rental accommodation, thus creating opportunities to invest in rental property. Most people aspire to owning their own home and it is always better to own rather than rent if you can afford to do so.
It is easy to get caught up in the news and drama of politics and property market commentators who paint a picture of poor growth, but remember, you are buying the roof over your head not shares in the Stock Exchange. Property differs from other asset classes.
There has been several FNB Property Barometers this year, which has shown that the mini- property boom of 2013-2015 delivered excellent capital growth for property in many areas, especially the Cape region where the coastal suburbs are in high demand. These growth rates have not only exceeded inflation and the national growth rates, but also those of other urban centres including Johannesburg and Pretoria.
Bear in mind that this growth came at a time when the economy, while growing, was not performing spectacularly. The lesson in this, is that had you bought in these particular areas just five years ago, you would have benefited from excellent capital growth on top of your initial investment.
FNB for example states that although the national house price growth has slowed to around 4.3%, it grew by 439% over the last 17 years and by 53.44% over the last ten years. Although Cape Town’s house price growth has slowed to 8.4% (from 11.3% in 2016), it grew by 50%-100% over the last five years in the high demand areas such as the Atlantic Seaboard/City Bowl and Southern Suburbs, outstripping all other areas in the country.
Given that there will always be people looking to buy or invest in property, it follows that there will always be property owners who want to, or need to sell for a variety of reasons. These might be because they want to upgrade or downgrade or relocate to another area or city. Lifestyles change and so do people’s property needs.
For as long as there are people who want to buy property, there will be opportunities for sellers. Whether you should be selling right now, will depend on your reasons for selling. If you are looking for a quick profit and have not held onto your property for at least 5-7 years, then you may battle to achieve a profit, but if you had bought for a good price, then the chances are good that you can turn a healthy profit.
Unlike other asset classes, property has an underlying value retention. That means that your asset might not always grow at high rates, but it will still grow and you will still have the base capital value. For this reason, property will always be an attractive prospect for buyers, sellers and investors.
The time at which you decide to buy or sell will determine how cautious you should be. If the market is down, as is the case right now, buyers should take extra care not to over pay. At the same time, sellers need to take extra care not to overprice.
Author: Coastal Property Group
