PROPERTY IS STILL AN IDEAL INVESTMENT VEHICLE

Dylan Burke - IPS

19 May 2008

Many would agree that there is a slight degree of uncertainty regarding the South African property market, this obviously influenced by successive interest rate hikes; and with the prospect of more hikes to come, property purchasing has become moderately slower…

This is according to Scott Picken, CEO of International Property Solutions, a company who links the expat market in South Africa with the properties being sold in that country. Property prices, which have pushed up capital values of real estate investments over time, have created large surplus equity in many property investments and this equity can be released to finance the purchase of additional properties.

“The light at the end of the tunnel is that of off plan purchasing” says Scott Picken, “this is an ideal vehicle for a first time buyer or a qualified investor to get their foot or collective feet into the property market. The reason why it is so appealing is the simple process of off plan, when a purchaser decides to buy a property, he or she would place a deposit for the unit, and with a lengthy wait up to 18 months for their first mortgage payment. This bypassing the risk in interest hikes and allows the opportunity to sell if the investor feels the interest rates have risen to high”

Over the longer term, residential and commercial property still offers very attractive returns. Specifically with the view of increasing tourism and growing demand in the run up to the 2010 Soccer World Cup.

However one should note that rental yields – especially of residential investments - have been poor and have definitely not kept up with the very rapid appreciation in residential property prices in some of the wealthier suburbs in South Africa. This is obviously a concern in the minds of the prospective purchaser, definitely a point worth noting. With that in mind, one must realize that when they step foot into the property investment circles, there are two points to note, the first being that of the ability to start or add to their property portfolio, and secondly, the capital growth ones property will accrue beginning the day they purchase the property.

Lately investors are looking towards the property market to provide both capital growth and a sustainable and increasing source of income, this coupled with a considerably high measure of capital protection compared to general equities.

Possibly one of the more important areas to focus ones attention on is that of financing the investment property in question, ideally speaking the easiest route is to put down as big a deposit as possible, thus lowering the monthly mortgage repayments. Another option for one to consider is to draw from capital appreciated in their already existing home loan, thus getting a lower interest rate.

Engaging the services of a professional can have many benefits for the investor, a way of securing and minimizing the risk of any hiccups on your investment front. The services include the security of having it valuers conduct thorough assessments of the property, the reviewing of leases, assessing the credibility and sustainability of tenants, to compare rentals to market rates.

To sum it all up in one paragraph, Scott Picken of International Property Solutions has the following to say,” The core advantages of investing in off plan property, in my opinion include the following: the notably low entry and exit costs associated with the property (no transfer duty/attorneys fees etc) as well as the elevated level of liquidity, thus giving the investor the ability to turn the investment into cash within a short period of time”

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