Is property still considered a good investment?

In the not too distant past property in South Africa was considered a gem, with the years between 2004- 2008 seeing the doubling of property values. Property was in great demand, with many people even moving out of rural areas and looking to purchase homes within cities. However, the recent years have resulted in a dramatic change within the property market and it is interesting to find out whether buying property is still a good investment.

Glancing over property trends from the past twenty years, it has been filled with fluctuations- increases in price have been followed by decreased prices, and visa versa. At present, the global recession has resulted in people having less disposable income which has affected investment opportunities. The introduction of the National Credit Act (NCA) has also made it significantly harder for people to be granted bonds.

Current trends in the market reflect that the percentage of buy-to-let buying is at an unyielding low, closely mimicking those patterns in the previous two quarters. This trend is expected to continue as buy-to-let investors wait for capital growth prospects to increase. Those in the market are above all buying homes for primary residential purposes, and with the market as it is at present, there is the opportunity for these potential home owners to negotiate great deals on property.

According to Richard Gray, CEO of Harcourts South Africa, “Due to current circumstances, South Africa finds itself in a buyer’s market due to an increase in property stock, with the supply having overtaken the demand for property. As the price of property decreases and one is lucky to be granted a home loan, it is the ideal opportunity to purchase one’s dream property at a significantly lower cost than in the past.”

As with all investments, the purchase of real estate involves rewards and risks, therefore it needs to be approached with the utmost caution and careful consideration. With that being said, real estate is generally a safe investment as the likelihood of losing money is usually low.

When evaluating growth in value of a property in Durban North over the last 25 years- during which time the economy has both boomed and gone through recessions- it reflected dramatic inflation with the value doubling 3.25 times in the first 12 years and has steadily increased over the years. This reiterates the fact that although prices will fluctuate over time as a result of external economic conditions, they will increase in the long term and therefore purchasing property will always offer a solid investment.

The month of October revealed that house price growth has once again slowed, after a brief inflation earlier in the year, prices have continued to decline. With that being said, Gray concludes, “In the long run property is always a good investment – it is definitely an asset as prices are bound to be driven up again in the future. People need to remember that buying property is still one of the best decisions they will ever make.”