STILL HOOKED ON INVESTMENT PROPERTY

The business of property is an affliction that affects many of us. We all get carried away when prices are powering forward, pushing house prices higher than they should be, then we overreact when the market slows letting the market freefall. The property curve runs pretty much in line with interest rates but from a higher base each cycle. Put simply, investing in property is cool because you can anticipate what direction in house prices are moving. Right now we know that prices have softened over the winter compounded by all the things that are now old news, the credit squeeze, electricity shortages, political uncertainty and reduced affordability. There is however anticipation that interest rates are reaching a plateau and the market is now alive with opportunity. I feel summer coming on.

Some of you may still believe that you have it all wrong and property is a risky place to build your wealth? I think that you will find that history proves differently. A recent report released by Jacques Du Toit, ABSAs property expert really put it in perspective and I have included his graph below. He plotted the internal rate of return of buy to let residential property over the periods of five, ten, fifteen and twenty years, and in South Africa property has beaten most other asset classes, as well as inflation.

The fundamentals are all pointing in the right direction for Buy-to-Let property, so if that’s your thing and you have access to credit, you will struggle to find a better time to build your portfolio.