The attractiveness of residential property as an investment appears to be gradually improving‚ according to FNB analyst John Loos and Michelle Dickens‚ managing director of TPN (Tenant Profile Network) Credit Bureau.
“While the average home owner appears to place much emphasis on the value of his or her property‚ when it comes to property as an investment it is actually the income stream that it generates‚ relative to the price paid‚ that should really be the focus‚” said Dickens.
“In investor speak‚ a far better number to focus on would arguably be the ’initial yield’‚ i.e. the income expected to be earned over the next year divided by the property value”.
Loos added that it is therefore somewhat ironic that‚ “when we discuss house price performance in recent years‚ many see it as a depressing picture.”
“However‚ weak house price growth that underperforms rental income growth is actually what is required to improve the attractiveness of property as an investment in future through leading to a higher yield.” - I-Net Bridge