Nobody can deny the devastating impact that Covid-19 has and will continue to have on the global economy. Our personal finances are threatened from all ends, as the lockdown has left millions of South Africans desperately seeking additional sources of income.
For those who have access to the capital and want to own a property, Financial Adviser at Momentum, Ernest Zamisa recommends investing in property as a good way to create an additional revenue stream.
“With interest rates at record lows, coupled with keen sellers; investing in property in South Africa seems to be a very enticing prospect at the moment,” says Zamisa. “If you were ever looking to invest in property either by purchasing a property or through investing in a property fund, now would be the time to do it.”
You don’t have to buy, to invest in property
Although there are distinct advantages to investing and owning your own property, if you don’t have the capital – or are a little more risk averse – but still want the investment exposure that property brings, the property market is still ripe with investment opportunities. Through a property unit trust, you can invest your money into a fund that is dispersed across a wide variety of properties, which is managed and run by analysts and investment experts.
On the most recent episode of money show Geldhelde on VIA (DStv channel 147), Deputy CEO of Momentum Metropolitan and CEO of Momentum Investments Jeanette Marais said, “Investing in a property unit trust will give you the opportunity to benefit from the growth in property - without the physical hassle that often goes with a house, like maintenance or difficult tenants.”
Zamisa adds that you don’t need a huge amount to invest in these unit trusts. “You can invest as little as R1000 per month to get a good return on investment,” he says
As one of the top rated property trust funds in the country, Zamisa says that Momentum can help you broaden and diversify your property portfolio, allowing you to invest in multiple property types from commercial properties to shopping centres and even residential developments. “With a much lower barrier to entry, a property unit trust gives you access to a proven team of analysts and fund managers who have the capabilities and expertise to help you grow your investment.”
For the buyers - Lower interest rates mean property is less expensive
Zamisa says that South Africa is now in what the industry is calling an unprecedented buyers’ market. “Banks are actually quite willing to offer 100% home loans, and with the recent reduction in interest rates, the market is well positioned for recovery.”
This provides a lucrative opportunity, also for first-time buyers, advises Zamisa, who indicates that prime sitting at 7% makes home loan repayments much more affordable. ‘Prime’ refers to the rate of interest that commercial banks charge their most credit-worthy clients, so it provides a good baseline to predict the interest that you will be paying - provided you have a good credit record.
For example, it wasn’t two years ago when repayments on a home loan of R1m would have cost R10k a month. With the current prime interest rate, this repayment value is closer to R7 600 a month.
However, Zamisa warns that the purchase of a physical property will leave you exposed to the financial elements as interest rates inevitably rise again and the hidden costs of property like maintenance, rates, taxes and municipal accounts management take their toll.
“On the plus side, you can rent your property out and make a more immediate and tangible extra income. Property has shown to be one of the more stable investments over longer time periods,” says Zamisa.
The power of the right advice
Whether you want to buy a physical property or invest in a fund, Zamisa advises potential property investors to seek out a qualified financial adviser.
“If you want the right directions on your journey to success then speak to people who understand the market and will help you draw up a realistic financial plan, he says. “A good financial adviser will assist you by conducting an affordability assessment of your finances and will assist you in calculating what you can reasonably ask for rental, taking the current market into account.”
Zamisa says a financial adviser may even advise you to hold off on buying a property and rather focus your available funds into a property unit trust as an alternative way to take advantage of this boom in the market.
All-in-all, whether you have the time, energy and funds to buy a property yourself and reap all the rewards or simply want to widen your investment portfolio and cut the risk by investing in a property unit trust, Zamisa says that “one thing is for sure - property is still a viable and very lucrative way to invest your money.”
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