For the large majority of consumers, buying property will be the biggest investment decision they make and one that will affect their financial wellbeing for a long time to come.
This is according to Adrian Goslett, CEO of RE/MAX of Southern Africa, who says it is likely that the property they buy will account for the largest percentage of their net wealth, which is why it is comforting to know that owning a property is a viable investment option that has proven itself, over time, to be a cornerstone of building personal wealth.
“Many savvy property buyers have been able to live out the lifestyle of their dreams through well-researched property investments,” says Goslett, who points out that in all investment endeavours the key element to success is knowledge.
“Regardless of whether it’s buying property, shares or any other financial investment – it’s all about putting in the time and doing the research.”
He says it is vital for any investor to study the market and know how and where to invest in order to make the most of the current conditions surrounding the market they choose.
“Irrespective of the market phase, one still needs to make the most informed decision and take into consideration all relating factors before a decision is made. For property investors, these factors would include the location and future potential appreciation of the property over the medium to long term, which are important elements regardless of the conditions surrounding the transaction,” he says.
Goslett says consulting with a financial adviser or experienced real estate professional is highly advisable for property investors who are unsure if they are making the correct decision.
“The saying that ignorance is bliss might pertain to certain elements of life, but property investment is certainly not one of them. Making a bad investment decision due to lack of knowledge can be the difference between financial independence and losing thousands. However, real estate investment is far more forgiving than other vehicles of wealth creation.”
While the property market experiences cyclical phases, it is a far less volatile option than the equity and share markets. Additionally, he says, unlike other forms of investment, property investors have complete control over their asset.
“Although there are sometimes unexpected factors that can impact on the property market, generally property price growth is fairly consistent over time. This makes it easier to more accurately predict the potential return on investment with a property purchase as opposed to any other investment class. Unlike other investment options, there is no need for a property investor to constantly be watching the market to see exactly the right time they need to sell to make a profit.”
Another aspect that sets property apart from other investment options is the fact that it can be financed and leveraged. Essentially this means that the investment can be bought using the bank’s money.
“Investors who can show the necessary levels of affordability required by financial institutions and can meet the loan repayment conditions will be able to qualify for the finance to buy the property.”
Goslett points out that property is the only investment option that banks are willing to finance because the property acts as collateral for itself.
The money that financial institutions lend is going into the investment of an asset that will appreciate in value if it is managed correctly, he says. “Should the investor default, the sale of the property will largely mitigate the bank’s loses,” says Goslett, who adds that property is one of the few investments that either keeps up with inflation or outstrips it over the long term.
He says property is and always will be a vital component of any investment portfolio, provided the principles of property investment are always adhered to. “It needs to be viewed as a medium- to long-term investment in order for the investor to truly experience its full potential.”
Property will remain a sought-after asset class in the future and a key building block to personal wealth, says Goslett.