Why you should invest in property

why invest in South African property

The collapse of African Bank and African Bank Investments Limited has in many people’s minds reinforced the relative security and simplicity of property as an investment.

The ordinary man in the street should invest in property and should endeavour to see that it comprises at least 30 percent of his asset portfolio.

This is according to Bill Rawson, Chairman of the Rawson Property Group, who was talking to a group of investors at Rawson Developers’ new Claremontsectional title development, ‘The Beaumont’.

“What you see here is what you will get. The great advantage of a property investment is that it is relatively straightforward – most people can understand it without difficulty. You are not putting your funds into the hands of a fund or asset manager or analyst who may or may not be reading the stock market and the economic scene correctly – and who will charge you a monthly management fee whether or not your assets increase in value.

“I am not saying that there is no risk in property investment, obviously that can never be true. However, the risks are more easily understood and assessed: the investor himself can inspect, see, touch and handle the ‘product’ from which he hopes to benefit (along with all the fixtures and finishes that will go into it),” says Rawson.

He says this fact always was and always will remain one of the chief reasons why the ordinary man in the street should invest in property and should endeavour to see that it comprises at least 30 percent of his asset portfolio.

The second main reason for the wisdom and popularity of a property investment is that such investments are often quite easily geared with bank finance.

The third reason is that in the major urban areas demand from tenants now exceeds supply, ensuring the owner of ongoing leases.

For the record, those who bought in the earlier stages of ‘The Beaumont’ development, i.e. close to the launch or within six months of it, can often now resell their units, should they wish to do so, at a 30 percent to 35 percent mark-up.

Asked whether he has any advice on whether to opt for a residential or commercial investment, Rawson reminded his audience of what he has said previously: commercial units, being bonded for a maximum of only 11 to 12 years, are burdened with more expensive repayments, but, can also usually also get higher rentals, giving 2 to 4 percent higher returns on investments than is possible for residential property.

Rawson says while that can make commercial property attractive, it has to be remembered that finding a tenant for such properties is far harder than finding a tenant for a residential unit. In South Africa’s big cities and their suburbs right now, there is seldom any difficulty in finding tenants, but in the commercial and industrial fields, tenants are still elusive.

Source: http://www.property24.com/articles/why-you-should-invest-in-property/20607

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