In good financial times and bad, property is seen by most financial advisers as a safe investment. In difficult times such as the world is experiencing at present, your home may lose value for a time. In the long term, however, bricks and mortar have traditionally held their value. Before the Covid-19 lockdown, banks were granting more home loans as well as asking for lower deposits from applicants. Inflation is expected to be relatively low in the near term, and the South African Reserve Bank (SARB) cut the repo rate by a further 50 basis points in May 2020. Rhys Dyer, chief executive of ooba, says: “Although there will be some challenging times ahead for consumers, we don’t believe the outlook for property is all doom and gloom. “The prime rate of interest is at the lowest level it has been since 1973, with the prospect of potential further rate cuts. For first time home buyers the cost of renting versus buying is now swinging very much in favour of buying, especially for properties priced below R1 million, where no transfer duty is applicable. “There are likely to be attractive deals in the market as sellers who have been holding on for some time to sell their properties are forced to reduce prices, which should bolster demand.” Fewer transactions During the national lockdown, real estate transactions have come to a halt, world wide. Data from China, South Korea and Italy reflect a drastic drop in real estate transactions in those countries, and South Africa is no different. What’s important, however, says Schalk van der Merwe, Rawson Properties’ franchisee for the Helderberg region, is the fact that there is always a rebound once the crisis is over. “In all recorded cases to date, once the epidemic – or pandemic in this case – is over, real estate snaps back to normal.” Stock market woes good for property The stock market crash will doubtless have far-reaching effects for investors. When it comes to the property market, however, van der Merwe says some of those effects could actually be positive. “During times of economic turmoil, a lot of investors tend to seek ‘safe harbour’ in brick and mortar assets. With interest rates as low as they are at present, the net yield on properties has increased, making this even more attractive. We’re hoping this trend will help the market rebound once the Covid-19 crisis is over and agents can resume operating as usual.” Opportunities for first-time buyers This return to normality, paired with low interest rates, eager lenders, and the flood of properties expected to hit the market will create very favourable conditions for most buyers, says van der Merwe. These opportunities are compounded for first-time buyers, whose rental instalments could soon be neck and neck with their potential bond repayments. “For those who can afford it, the post-Covid-19 period is going to be an excellent time to snap up bargain properties at record prices,” he says. “That said, it’s not the time to overreach. As the economy recovers, interest rates will climb again. You don’t want to be at the edge of your affordability when that happens.” |