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Does investing in property make sense right now?

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Does investing in property make sense right now?

With time on my hands, I have been pondering what this pandemic means for property purchasing decisions. Moving into level 2 of lockdown, we have started to see signs of what appears to be normality returning with the face-to-mask ratio increasing, if my morning stop at the local coffee shop is anything to go by.

I think collectively we are all trying to breathe a sigh of relief (without steaming up our sunglasses) but can we – or should we – remain twice-shy with the bite of COVID-19 still fresh in our minds, albeit 161 days in? Have we become more risk-averse, and should we be? Is there still money to be made from investing in property? A quote from the great Warren Buffett comes to mind: “Be fearful when others are greedy and greedy when others are fearful.”

The mood in the property market seems pretty upbeat lately, with some large agencies achieving record sales months in June and July, bond originators reporting that home loan applications are up close to 60% year on year, and banks regularly (at least half of the time, according to Ooba) giving up to 100% bonds. Further to this, website traffic to online property platforms has now surpassed pre-lockdown levels. That said, there also seem to be more vacancies than usual, definite pressure on rentals and a lot of people are selling. It’s a buyer’s market after all, is it not?

So this raises the question – should we be fearful or greedy – is this a good time to invest in property? With interest rates at a 50-year low, we can naturally expect borrowing to increase, meaning that there will be an increase in buying activity in the market. Coupled with the abundance of well-priced stock, some incredible tax-saving property investment opportunities (shout out/elbow nudge to Flyt’s Section 12J Select Fund), and the willingness of banks to lend to the consumer, these factors mean that buyers are certainly in the driver’s seat and can cherry-pick the dream home that may have been out of reach until now. These conditions have already impacted property prices, and should, at least in the shortterm, continue to increase, as we have seen already seen on FNB’s House Price Index.

Although it is difficult to predict what the longer-term impact of the pandemic will be and whether we will see a muted recovery in house prices, what is clear is that the current market conditions do not come around every day. Provided investors have a stable income and/or reliable, paying tenants, can afford to borrow from the banks and, more importantly, do not rush their investment decisions (BUY AT THE RIGHT PRICE) – it is certainly worth considering.

 

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