Is it a good time to purchase real estate? Well, if you are purchasing property for your own personal use, such as scaling down, accommodating a larger family, or moving to a better location – then there is no reason why you shouldn’t go ahead with a purchase.
If your concerns are the investment merits of owning property, then consider the following:
Where else can you borrow funds from a bank to purchase an asset? If you want to invest in the stock market you will be doing so with your own cash. Yet a bank will finance a property purchase up to 100% in some cases. It’s called “gearing” – and it’s the ability to borrow funds to acquire an investment that will grow over time.
If you are buying for investment, what other investment will give you a rental return? When you consider you can use the banks’ money and get a rental return, it means you effectively increase your wealth over time and enjoy the benefit of other people paying for it.
Another important aspect to consider is that property, over time, has always been a sound investment. Sure, other forms of investment may have better yields for specific periods. But property is less volatile an investment, and history shows that even if there is a drop in property values, they have always recovered.
Consider that interest rates are at their lowest since the early 1970’s. That means servicing your mortgage bond is cheaper now for many purchasers than ever before in their lifetime.
The cheaper cost of finance also means that today you could afford to service a bond that you may not have been able to in 2005. Yes, interest rates will in all likelihood increase over the next few years, but should remain affordable as your income grows.
The big question is: Should I wait to see if property prices drop further?
Both ABSA and FNB , in their property reports, expect property prices to remain flat, or experience slight nominal growth over the next few years. That means the price you pay for property shouldn’t drop below current levels and that, barring some global crash, properties are probably at their bottom now. So waiting longer shouldn’t result in lower market values.
When you consider the cheaper cost of finance, the appetite the banks are regaining for home loans, and the fact that prices are now realistic in most cases – there is a good argument that there has never before been a better time to purchase property than now!
Work out your affordability and purchase wisely. Don’t overextend yourself and allow for an increase in the interest rates so that you aren’t hit with any nasty surprises. Over the medium-to-long-term you should be very happy with the returns. And, combined with your other personal reasons to own your own home, it is a great time to get into the property market.