Where Do I Invest Now?

There will always be investors, irrespective of the market and the economy.  The difference when the economy is unsettled, and the market uncertain, is that investors are more selective about where they invest.

For the foreseeable future, the Rand will continue to be unstable and will react to any political or economic changes.  Just look back at the last few weeks to see how global fears and local issues have negatively impacted the Rand.  There may well be a follow-on impact of interest rates increases next week – a careful balancing act that will undoubtedly impact inflation.

Consider the investment options.  Just how volatile is the stock market?  Unless you’re an expert, it’s really a gamble, especially in the current economic climate.  Feel for those who had Steinhoff shares in December last year… or who have MTN shares now.

If you invest your cash in a bank, all you’ll earn is the interest, on which you are largely taxed.  The interest barely covers the cost of inflation. So in real terms, allowing for inflation, you’re no better off.

Perhaps you could invest offshore, in foreign currency or property?  Whilst it’s great to hedge against the Rand – with exchange rates as they are now, the opportunity has really passed.

So that leaves property.  In uncertain times investors often turn to property.  It’s much less volatile than most other investments.  In addition to this, investors can often borrow from their bank to finance their property investment.  The rental market is under pressure, but when your rental is correctly priced you will rent it out, and a large portion of your finance costs will be covered.  When geared with cash, your rent should cover your finance and running costs.

The property market is not nearly as volatile as most other investment options.  And whilst markets do move up and downwards, property cycles are more gentle and allow you to make informed decisions as to when to buy and sell.  When you can plan ahead and time your decision to sell, you will very rarely do badly.

The great thing about the market we’re in is that there are excellent purchasing opportunities.  Sellers who do need to sell are pricing their properties in line with current market value.  Now is the time to buy!  Add to this the fact that banks are keen for your home loan and will offer you a good rate, and you’d be a fool to let this chance pass you bye.

As with all investments, it’s important that you never overextend yourself.  Allow for the interest rate to increase.  Price your rental to attract good tenants.  Be patient.  When the market starts its’ cycle of recovery, expected late next year, you’ll be glad you invested in real estate.

 

Steve Caradoc-Davies
Principal

Harcourts Platinum

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