How low can the property market go?

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Jaco Grobbelaar founded Prosperity Enterprises to equip individuals to build their property portfolios through education, structuring and support. He is a property investor, structuring specialist and international speaker.

The property market is at an all-time low but these lows aren’t what you imagine. This according to managing director, Jaco Grobbelaar, at Prosperity Enterprises. Grobbelaar explained that things are about to get better because when everything is low, it creates opportunities for property investors.

Grobbelaar says that South Africa has experienced some lows recently, including the low GDP growth, rolling power blackouts, SAA being placed under business rescue, the anticipated Moody’s downgrade, and pressure on household finances.
“However, the new century brings great opportunities for Africa because of the rising demand for its natural resources and the need for its workforce and investors’ search for new markets, of which Africa is a market of over one billion people.”

According to Grobbelaar, South Africa is the economic powerhouse of Africa and has world-class infrastructure, innovations, sophisticated financial, legal and telecommunications sectors. In short, it’s not all bad news. South Africa and Africa still offer fantastic investment opportunities. And the best thing about hitting rock bottom is that you cannot go any lower. The only way to go is up!

Grobbelaar gives five reasons why people should continue building their property investment portfolio in 2020 despite the lows. He firstly starts off with low prices and explains that Adrian Goslett, the regional director and CEO of RE/MAX of Southern Africa has said that he remains confident in the local property market and believes that we are near the bottom of a downward cycle, which is poised to start a long-term corrective journey as we head into 2020. The second reason is low risk and volatility, which is explained as property in South Africa has grown consistently over the last 40 years. Sometimes it grew faster and sometimes slower, but property prices have continued to grow. Rental income has also shown very consistent growth over this period.

The third reason is low interest rates, which means property industry experts anticipate lowered interest rates for mid-2020, and which also means you will pay less servicing debt and enjoy an increased disposable income. The banks are also granting more affordable and easier access to home loans, which makes property an increasingly attractive investment option.
Fourthly, low rentals help investors to acquire properties at low prices, to which Paul Stevens, the CEO of Just Property, adds the following: “On a positive note, I believe rentals will start to increase in the second half of the year. This presents savvy investors with an opportunity to take advantage of the buyers’ market now, with the cautious expectation of yields improving going forward.”

The final reason is low returns on other investments. Over the last five years, the JSE has effectively been flat. However, property always seems to come out on top when your capital growth plus your net rental yield is still much higher than returns on other investments. Prosperity Enterprises will be hosting a full day Property Seminar on 22 February at the City Living Boutique Hotel in Bloemfontein. Residents can book online: https://prosperityenterprises.co.za/seminars/ or by sending an email to: seminars@prosperityenterprises.co.za.

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