Voices

Covid-19 unlikely to derail residential property market in the long term

2020-03-19 12:54

On Sunday night, President Cyril Ramaphosa addressed the nation about the Covid-19 coronavirus, declaring the outbreak a national disaster in terms of the Disaster Management Act.

He assured us that all necessary measures and systems would be put in place to contain the spread of the virus and to limit the effect it will have on the economy.

The question around the pandemic’s impact on the property market is an important one, as the real estate market is keenly affected by the overall health of the economy, consumer confidence and, in particular, levels of employment, which means that major disruptions in other sectors will have at least some impact on the property market.

Having said that, property tends to be a particularly resilient investment.

Over the past few days, we’ve equities have been significantly affected, but property has remained fairly stable.

Earlier this month, US news outlet CNBC reported that residential real estate in North America appeared to offer investors the calm they were looking for in the coronavirus storm.

Traditionally, property is far less volatile than the stock market and has a high tangible asset value.

Irrespective of the impact the virus has on society, people will still need accommodation, which offers a measure of security in terms of a property investment holding ground in times of turmoil.

What’s more, property is an asset class with supreme resilience and a unique ability to “bounce back” as market conditions improve.

The prevailing market condition – the so-called buyer’s market – is another reason not to shy away from property investments in the time of Covid-19. A buyer’s market, which is a situation in which the supply of property exceeds the demand for property, bodes well for those looking to purchase property because prices are generally lower in this type of market.

It is a good time for investors to remain at least slightly positive about the immediate future of property because banks are open to offering 100% home loans to qualifying individuals; the threshold on transfer duties was recently raised to R1 million (meaning that transfer duty costs are lower for buyers); and that it is speculated that interest rates will be dropped by at least a further 25 basis points later this week.

Our advice is to ensure that you buy at the right price, that your affordability is in order and that you don’t extend yourself too much when acquiring a new property. Putting down a deposit is always a good idea and might mean that you get a better interest rate on your bond.

At this stage, we must caution against panic and, while we need to take the necessary precautions to protect ourselves and our families, we also need to think as rationally as possible about property and investments in general.

Coetzee is CEO of BetterBond


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March 29 2020