Why 2021 is the Best Year to Invest in Real Estate
If you’ve been holding out for the perfect time to leap into the property market, you’re not going to be disappointed this year. With a triple-whammy of rock-bottom interest rates, subdued property prices, and plenty of stock available, the year ahead is quickly shaping up to be the best property investment climate in fifty years.
Craig Mott, Cape Town Regional Sales Manager for the Rawson Property Group, shares his top reasons why 2021 is the perfect year to make your property dreams a reality.
1. Easy leverage
Leverage – or the ability to earn more with less is one of the biggest advantages of property as an investment. No other investment class allows you to easily leverage other people’s money (i.e., bank finance) to buy an asset, and still reap the full rewards of appreciation on its total value.
Now, in the wake of Covid-19 and an extended period of low property market activity, lenders are practically competing to give qualified buyers their money.
“Lenders are definitely more motivated than they’ve been in a long time,” says Mott, “to the point that they’re offering up to 104% loans, in certain cases. Buyers still need to demonstrate financial responsibility and sufficient, stable income, but we expect lenders to be very cooperative in the new year.”
2. Great interest rates
According to Mott, the finance deals that lenders will be offering in 2021 will likely include amazingly low-interest rates.
“The combination of the recently slashed repo rate and lenders ’ eagerness to sign new bondholders means a lot of applicants are going to be getting below-prime interest rates on their bonds,” he says.
To coax the very best offers out of lenders, however, Mott says buyers should still plan for a deposit, even if they qualify for a full-coverage bond.
“Banks seldom give their best interest rates to buyers taking 100% or more loans,” he explains. “Buyers putting down a deposit are a much lower risk, so those are the ones lenders really pull out all the stops for.”
3. Low risk
With a consistent growth record over the last 50 years, Mott says property is one of the most secure and stable investments available in today’s economic climate.
“Property tends to retain its value very well, even when other investment types are crashing,” says Mott. “That makes it an excellent, low-risk choice during periods of economic volatility like we have now.”
4. Excellent growth prospects
Buying property in 2021 isn’t just the safe choice, however. Mott says it could also be a very profitable one.
“If you’re looking at short-term earnings, property isn’t the way to go,” he says, “but if you follow the investment strategies of experts like Warren Buffet, property investment becomes a whole different ball game. Taken over the long term 10 or 20 years, for example, returns on property investments can be exponential.”
Since the property market is currently at the bottom of a long, downward cycle, making a purchase in 2021 almost guarantees buyers the excellent growth that comes with the next upswing.
“The clock is running out for those wanting to get into the market before it picks up momentum,” says Mott. “I certainly wouldn’t delay any longer than necessary in the new year.”
So how do you get started?
To get market-ready as quickly as possible, Mott recommends prospective buyers save as much as possible for purchase fees and a deposit, contact a bond originator for pre-qualification, and reach out to their neighbourhood realtors to start getting a feel for the market.