Levelling up while levelling down: why a recession is the perfect time to buy

As the dust settles in South Africa, there is a renewed
sense of optimism in the air. Experts are hopeful that the country is on the
path to economic recovery but there is still some way to go. This has been
hailed as our worst recession in ninety years with the economy expected to
shrink by 7.2%.

The knock-on impact on the property sector is that buyer
confidence is at an all-time low – something that cannot be attributed solely
to the pandemic. John Loos, Economist at FNB Commercial Property Finance says
South Africa has already gone through a recession and a mildly correcting
property market prior to 2020 and Covid-19 merely made this recession deeper.

Yet despite the economic climate, experts have predicted a
manageable impact to residential property which offers a strong argument in
support of the fact that property – even in the most turbulent of environments –
remains a relatively stable investment.

Jacques van Embden, Managing Director at urban property
development firm Blok, says that if there is one thing that history has taught
us, “it is that the economy will eventually recover and that property is one
such asset class that shows stability over the long term.”

Internationally, CNBC
has reported that property continues to offer investors a ‘safe haven’ in
volatile climates as the risk-rewards rations remain reassuringly linear, while
an article published in the Global
Property Guide
analysing the 2007 economic crisis, reiterated that residential
property was generally far more stable than non-residential real estate –
regardless of the country.

Property is extremely resilient, offering less
volatility than the stock market
” says van Embden. “Ultimately, people
will always need a place to stay which provides buyers with a sense of
security, even in times of turmoil

Given the prevailing conditions, South Africa finds itself in
an unprecedented buyer’s market, thanks to the current supply-demand context.
Under massive fiscal pressure, the onus falls on the Reserve Bank to assist
South Africans. Banks are far more amenable to offering 100% home loans and with
the recent slashing of the repo rate for the fourth time this year – from 4.25%
to 3.5%, taking it to a fifty year low – the market is well-primed for when the
recovery starts.

This makes it a highly attractive time to purchase
says van Embden “and buyers can expect fantastic value.”

Another advantage is that buyers will have an increased
access to highly desirable locations which may have previously been unobtainable
due to price.

Suburbs such as Sea Point, which remains perennially attractive
from an investment point of view, are now within reach

Van Embden says that he is increasingly seeing buyers
prioritise apartments located in sought-after areas over a larger square
meterage, as these apartments show a sustained Return on Investment (ROI) over
long periods.

Adding value to consumers through an increased emphasis
on lifestyle – for example, an attractive neighbourhood and various serviced
offerings – means that developers are able to keep apartments compact in order
to improve affordability for buyers

Van Embden says that developers are looking at new ways to
entice would-be investors and consumers can expect to see a great deal of
innovation in this space.

These past
few months have shown us the importance of agility, and that we need to be able
to design products that respond well to market conditions.”

I would
advise buyers to take advantage of the exciting opportunities this market
affords. The gap between owning and renting has grown significantly smaller,
and it makes sense to invest in a property that will show return for years to
,” he concludes.

Source: Propertywheel.co.za | https://propertywheel.co.za/2020/10/levelling-up-while-levelling-down-why-a-recession-is-the-perfect-time-to-buy/

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