Buying an investment property? 5 tips to make an informed decision

From a 2 year-long global pandemic with multiple viral wave outbreaks to civil unrest felt throughout the country in 2021, there's no doubt that South Africans are feeling the crunch in terms of their existing investments. 

The fact of the matter is, these unprecedented disruptions are felt through the entirety of our economy and have translated into a fractured landscape for the property market. This inevitably impacts the demands on market trends alongside the strategies behind investments in what still is the best and most lucrative avenue despite these challenges. 

Because of this, we explore some of the more versatile strategies a property investor can take in order to stem the tides of a depressed market.

Define property as an asset

Property is perhaps one of the safest investment portfolios because of how it is able to retain its value against adverse economic situations. During times of strife or global recessions, it is often the case that property value takes far longer to decrease than other asset classes. Beyond this, property value is also based on commercial, residential, and industrial subsectors, the location and the ultimate price point creates a variety of potential investment avenues. 

Understanding these avenues can allow an investor to make an informed decision on precisely what subsector to focus on. Investors should also be familiar with the scope of each sub-sector as well as becoming familiar with various digital tools like PropTech or online social media marketing employed by Homes of Distinction.

Keep up with trends

Having a finger on the pulse of macro-economic conditions is key for investors to understand their potential impact on the property market. This allows for both foresight and aids in formulating strategies that serve the best outcomes for economic conditions whether they be positive or negative. 

One can still benefit from turbulent conditions. For example, taking the example of the recent low interest rate allows homebuyers and investors to purchase property at a much cheaper rate. This opens the market for investment especially if one is savvy enough to recognise it.

Factor in Covid 19

The seemingly omnipresent and extensively covered covid 19 pandemic is an important aspect to consider as a benchmark for future proportionally sized and impactful events on the economy.

In the property sphere, these sorts of events manifest and impact in two important ways. Number one, the economy, and number two, use patterns within that economy. For example, sudden and strict lockdowns meant that people were forced to spend more time at home, ultimately leading to the occupancy of a commercial property experiencing a sudden downturn. 

As a result, and even after eased restrictions, people (who are able to) are finding that working from home is a sustainable trend. This growing trend thanks to Covid will leave lasting effects on the use of property, especially in the residential sector.

Seek opportunities in affordable markets

Because of South Africa's high-income inequality with a Gini Coefficient of 0.63 (The highest in the world), the supply of quality affordable housing is abysmally low for multiple income groups. This social need creates opportunities for investors to fulfil these demands in both a socially acceptable yet profitable way.

Densely populated city centres and historically under-developed areas can be improved upon via the use of creative and flexible solutions for developing housing as well as commercial spaces. The informal economy represents a major percentage of the overall economy yet is scarcely considered and often overlooked by property investors.

Consider sustainable investments 

With the knowledge that almost 40% of global emissions come from the property sector (in terms of development), it comes as no surprise that a primary objective is to reduce energy consumption that affects our environment. 

As such, supplementary initiatives exist in order to promote sustainable business practices and pragmatically move society away from the need for fossil fuels. These initiatives are key drivers within international property markets which have been further highlighted due to the recent pandemic.

Other avenues that bear sustainability in mind include interior design and construction elements that utilise ethically sourced materials alongside operation and management methods for "green buildings."

With this in mind, it is no surprise that sustainability and focus on the triple bottom line in property development is playing an increasingly important role in an investors decision-making process.

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