Hold onto your investment
Mike Greeff, CEO of Greeff Properties, has joined his voice to those of others in urging struggling bondholders, particularly investors in new development buildings, to 'bite the bullet' and see out the current high interest rate period.

Within 18 months, he believes, apartment rentals will have risen significantly and it is quite possible that interest rates will have dropped.

Don't sell yet

"Take every possible step to avoid selling these apartments," says Greeff. "With capital appreciation still above 10 percent and rentals rising at eight percent it will pay to hold onto your property. If you panic and sell now you will inevitably get less than the true value."

"Investors in Cape Town's CBD, Century City and Tyger Valley apartments, may well find that in the next 18 months, they are only getting a four percent return on their property while the over-supply is taken up," says Greeff, "but, all the indicators still point to Cape Town CBD and suburban apartments being good investments".

Suck it up for a while

Relief measures that could ensure continued ownership, said Greeff, could include; arranging with the bank to pay only the interest on the loan for a specified period; scaling down to minimum payments temporarily on retirement annuities and the like, as these can often be kept intact albeit at a lower payout value; negotiating a higher rent or adding levies into the rental amount; and being disciplined and sticking to a tighter budget.

He also says that rents do tend to follow interest rates up, but only after a time lag of six months to a year. A shrewd landlord may be able to insist on a rise within six months and often this will be covered by a clause in the rental agreement.

Avoid buying now

"Those buying now, could take the precaution of fixing interest rates for three to five years. This may result on their paying premium rates for their bonds at some stage but it will eliminate uncertainty, anxiety and remain a fixed monthly 'known cost'," says Greeff.

In his view, Greeff repeated, the higher interest rates will have had the desired inflation dampening effect within 18 months and property values will by then again have risen 15 percent, so it must pay to hold on.

Article by: www.iafrica.com