Is property still a good retirement investment?
The slowdown in the property market has prompted questions about the suitability of property as an investment vehicle for retirement, but it still offers excellent prospects.

That’s the opinion of Martin Schultheiss, CEO of Harcourts Africa, who says that against the returns of 20% to 30% a year that were being achieved before the slowdown, it is understandable that investors are questioning current projections.

“However, they should keep in mind that the performance of property in the 2003 to 2007 boom was exceptional. The market has not caved – it has merely stabilised and is still yielding an average 8% a year in average areas. Significant price decreases and negative growth are really only evident in areas that were in very high demand during the boom and where prices are now being corrected by the market.”

He adds that property has always come into its own as a long-term investment. “After the boom years, investors need to readjust their expectations to more realistic levels, but that is not to say that the market does not offer excellent prospects.

“In the first place, you have to argue that property as an investment is faring extremely well in the face of the current recession, especially when compared to the slump in the equity market. Rental returns have, in fact, increased with an attendant reduction in rental shortfalls as interest rates have come down.

“Secondly, South Africa has an emerging economy and the average household income is growing. In addition, homeownership is deeply embedded in our culture – homes of their own are among the top aspirations of most South Africans. We therefore confidently anticipate that about 20m people will buy homes in SA over the next 20 years. What is more, this confidence in our property market was a major reason for the giant international real estate group Harcourts to invest in SA.”

Harcourts Africa, he says, is actually very excited about future prospects. “We believe that all sectors of the market will yield good returns in the longer term. However, we advise investors looking for returns in the shorter term to concentrate on property in the lower and middle ranges, were there is currently greater demand.”

Schultheiss adds that property investors who want to see solid returns will do well to remember that what’s important about property is not when you buy or sell, but how long you keep it.

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