Do not sell but rather rent out your home - this might be the right tactic now - APKF MD
are situations in which a homeowner thinking of selling should be advised
not to do so especially if he is not in urgent need of the cash,
says Lanice Steward, MD of Anne Porter Knight Frank.
With the stock market already recovering from its low point a few months back, some are thinking of selling to invest in shares.
While it is true that those who really understand the stock market (and the real potential for each share), tend to do well no matter what the up or downturns, for the average person, with his time taken up earning a living and without totally reliable securities exchange information, property is usually the safest investment option of them all.
Her experience, especially over the last year when Cape properties held their values better than any others, said Steward, has been that it pays to hold onto and rent out a property rather than sell and invest in shares.
The average Rondebosch home, valued at R2,5 to R3 million, now produces a yearly rental of R120 000 to R140 000. This means that the return on rentals is in the region of 4,5%. Add to this the likelihood that, once the recession is completely over (say, by 2012), 12 to 16% value increases will again be on the cards and you can see that property bought now for rental purposes is likely to be a sound investment.
Asked if 12 to 16% annual increases are not a little high, Steward said that over the last six years the Southern Suburbs had shown an annual growth of 22,6% (a figure quoted by John Loos, Property Economist of FNB).
In 2003 to 2004 the growth was in fact 40,3%. It is unlikely that this will be achieved again, but the bottom line is that, if you do not have to sell a home now (i.e. you do not need the cash urgently) it is wise to hang onto a home and rent it out in anticipation of capital appreciation once the market turns.
Article by: www.anneporter.co.za