Good time to invest in property – FNB

FNB said property can be a good investment that avoids volatility and provides security and stability over the long term. It also said that the housing market currently presents an opportune time for prospective buyers.

FNB Private Banking’s head of sales and advisor, Pravesh Sunker, said that purchasing a home represents the largest investment most people will ever make.

Buying a house also carries emotional significance as a symbol of stability, security, and achievement. 

However, he said property can offer much more than just a place to live – it can also be a powerful investment vehicle capable of generating wealth, providing liquidity, enhancing cash flow, and diversifying one’s portfolio.

“Whether you’re a young professional purchasing your first home, an established investor looking to expand your portfolio, or a high-net-worth individual considering property as part of a diversified portfolio, there are many important considerations when buying a home and many good reasons to consider doing so,” he said.

The tangible nature of the property, coupled with its longstanding market acceptance, renders it less vulnerable to volatility compared to other investment options, offering security and stability over the long term. 

“When properly structured, property can become an increasingly sophisticated part of an investment portfolio. It can assist with cashflow, permit offshore exposure, or support further diversification,” Sunker said. 

However, given South Africa’s current high interest rate environment, FNB sees many clients with expensive unsecured debt and cash flow strain. 

“They could leverage property to convert some of that very expensive unsecured debt to secured debt and free up some cash flow,” Sunker said. 

“If a client wants to diversify from South Africa and have some offshore exposure, they could borrow against property, externalise funds and invest in equities.” 

FNB Home and Structure Lending’s head of product, Angela Glover, said the converse arrangement is also possible – you can borrow against cash investments instead of withdrawing them, allowing you to free up cash flow.

“The housing market currently presents an opportune time for prospective buyers,” she said. 

“With the possibility of a gradual decline in inflation and borrowing costs from the latter half of 2024, combined with anticipated employment gains, a moderate uptrend in house prices could materialise, stimulating demand in interest-rate-sensitive segments over the medium term.”

Encouragingly, recent surveyed data indicates an upward trend in buying activity over the past few months, leading to a reduction in the time required to sell a property. 

However, some lingering concerns about affordability, political uncertainty, and global dynamics underscore the need for cautious optimism about the sustainability of these improvements.

“Buying a home is a complex, long-term consideration that necessitates experienced guidance, as the decision encompasses far more than just the purchase price and interest rate,” Sunker said. 

“It is important to consider whether a secured or unsecured loan suits your investment objectives and cash flow requirements.” 

“You will need to consider the size of your deposit, your preferred loan terms, and further costs such as home insurance and possibly increased life cover to allow your dependants to continue to pay off a home loan.”