For most people, purchasing a home represents the largest investment they will ever undertake, and carries emotional significance as a symbol of stability, security, and achievement. Property can offer much more than just a place to live – and 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 with a second property, 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,” says Pravesh Sunker, Head of Sales and Advisor for FNB Private Banking.
The tangible nature of 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 cash flow, permit offshore exposure, or support further diversification,” says Sunker.
Given the current high interest rate environment, we see 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. “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. (Incidentally, the converse arrangement is also possible – you are able to borrow against cash investments instead of withdrawing them, allowing you to free up cash flow,” says Angela Glover, Head of Product, FNB Home and Structure Lending.
“The housing market currently presents an opportune time for prospective buyers. 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,” she adds.
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, lingering concerns surrounding affordability, political uncertainty, and global dynamics underscore the need for cautious optimism regarding 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. “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”, adds Sunker.
“There are also several financial products available to help make your property investment suit your investment needs. For example, we offer a comprehensive solution that allows you to consolidate multiple properties under a single facility, linked to a transactional account, providing a cost-effective tool for managing your entire property portfolio”, said Glover.
“Unsurprisingly then, given all of these consequential choices, our most important advice to anyone looking to begin or expand their property portfolio would be to get more advice. Buying a property, and making the most of your investment, is a complicated, long-term consideration that benefits critically from experienced counsel.
“Our private advisors are well-equipped to guide you through this intricate process, ensuring that you make informed decisions that yield long-term benefits. By leveraging our expertise and utilising tools like the FNB app’s nav>>Home feature, which enables you to find nearby properties and obtain value estimates, you can embark on your property investment journey with confidence and strategic foresight”, concluded Sunker.
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