Interest rate hike signals change to property investment strategies

Today’s 0,5% rise in interest rates has signalled a change to property investment strategies and a “wake-up call” to those who believe things can just keep getting better, says commercial investment property experts, Bales Delaporte.

“For more than a year, property prices have been rising steeply, capitalization has been falling steadily and optimists have been saying that things will just keep getting better.  However, human beings have short memories and sometimes need to be shaken into reality,” say Tony Bales of Bales Delaporte. 

The average long-term interest rate over the last 12 years has been approximately 14% with current interest rates at a 40 year low.  According to Bales, South Africa is still deemed an emerging, risky and far-away investment market and only due to the lack of investment choice has the commercial property market seen such rapid growth with the residential market continuing at heady levels. 

“However,” cautions Bales, “the good times don’t last forever.”

“Experienced property investors have been sitting back while huge prices have been paid for marginal properties.  These investors have seen similar cycles in the past and know how and when to jump back into the market.”

“This is the opportunity that many knowledgeable people have been waiting for,” says Bales.  “It has been purely a matter of when rather than if the interest rates move upwards. For a while now, the warning signs have been around that more defensive property investment strategies need to be adopted.”

“The market should remain fairly buoyant,” concludes Bales, “but hopefully with a realistic undertone where buyers and sellers realize that there are cycles to the property market ….the wheel has just tuned a few notches!”

Source: eProp - www.eprop.co.za

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