5 Reasons You Should Invest in Real Estate During a Recession
Updated: Dec 9, 2020
South Africa has been in a recession for nearly all of 2020 and November is no different.
This has led to many of my students, potential real estate investors and beginner investors to be concerned about investing today due to the poor economic environment.
This shouldn’t be the case. Here’s why: Despite the country being in its second recession in as many years, I have closed over 20 deals, acquired projects over R240 million rands and hosted the country’s largest virtual real estate investment summit.
I don’t say this to brag. I say it to show you that the current economic environment does not have a bearing on your success as a real estate investor.
It may sound unlikely, but South Africa’s stats back me up here.
In Q1, 17.6% of homes were sold to first-time buyers
Major banks are accepting more bond applications than ever before- a whopping 73%
The average home loan interest rate is currently 7%- the lowest it’s been in 50 years
Now is the perfect time to invest in real estate- during a recession. Here’s why:
Real estate is a reliable investment
When looking for properties to invest in, you may notice that property prices have remained relatively the same. This is because the real estate industry does not fluctuate as much as other types of investments like stocks or bonds.
Real estate also consistently appreciates in value, which means that when you land a good deal, you will rarely see a low ROI.
There is less competition
Many South Africans were unprepared for the current recession. They are scrambling to make ends meet. Purchasing a property is outside the realm of possibility for most of them.
This is good news for you because it means that there is less competition in the market. Less competition means that you will not only be able to find more high quality deals, but you’ll be able to get them at better prices than before the recession hit.
Interest rates are lower
Home loan interest rates almost always decrease during a recession. This year, South African banks have cut interest ra