For many, purchasing a home represents the largest and most emotionally significant investment they will ever make, symbolizing stability, security, and achievement. Beyond serving as a place to live, property 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,” 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,” Sunker explains.
In the current high interest rate environment, many clients face expensive unsecured debt and cash flow strain. Property can be leveraged to convert some of that unsecured debt to secured debt, freeing up cash flow. “If a client wants to diversify from South Africa and gain offshore exposure, they could borrow against property, externalise funds, and invest in equities,” says Angela Glover, Head of Product, FNB Home and Structured Lending. “Conversely, clients can borrow against cash investments instead of withdrawing them, allowing for increased cash flow.”
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 materialize, stimulating demand in interest-rate-sensitive segments over the medium term, Glover adds.
Encouragingly, recent data indicates an upward trend in buying activity, leading to a reduction in the time required to sell a property. However, lingering concerns about 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 decision that necessitates experienced guidance, as it involves 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,” Sunker advises. “You will need to consider the size of your deposit, your preferred loan terms, and additional costs such as home insurance and potentially increased life cover to ensure your dependants can continue to pay off the home loan.”
Several financial products are available to tailor property investments to suit individual needs. For example, FNB offers a comprehensive solution that allows the consolidation of multiple properties under a single facility, linked to a transactional account, providing a cost-effective tool for managing an entire property portfolio, Glover notes.
Given the multitude of consequential choices, the most important advice for anyone looking to begin or expand their property portfolio is to seek experienced guidance. “Our private advisors are well-equipped to guide you through this intricate process, ensuring that you make informed decisions that yield long-term benefits,” Sunker concludes. “By leveraging our expertise and utilizing tools like the FNB app’s nav>>Home feature, which helps you find nearby properties and obtain value estimates, you can embark on your property investment journey with confidence and strategic foresight.”