How to buy property in a South African recession
They say a recession presents opportunity. So where are all the deals?
First let’s understand the fabric of the South African commercial property industry:
A REIT (Real Estate Investment Trust) is a vehicle in which you can own shares in property on the stock market. SA REITs as a collective have performed better than cash, equities and bonds over the past 10 years. They’re a big, strong body, with very deep pockets: R360 Billion, to be exact.
Most of our REITs have some sort of international exposure, on average about 30%. This means the more value the ZAR loses, the better these portfolios perform. They’re well hedged.
Furthermore, remember commercial leases are long term: 3, 5 and 10 years. Landlords lock tenants in with escalations exceeding CPI, contributing to these sterling financials.
Why does this matter?
In Joburg particularly, REITs own the lion’s share of the commercial market. And although this recession is not insignificant, their pockets have more than enough resources to weather the storm.
They’re focused on filling vacancies, with general trading on hold.
They’re. Not. Panicking. (read more on how to thrive during a recession here)
So what does this mean for you?
If the mountain won’t come to Muhammad, Muhammad must go to the mountain.
As South Africans, we know how important our image is. And in this market, disposing of assets in the open market is a bit like airing your dirty knickers. Perceptions matter, lest you seem desperate.
So, if you want to buy property, you must be like Muhammad; Muhammad with a map. Go find your deals. If you look in the right places, there are deals to be done.
For assistance with that map and identifying the right mountains, contact Kat.
