Banks Welcoming Property Investment
Banks are finally viewing property investors in the correct light, respecting their foresight and offering support.
Owning your own property allows you to build up your equity over time. It is like an obligatory manner of saving. Property also comes with other advantages.
If it is your own home, you will have full creative freedom to renovate and decorate as you wish and the money spent doing so will only add to the value of your investment. You will also feel a sense of permanence and involvement in your community as a homeowner. You won’t have to worry about any threat of eviction and your property could be used as security if you were looking to obtain additional finance.
Property is also an asset class that allows savvy investors to build up portfolios that bring in extra income through rental, and provide a nest egg for retirement and a hedge against inflation.
The good news, says Pieter Piek of Just Property Invest, is that banks are welcoming investment in property. “Even if the property being purchased is a second or third property, they are making it easier to finance this investment.”
Piek points to Absa as an example. The bank has recently introduced Future Rental Income, a first-of-its-kind solution for South African property investors. “This solution allows a loan applicant, who already owns two properties, to include part of the expected future rental income of the property they wish to purchase, to their affordability assessment,” the bank stated in a recent press release. “Let’s imagine your current income is R20 000 and as well as your home, you also have one existing investment property earning R6,000 rental income. You apply for a loan to buy a two-bedroom, sectional title apartment and based on similar properties in the area you determine that the expected rental income for this property is R8 000 a month.
Absa will then take a portion of this expected future rental income, even if the property isn’t yet tenanted and add it to your total income. So with Absa’s buy-to-let Future Rental Income solution, you will qualify for a higher loan amount than before. It’s this kind of foresight and belief in the potential of investors that is changing the property investment game in South Africa.” (See the full press release here httpss://blog.absa.co.za/category/money-matters/residential-property-investment/)
“This is the kind of sensible, forward-thinking impetus we need from our financial institutions,” says Piek. “Property is a long-term investment – investors in this asset class are carefully building toward a secure future. They are exactly the kind of clients banks should want to hold on to and support. It is extremely gratifying to see moves like this one from Absa.”