Commercial Property
Not to buy
In our view, a reason not to purchase a commercial property or any other property for that matter in the current economic climate would be the uncertainty of when the lockdown will be lifted and when we will be able to resume business. We will hopefully have clarity on this shortly and one could also argue that because the Deeds Office is currently closed and therefore property transfers cannot take place, there is no risk of having to take transfer of property before the lockdown period is over.
If buying an investment property, the fact that the economy will take some time to recover will have to be taken into account. It is thus important to focus on tenanted properties or tenants who have not been so severely affected by the lockdown such as essential services companies.
To buy
In our opinion a good reason to purchase commercial property now is that the prime interest rate is at a record low which makes it a good time to finance property.
Another reason would be that interest earned on fixed deposits is currently low making it even less viable to keep large amounts of cash in interest-bearing accounts.
Even though there is presently limited good quality commercial property stock available in the market, the tide is changing and there will most likely be more stock available to choose from in the near future.
There will also possibly be upward pressure on rates of returns investment properties will have to offer, which will enable purchasers to buy property at more favorable yields once lockdown has been lifted and we will then enter a buyers' market.
With the weak Rand, taking money abroad now will come at a substantial loss which leaves you with the fixed property as one of only a view safe alternative.