There is no asset class in the world that provides absolute capital growth and income. There is one asset class that have proven itself over many centuries, in fact since humankind moved from daily survival to building personal wealth. And that in its simplest form is “shelter!”
The Evolution of Property as an Investable Asset
Early man evolved over millenniums and by the middle ages were living in fortified castles and when we get to MARS, we will also need shelter to survive. After food we all need shelter. As man evolved so it was realised that one can earn income from shelter by renting out to those who required a roof over their head.
Shelter – Property – Real Estate as it is referred to has become a sophisticated asset class that offers the investor many alternatives. Wealth in property is derived in three ways:
1 Capital growth | Purchase to sell at a profit
2 Rentals | Invest in yields
3 Capital growth and/or rentals
The hidden gem of property is in the entrenched demand in that the world’s population needs shelter. And as the planet’s population expands so does this drive the demand for property. Demand drives property prices underpinned by the increasing cost of building new property. Rental demand is driven by the fact that more and more people cannot afford to get onto the property ladder and the escalating trend of globalisation which drives job mobility. As little as twenty years ago it was the rare exception that persons and families would move continents, now an accepted fact of modern living. Gone are the days where one grew up and died in the same neighbourhood!
Wealth Management by Property
Investors who wish to progress to towards financial security need to build wealth. The popular choices are paper assets; like shares, unit trusts and bonds; commodities like gold coins and diamonds and property like residential, commercial and student accommodation.
Every asset class has its pros and cons, yet it is acknowledged that bricks and cement | shelter-property-real estate | is a robust investment able to deliver in good times and bad times. In good times there is profit from capital growth; at all times there is rentals. Even when economic times are tough the Landlord can still negotiate a return. With paper assets the investor has minimal if any control and of course has to be able to handle volatility!
We believe that in this uncertain and disruptive world we live in, FUTURE-proofing tomorrow is paramount as irrespective of the challenges of today, tomorrow will arrive, and “sitting on one’s hands” for better times? … does not take away the need to plan for the future if one wants to enjoy personal and financial freedom.
Each country on the planet has varying degrees of investment risk. Broadly speaking, emerging vs. developing vs. developed countries. Global credit rating agencies like Moodys and Standard & Poor’s rate the investment grade of a country. “How safe is the investment versus the potential return?”
Once a country is rated sub-investment grade it is referred to as junk status as the risk versus the reward is out of balance.
In an emerging country like South Africa, the risk is further exacerbated by the soft currency the RAND. One unhappy symptom of globalisation is that efficient economies put out of business industries that are uncompetitive. Result, the country loses its ability to produce goods and services locally requiring the importation of goods and services.
Simply, every year the same “pair of shoes” costs more and more, as most of the shoes available are imported and are priced in US Dollars – THAT price converted to RANDS.
Passive Income by Property Rentals
The outstanding characteristic of property is the ability to generate rentals in good times and in bad times. Referred to as passive income, this income is deposited into your bank account and is accessible to the Landlord anywhere and in any currency.
Hard Currency Passive Income
But when you earn soft currency passive income the reduction in purchasing power is unavoidable. One becomes poorer and poorer as the RANDS earned by passive income purchases less. Thank goodness globalisation has made investing in hard currency property passive income possible and profitable
Get FUTURE ready if you want to FUTURE-proof tomorrow! Invest in HARD currency property passive income says Costas Souris of Quality Group SA