Investing in property – are you a home owner or a shareholder?

Owning a home is a common dream shared by most people! No landlord to pay rent to and you have the freedom to modify your home with a new bathroom or beautiful garden as and when you desire to make those changes. However, the home you live in is not an in

The risks of direct property investment are huge. When starting out you're likely to buy one property and as such this lack of diversification carries risk i.e. what if the tenant doesn't pay rent one month, or the area in which you bought takes a turn for the worse? The other issue associated with direct investing are the costs as buying and selling a property is very expensive and maintaining it is costly and time consuming.

With property investing in mind, one should consider investing in JSE listed property stocks as they greatly reduce the risk of directly investing into property. Nico-Louis Minnie, an investment specialist at Liberty, comments that; "Listed property gives investors the ability to invest in property developments, retail property, etc. An individual investor with R20, 000 for example, will be able to invest in shopping centres. This won’t otherwise be possible with such limited resources. Investing in listed property is also very liquid so you can withdraw your investment at any stage, should you need to do so".

Minnie further adds that; "Listed property outperformed all other asset classes over the last 5, 10 and 15 years, giving a return ahead of the overall JSE”. Going forward, one cannot be certain for this to repeat but one can still expect inflation - beating returns.

An important point is that one can invest in: property stocks specialising in commercial, industrial or office space, or even a blend of these sectors for properties based all over South Africa. Being JSE listed also means that you buy listed property through a stock broker and therefore pay low fees when buying and selling.

On the issue of diversification Minnie adds; "Although investing in the listed property market exposes you to the same type of risks such as volatile asset values, sentiment changes, uncertain dividends etc. the market is not perfectly correlated with equities. This means that we expect these two markets to behave differently, so a property investment adds diversification benefits". In other words, your listed property could be performing extremely well whilst your other investments could be taking a slight knock, helping to smooth out the market gyrations.