New buy-to-let offering

Absa introduces new buy-to-let offering

The buy-to-let market, from an investor’s point of view, has grown substantially during the period of declining and low interest rates experienced from 2003 to 2006 as the favourable economic and interest rate environment made it easier to acquire investment property.

However, strong growth in the South African economy coupled with low interest rates also made it easier for prospective buyers to own their own property. This obviously placed the buy-to-let-market under pressure against the backdrop of a surge in supply of rental properties coming onto the market. As a result, rental yields began to decline to levels as low as 0,5% in the recent past. Current market activity does, however, indicate that the rental market is beginning to show signs of resurgence as interest rates rise and the full impact of the NCA comes into play. These developments have had an impact on a buyer’s ability to qualify for a mortgage loan to purchase property.

It is expected that the rental market will improve further as current market conditions continue for the foreseeable future. This coupled with the possible negative impact that the electricity crisis may have on economic growth, employment, inflation, household income and consumption may force many households to look at entering the rental market.

These developments may benefit the investor market from a buy-to-let point of view. Benefits are also available to those who are able to access cash or who do not require high gearing on their investments as investment properties may be acquired at reasonable prices.

The property market is expected to bottom out towards the end of 2008 or in early 2009, with single-digit price growth projected over the next twelve months. As such, this year may be the best year to purchase a house, as well as investment property. It is noted that property in 2012 is expected to be about 60% more expensive than today, taking into annual growth of 10% over this period.

Absa has recognised the unique needs of the buy-to-let investor and has recently launched an offering aimed at addressing these. With the Absa Buy- to-Let product, both novice and experienced investors are placed in the enviable position to create wealth through property ownership.

The product, which is available to investors who purchase property up to the value of R1.5 million, acknowledges the existence of future rental income and uses this in affordability calculations. Value-adds are also offered on a number of items including discounts on Conveyancing Fees and access to services offered through independent Property Management companies.