All data is delayed
See More

Political risks and property

Jul 04 2011 09:31
A Fin24 reader writes:

I am considering buying a home. I can afford it, but I’m not sure whether it is really a good investment given the unstable political environment in our SA.

Erwin Rode, property economist and valuer at Rode & Associates, replies:

History has shown us that bad political choices have the potential to affect all asset classes - eventually.

However, before we get too despondent, may I remind the reader that some of us, or some of our parents, were concerned about the unstable political environment in 1948, 1961, 1976, 1986, 1994, and now in 2011.
Shares, the most volatile of asset classes, would dive more immediately than immovable property. But, make no mistake, in the end, property’s value is held up by continued demand, which in turn is partially determined by affordability.

Even “risk-free” government bonds would be affected by a political fallout, because political instability invariably brings in its wake unpleasant inflation, with interest rates that shoot through the roof, thereby depressing the market values of bonds.
Shares, bonds or property are the classic inflation hedges, provided inflation remains moderate; but once it goes into the stratosphere, thereby destroying the economy, even these asset classes will be of little help.
The alternative is to buy cut diamonds, tell no one and sew them into your pants (near the zip somewhere) or bra. In short, if you are contemplating Armageddon, don’t think of property. Think of something transportable.




Read Fin24’s Comments Policy publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

We're talking about:


Marketing is a big concern in SA's small business community, followed by a lack of confidence and partnering with the wrong people, according to a survey.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

The 25 basis points interest rate increase is:

Previous results · Suggest a vote