Where to invest in a volatile economy

Multiple interest rate increases, a drastically weakening rand, escalating food prices exacerbated by drought, and a climbing inflation rate all indicate tough times ahead for the consumer.

Given this, just where would you invest your hard-earned funds for the next few years? Sadly, the opportunity to get your funds offshore has passed now that the rand has fallen out of bed.

Would you risk the stock market? Cash in the bank won’t keep place with inflation. So what options remain?

According to Harcourts Platinum principal, Steve Caradoc-Davies, for the shrewd investor, property provides one of the best returns. Irrespective of the economy, there will always be increasing demand for property because of the increasing population.Those who can’t afford to own property will rent instead. High rental demand means that property rental values will continue to escalate, thus yielding even better returns, he suggests.

Add the rental return to your capital growth, and the combined growth represents your return on investment. What makes this return even more impressive is the ability to fund part of the investment with the banks’ money, while enjoying the capital growth on the entire property, says Mr Caradoc-Davies.

A shrewd investor will ensure they purchase in good locations where demand is growing – thus ensuring not only a good rental return, but also strong capital growth.

Every investment has risk, but Mr Caradoc-Davies says property has shown over time that it is less volatile than most other forms of investment and less susceptible to the emotional fluctuations of the market.

With all the uncertainty surrounding the economy it makes sense to turn to property as an investment to keep pace with inflation, he says.

“We see this segment of the economy delivering strong returns as investors recognise the benefits and move their funds to real estate. That being the case, now is a great time to invest in good real estate before the prices climb even further. This is especially true in the Western Cape, where demand often outstrips supply – a trend that is expected to continue for the foreseeable future.”