There is a strong case to be made for "sensible use" of more gearing of property investments right now.
While Luntz Rodney of property consultancy, Abro Luntz, warns against structuring property deals based on second-guessing interest rates, he feels there is no doubt that higher gearing is being encouraged by the lower interest rate trends.
"However, no two opportunities are identical. Gearing packages have to be carefully and correctly structured to a given development or purchase.
"Softer interest rates are boosting the business climate generally," he points out, "and demand for commercial property is benefiting accordingly to ensure escalating growth in values and the associated benefits of capital gains.
"What's more, interest rates are likely to drop again later this year," he says.
The ingredients were therefore in place for a classic property gearing climate.
Lower interest rates meant enhanced returns and - from a selling perspective - the market could expect a tightening of yields which would translate into a higher selling price, similar to the mechanisms driving the bond market. - The Star
Publisher: The Star
Source: The Star
