South African Property News

Power Shortage Not to Affect New Developments

An article by Luyanda Makapela in BuaNews reports that concern over electricity supply shortages and the proposed moratorium on new property developments is somewhat unfounded, according to Housing Minister Lindiwe Sisulu. The Minister has reassured South Africans that any new residential property developments requiring less than 100KW and low-income housing projects will not be affected.

This follows concerns raised by the Banking Association of South Africa (BASA) that suggested perceptions created by Eskom’s announcement of a moratorium last month could have a negative effect on all future housing developments. Ms Sisulu is quoted as saying, “The power supply challenges cannot be allowed to affect housing delivery to South Africa’s poor and government’s commitment to improve the living conditions of its citizens”.

The Minister of Housing met with Minister of Minerals and Energy, Buyelwa Sonjica and Minister of Public Enterprises, Alec Erwin in a bid to put to rest the concerns raised by BASA. Department spokesperson, Marianne Merten reports that, “Minister Sisulu wants to again confirm that government is committed to ensure new property developments requiring supplies of less than 100KW or 100KVA and affordable housing projects receive the necessary electricity supplies”.

Ms Merten insisted that, “[A]ny lingering doubts on this matter must now be laid to rest, particularly as Eskom already said it will not stop any developments”. She also assured that all those developments that have already applied and received quotations would receive energy.

In line with efforts by government to deal with the power crisis, the Department of Housing has joined a government task team to ensure that energy efficient building regulations are enacted. The criteria will be incorporated into the standard regulations of the National Home Builders’ Registration Council (NHBRC). “The housing department will play its role to ensure that individual households are part of the national energy saving drive,” according to Ms Merten.

The Minister of Minerals and Energy, Buyelwa Sonjica addressed a number of delegates at the 10th annual African Power and Electricity Congress at the Sandton Convention Centre recently and advised that government had instituted a Power Conservation Programme (PCP), which is intended to manage the rationing of power. “To address the current situation, a number of policies and strategies have been developed and approved to ensure that we approach the value chain of electricity supply in an integrated and sustainable manner,” the Minister said.

It was also reported that the Nuclear New Build Programme and the Renewable Energy and Liquid Fuels and Strategies have been developed and approved. In order to speed up the implementation of power conservation programmes, the Minister said that her department was in the process of developing necessary regulations under existing legislation to facilitate the department’s legislative mandate. “As a region and continent we will continue to call upon all our fellow governments and private sector to collaborate in managing the prosperity of the African continent,” according to Ms Sonjica.

The information in this article is courtesy of Luyanda Makapela (“South Africa: Power Shortage Will Not Affect New Property Developments”, BuaNews, 24 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Pam Golding Top of the Pack?

An article by I-Net Bridge suggests that while most agencies are struggling in the current property market, Pam Golding reports a total growth in turnover of 13.5% over the previous year, which is way ahead of the market. The record sales achieved amount to R21bn in the financial year ended in February.

Chief executive Dr Andrew Golding says that performance has been achieved despite the introduction of the National Credit Act in June 2007, the ever-rising interest rates, political uncertainty and the effects of the energy crisis currently gripping the country. Successful transactions were concluded for a total of 26,000 clients and while “this represents a 9% decrease in units over the previous period, it does however indicate sound growth in market share as the rest of the industry reported decreases ranging from 20-30%” (Golding).

Golding says that the Group expanded its network of offices to 310, with 25 new offices being launched throughout southern Africa. The residential sales came in at an impressive R18bn, reflecting a growth of 9% over the previous year. The company’s average house price is up to R1.4m from R1.1m last year. The bulk of homes sold were in the R1-6m margin, with an increasing number of transactions over the R20m mark and some exceeding R35-40m.

The number of sales to overseas buyers represents just 3% of the total residential units sold by Pam Golding Properties, of which buyers came from 26 countries around the globe. The bulk of sales were to British nationals, followed by those from America, Germany, Holland, Belgium and France. According to Golding, “It is interesting to see the increasing demand among American buyers, and following our successful international property exhibitions held in Russia, China and India last year (2007), we are also experiencing growing interest from those countries”.

Golding acknowledges that the market is clearly in for a challenging year ahead and has no doubt that even in the medium and long term, property as an asset class will continue to be a sound investment option offering excellent returns.

The information in this article is courtesy of I-Net Bridge ("Pam Golding Reports R21bn in Sales", The Times, 23 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Property Barometer At All Time Low

An article on the Dispatch website indicates that the First National Bank (FNB) residential property barometer has recorded an all time low for any quarter measured since its launch in 2003.

The barometer measures commercial activity in South Africa’s major urban centres on a scale of 1 to 10 and has dropped from 5.09 in the previous quarter to 4.96 in the first quarter of 2008.

FNB has reported that up to 83% of people selling their homes have been forced to accept much lower offers than their asking prices, making the South African property market decidedly in favour of buyers. The average time that a house stays on the market has risen from 11 weeks and 2 days in the previous quarter to 12 weeks and 4 days in the most recent quarter.

Economists at FNB have said the deterioration in the market is due to a “sustained regime of interest rate hikes and rising inflation eating into disposable incomes”. They also argue that a general erosion of sentiment has been caused by a slowing economy, most notably since the political change that occurred in Polokwane in December and the current energy crisis being experienced in the country.

The slow activity in the coastal market is evidence of a changing appetite for luxury holiday homes, which FNB property strategist John Loos believes is “the result of rising interest rates impacting to a greater degree on non-essential holiday buying than on primary residential demand,” with Gauteng “more dominated by the latter form of demand making it slightly less cyclical than the coast”.

According to FNB, the rise in consumer price inflation has had more of an impact on the lower-end residential property sector, which has been attributed to essential items such as food and petrol that carry a larger weight in lower income groups.

FNB has said that while the higher end of South Africa’s residential property market looks healthier in the first quarter than the lower end, the barometer has picked up a substantial increase in the number of properties sold in order to emigrate than compared to the previous quarter.

However, in light of the future, FNB believes “that unease over political uncertainty will subside. Furthermore, we are seeing certain market fundamentals improving, notably a strengthening rental market which would at some stage improve buy-to-let attractiveness, as well as sharply slowing residential building activity which will help to bring supply more in line with demand”.

The determining factor in terms of the overall market recovery is deemed to be how interest rates pan out. “We believe that the market will be looking for very strong evidence that rates are set to decline before demand and activity levels gradually start to recover”. This is only expected late in 2008.

The information in this article is courtesy of Dispatch Online (“Property barometer drops to its lowest level”, 22 April 2008).

If you are interested in buying or selling property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Rode's Take on the Current Property Market

An interview with property economist Erwin Rode of Rode & Associates indicates that the house party most South Africans have been enjoying over recent years is officially over for now.

There has been much debate among property experts lately, with one side arguing that the current scenario is merely a “bump” in the road that will soon “head skywards”, while the other side predicts a “continuing downward spiral for the foreseeable future”. Rode suggests that before coming to any rash predictions about the future, it is first necessary to clarify how we got here in the first place.

The residential property boom experienced in the early years after the millennium is a once-in-twenty-years experience. “We must remember that it came off a very low base to begin with, and coincided with the longest business-cycle upswing (which started in 1999) that the country has ever experienced,” according to Rode. The combination of steady economic growth and low interest rates managed to spur on the market into “a state of euphoria”. Rode says that these expectations of growth are often “self-fulfilling” and that all these factors resulted in a “sustained – but unsustainable – growth” that far outweighed income growth and replacement costs. This inevitably led to houses becoming that much less affordable.

Rode believes that what is happening now amounts to a “natural period of consolidation” and that the struggling world economy, rising interest rates and the continuing electricity crisis in the country have merely sped up the cycle. Obviously, Standard Bank’s recent findings that house prices have declined for the first time in 8 years and the recent interest rate hike of 50 basis points by the Reserve Bank have done little to ease the panic in the marketplace.

Rode says that, “We should bear in mind that the effect of a change in interest rates is only felt three quarters (nine months) down the road, and high nominal interest rates are going to be with us for a long time to come. Thus the 2010 enthusiasts in South Africa might like to rethink their predictions of a property boom induced by the soccer World Cup.” He adds that, “A one month tourist orgy was never going to create a boom.”

The information in this article is courtesy of Rode & Associates (“The house party is officially over for now”, www.rode.co.za, 16 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Interest Rates Bring Down House Sales

An article in Business Day reports an immediate negative impact on property values across the board after the latest interest rate hike. The Alliance Group auction house expects this to result in a further increase in liquidations in the short term.

CEO Rael Levitt says that the Alliance Group has noticed, “even more valuation decreases in the residential property market and certain sectors of the commercial market”. The Group has also noticed a “decline in values on our auction floors, but it is still too early to provide an exact percentage”.

In fact, between February and March this year, a 56% increase in company liquidations and personal insolvencies was reported and Levitt expects this trend to continue in the short term. He says that South Africans have become used to an “upward trajectory only” in residential property values over the last five years, “Now we are having a dose of reality setting in. All the other issues aside, interest rates have a direct effect on value. When interest rates go up, valuations of property go down”.

Levitt believes that the current problems run a lot deeper than prevailing sentiment. Vacant land prices have dropped by up to 30% in the past six months, with certain residential property nodes showing a decrease of 5-10% over the same time (Levitt). “I don’t expect a residential crash, but I do expect a real correction in prices. How far that correction will go is anybody’s guess.”

However, FNB property strategist John Loos does not expect a dramatic crash in house prices. Given the latest interest rate hike and widespread concern about further increases, the residential property market may be heading for “a short period of mild price deflation,” which would obviously be experienced as more pronounced in reality.

Gavin Opperman, managing executive of ABSA Home Loans, says that the rising interest rates are affecting affordability and making it more challenging for the consumer. “This, coupled with other consumer expenses such as fuel, municipal rates and so forth, will result in a natural slowdown of property growth. We have to realize that we are coming off an all time high in terms of residential property growth,” says Opperman.

Opperman expects a price growth of about 7% this year when it comes to residential property. “South Africans still attach sentiment to property and believe it to be a good investment in their diversified portfolio. Historically, property has always been a medium to long term investment.” He also believes that the hike in interest rates and the slowing growth in property prices will hamper speculative buying.

The information in this article is courtesy of Nick Wilson (“South Africa: Interest Rates Knock House Sales – Alliance”, Business Day, 16 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Green Building Accelerated in SA

An article published on the Engineering News website has indicated an increased awareness amongst South Africans to save energy and a consequent acceleration in green-building techniques amidst the national energy crisis.

Awareness of the need to save energy and protect our natural resources has grown significantly over the past ten years, particularly in light of scientific evidence presenting the effects of climate change on our environment. The world has been spurred into a frenzy of activity to pinpoint viable solutions to preserve our future, without entirely undermining the various lifestyle benefits that we have become accustomed to as a result of economic progress and development.

The economies are booming in many developing countries, which means that infrastructural development is also burgeoning. This has placed unbelievable strain on energy supply systems and the supply-side responses are also increasing the damaging carbon emissions into the atmosphere. This has brought the issue of green building technology to the fore, particularly due to the fact that the various methodologies are perceived as a critical element in improving the overall sustainability of residential, commercial and government property.

Given the current electricity supply shortages in South Africa, this energy-saving mindset has taken on significance as an economic imperative. Government and Eskom have called for residential and commercial consumers to take an active part, along with the industry and mining sectors, “in saving 3000 MW every day for the foreseeable future” (Engineering News).

Last year, it was reported that South Africa, by developed economy standards, was still lagging behind in its implementation of green building technology, despite the fact that government and consumers were increasingly aware of the need to preserve the environment. The creation of the Green Building Council of South Africa (GBCSA) in September is certainly a positive development, as it aims to promote green building in the commercial property sector. The Council will provide a forum for all members of the property industry, including scientists, property owners, developers, consultants and government to work together in implementing sustainable green building practices.

While South Africa is still considered lagging, it is acknowledged that some positive headway has been made. Another crucial development is the move to establish a green-building rating tool in South Africa. This tool will act as a guide for the establishment of green buildings and play a vital role in ensuring that energy and resources are utilized efficiently and wisely, so reducing the emission of carbon dioxide into the atmosphere.

The first pilot rating tool is expected to be released in July this year and once the various processes and industry feedback are complete, the GBCSA will move towards full implementation. The development process has been similar to that taken in Australia, as the two hemisphere nations share such a similar climate. However, the tool will be adapted to the unique conditions, applicable standards and legislation, as well as the available resources in South Africa.

“This is a voluntary tool and a market-led initiative rather than a regulatory intervention. It is designed to galvanise built-environment professionals and practitioners around the issue of sustainability. It incorporates high standards, which will apply to the top end of the property market and new commercial and public developments,” according to Bruce Kerswill, chairperson of the GBCSA.

The main concern seems to be whether the South African market is open to change and willing to embrace the inevitable transformation that comes along with green building technology. So far, the response has been positive, but momentum is likely to pick up once organizations try to compete and thereby set the pace for the evolution of green building in South Africa (Michelle Malanca, GBCSA rating tool project manager).

When asked whether the rating tool will become legislation, Kerswill emphasizes that it is a “voluntary tool” and that the government may decide to legislate certain aspects in time, primarily with regard to saving energy and water. Malanca says that, “Our aim is addressing best practice, as opposed to minimum practice” though. The Australian market has experienced a complete transformation, not only in terms of energy saving and green building, the various building and material suppliers and manufacturers have also transformed. It is hoped that the same situation will be repeated in South Africa.

The green building rating tool is believed to be an excellent way of dealing with the energy crisis in South Africa. Statistics show that green buildings have been known to reduce the consumption of energy by up to 50%, which is far beyond the 10% sought by Eskom. Even retrofitting is known to increase energy efficiency by up to 70%, decrease piped water use by 80% and lower discharge to sewers by 70%.

Malanca reports that on a global scale, buildings are deemed responsible for 40 to 50% of electricity consumption. “Studies released indicate that green building is the one mitigation solution that not only reduces carbon emissions, but, at the same time, is also the least expensive and most cost-effective solution of all,” she maintains.

Eskom spokesperson, Andrew Etzinger agrees with Malanca, saying that green building has a pivotal role to play in South Africa’s current energy crisis, adding that less electricity consumption will in turn result in lower emissions of damaging greenhouse gases. It seems that the implementation of green building methodologies presents a win win situation for residential and commercial consumers in South Africa.

A number of big names in the South African commercial sector, most notably Clicks, BP and Woolworths have all made some effort towards establishing green practices in their various buildings. However, only the rating tool will be able to show whether the steps being taken are green enough. Considering the current power crisis and possible water crisis in the country, green building promises not only to save energy, it will also put South Africa on the global map of protecting its valuable resources and becoming an environment friendly nation, premised on the notion of economic growth and development.

The information in this article is courtesy of Brindaveni Naidoo (“Green Building: SA accelerates green-building techniques amidst national electricity crisis”, Engineering News, 11 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Lower Income Groups Hit Hard

An article published on the Iafrica Business website has suggested that the latest interest rate hike will have a negative effect on the residential property market, particularly in light of the predicted recovery this year. The latest hikes are expected to delay the recovery considerably. The South African Reserve Bank hiked interest rates by a further 50 basis points in January, bringing the increase since June 2006 to 450 basis points.

“Whereas we had expected rates to move sideways for the entire 2008, a scenario which I believe would have led to a gradual recovery in residential demand as from mid-year, such a recovery has in all probability been delayed considerably, and it will take substantially longer for household confidence to start recovering,” according to John Loos, a property strategist for FNB.

House prices have already felt the pinch of higher interest rates, with Standard Bank’s property gauge reporting a drop in residential property prices for the first time in eight years during March. This pushed the y/y inflation to a negative 5.2% y/y.

Loos added that the news would increase the likelihood of a small period of national house price deflation, which might have been avoided had the rates been kept on hold. When splitting up the market by price category, Loos says that the combination of rate hiking and high food price inflation will bring the superior performance of the lower-priced end to a close.

“Lower income groups face the ‘double-whammy’ of rising interest rates, as well as high food price inflation. Food price inflation affects lower income households worse because it consumes a higher portion of their total income,” he said. Loos also suggested that those strongly holiday property-driven areas are probably also in for a torrid time, until such time as the interest rate cycle has made a clear turn.

A sector that will benefit from the rate hike is the rental market. “FNB’s rental property barometer has already been pointing towards a recovering rental market, and I believe that in the current environment of uncertainty and negativity, the resumption of rate hiking will be an additional boost for rental demand,” reports Loos.

The information in this article is courtesy of Tiisetso Motsoeneng (“Rate hike to hit property market”, I-Net Bridge, 10 April 2008).

If you would like to buy or sell property for sale in South Africa, please visit www.sahometraders.co.za.

South African Property News

Debt Burden on Consumers Increases

An article in the Mail & Guardian Online has indicated that consumers and small businesses are beginning to collapse under the increased debt burden created by higher interest rates, petrol prices and food prices.

The latest figures from Statistics SA paint a rather dismal picture, with personal insolvencies increasing by 58% last month compared to the same time a year ago and the civil debt judgments against companies skyrocketing to 41.2%. Even liquidations for the first two months of 2008 increased by 6%, which is the first time since February 2002 that this has happened. This comes as no surprise though, considering that the ratio of levels of household debt to disposable income rose to 77.6% at the end of last year, compared to just 72.8% at the end of 2006.

Not only is this the highest level of debt ever recorded in South Africa, the higher interest rates mean that the cost of servicing this debt has also risen. At the beginning of 2006, the cost of servicing debt was about 7.2% of disposable income, but this has since increased to 11.5%. Take into account petrol price hikes of 20% since the beginning of the year and the increase in food prices and the once pretty picture gets bleaker by the minute.

Standard Bank has reported an average repossession of two houses per month in 2007, with that number increasing to five houses per month since the end of 2007 and into 2008. 40% of repurchases for 2007 occurred in the last quarter, which is a trend that has continued this year.

Marcel de Klerk, a member of ABSA’s vehicle and asset finance division, says that it has seen an increase in repossessions in the first three months of 2008. Last year, an average of 100 vehicles a month were repossessed, compared to an unbelievable average of 1300 vehicles a month in 2008 so far. A 15% increase in car repossessions is expected for 2008.

The Reserve Bank reports that banks have made bad debt provisions of R10bn or 0.57% of their total assets. These are loans that have defaulted and the property (a house or car) is going to auction. A year ago, this figure was more like R7.8bn or 0.51% of total assets. As a percentage of assets, the increase that has occurred between December 2006 and the same time in 2007 represents a 10% increase in bad debts.

The main culprit when it comes to bad debt seems to be credit cards, which show the biggest potential for default. Although actual bad debts have only increased slightly over the past year, the number of repayments that have fallen in arrears (three months or more) has risen 54% when compared to a year ago.

Company insolvencies have also sharply increased and according to Jo Schwenke of Business Partners, which supports and finances small business development in South Africa, it is the restaurant industry that has been the worst hit. Schwenke reports that any business geared towards consumer-discretionary spending, including food stores like Pick n Pay and Spar, have seen a fall in turnover. The rapid increase in food prices has resulted in higher financial gain, but there is a clear indication that consumer spending has dropped.

“We are checking whether the business is sound and that the lower turnover is owing to broad economic slowdown – then we will restructure a deal to assist them. This is a priority for us right now,” says Schwenke, adding that Business Partners has also seen a slight upturn in arrears, increasing by around a third, but on small percentages.

The news is not all bad though, as businesses geared towards the infrastructure boom and sub-contracting to larger construction firms are still doing well. Those businesses geared to the export market are certainly benefiting from the weaker currency. There may be a fall in domestic tourism, but the industry as a whole is seeing more foreign visitors who are taking advantage of South Africa as a cheaper holiday destination.

The black cloud does have a sliver of silver lining though. The growth of private sector credit in February slowed faster than anticipated, registering 20.8% - down from 23.1% in January. The markets were expecting a somewhat modest slowdown of 21.9%. Economist Kevin Lings says that, “Although the slowdown is still relatively modest, it is expected to become more apparent during 2008.” Once these numbers are adjusted for inflation, the real credit is really only growing at 10.9% compared to its peak of 20.8% in February 2007 (Ling).

Mortgage lending grew by 0.8% in February and by 23.1% in the past year. Ling says that these numbers may be high, but it is the lowest monthly growth in mortgage credit since December 2002. In terms of value, mortgage advances only increased by R7bn in February as compared to a monthly average of R14.1bn in 2007.

Standard Bank’s property gauge reflected a drop in house prices for the first time in five years, with the average price being R550 000 compared to R580 000 previously. Credit card growth also decreased from a high of 44.1% in July 2007 to 21.6% this year.

Ling believes that a combination of interest rates and the introduction of the National Credit Act have helped to slow the demand for credit, as well as consumer and housing activity. “Hopefully, the Reserve Bank will be willing to continue to leave interest rates unchanged, while they assess the impact of the recent rate hikes,” says Ling. The key seems to be in a difficult economic atmosphere, consumers need to tighten their purse strings, borrow less and save more.

The information in this article is courtesy of Maya Fisher-French (“Under a debt weight”, Mail & Guardian Online, 10 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Building Professions' Unease Over Unified Body Plan

An article in Business Day has expressed concern over the latest proposals by the government to revise the regulatory framework of professions in the building industry. The engineering and other professions argue that these changes may not effectively address the challenges that they intend to deal with.

The proposals were published for comment last month by Public Works Minister Thoko Didiza and seek to replace the various engineering and built environment regulatory structures with a single unified body. Essentially, the South African Council for the Built Environment (SACBE) would be an umbrella body and would replace all the current councils governing engineers, architects, quantity surveyors, property valuers, landscape architects and project managers. The unified body would hold overarching responsibility for all matters falling within the scope of these building professions.

Those opposed to the proposed changes are concerned that they will strip the statutory councils for these professions of their legal status and autonomy, which may not be good for the professions in the long run. The building sector is already struggling with the problem of skill shortages and these professions are crucial to the implementation of infrastructure projects worth billions of rand.

Currently, each profession is monitored and administered by an independent statutory council, which plays an oversight role. The function includes setting and enforcing internationally accepted standards, assessing individual competence, ensuring growth in the profession and communicating with the various professionals and other stakeholders.

Didiza addresses the issue of skills in her introductory remarks to the proposal, highlighting the need to align them with the country’s primary goals of transformation and economic growth. The government is concerned that these professions are still not accessible enough, particularly when it comes to the previously disadvantaged. There is also the issue of fragmentation under the current system.

“We have learnt from experience over the years. We have had to grapple with issues of access to the professions, the shortcomings in the present regulatory model, as well as the need for organized professions to serve the imperatives of the national democratic revolution,” Didiza is quoted as saying (Business Day).

The draft policy document also pinpoints that the need for a change in policy stems from the low registration levels of built environment professionals with their various councils, which in turn results in insufficient funding for these councils.

The reaction from the various industry professionals has been one of extreme concern, particularly in light of the legislative changes and their possibly detrimental effects on the professions. The proposals have instilled a sense of unease and alienation among these professionals, which already have the problem of skills shortages to deal with.

The Engineering Council of South Africa (ECSA) is especially concerned that its autonomy is under threat. CEO of ECSA, Professor Ravi Nayagar says that, “These professions are very different and cannot be put under one body. It is important for ECSA to remain autonomous because of the vital role it renders to the profession, the industry and all the relevant stakeholders.” ECSA also contests the notion that the existence of these professional councils results in fragmentation and that the proposals will lead to improvement. “Opportunities for access to the engineering profession have never been more open to all members of society than at present,” ECSA argues.

The South African Council for the Quantity Surveying Profession (SACQSP) remains convinced that the proposed measures for change are insufficient to address the various concerns. “The SACQSP is concerned that, on the contrary, these proposed measures may prove detrimental to the long-term growth and development of the quantity surveying and other built environment professions in SA” (Business Day).

Nearly all of the councils have expressed concern at the lack of adequate communication by the department and the limited time that they have been given to respond to the proposals. Thami Mchunu, spokesperson for Didiza, says that the three week period given for public comment, which expired on March 28th, has been extended to April 16th. Mchunu believes that the new legislation is expected to be in place before the end of the year.

The information in this article is courtesy of Bheki Mpofu (“South Africa: Building Professions Jib At Unified Body Plan”, Business Day, 9 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Top Tips for Energy Saving

An article on the Save Energy website (About.com) provides some excellent tips on how to save energy at home. It needn’t take days of planning; there are many things that you can do to save energy right now and cut down on costs at the same time.

1. Reset your thermostat

Install a programmable thermostat compatible with your heating and cooling system. Make sure that it’s set comfortably low in winter and comfortably high in summer.

2. Lower your geyser temperature

The thermostat on your geyser should be set to around 49°C. This is equivalent to 120°F.

3. How to wash clothes or dishes

When you are using a washing machine or dishwasher, try to ensure that there is always a full load before you use it.

4. Use power strips

It helps to plug your electronic equipment into power strips. When you turn off the equipment, the power strip prevents standby mode from drawing unnecessary electricity.

5. Turn off computers and monitors

When you aren’t using your computer, ensure that both the computer and the monitor are switched off. Contrary to popular belief, this will not result in damage to your equipment. If you plan on using the computer but at different intervals then it helps to set the power save options.

6. How to dry dishes

Instead of using the heated drying cycle in your dishwasher, it’s best to air dry your dishes.

7. Use the cold water wash

Washing your clothes in cold water not only saves on energy, it is also better for your clothing.

8. Use CFLs

Compact Fluorescent Lights may be a little more expensive than regular bulbs, but they save on energy and last a lot longer. In the long run, they’re definitely worth investing in.

9. Shower

Taking a shower instead of a bath saves on the amount of water used and the electricity used for heating is significantly less.

The information included in this article is courtesy of About.com (“Top 10 Tips for Saving Energy Right Now”, accessed 7 April 2008).

If you are interested in buying or selling property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Should the EAAB go?

An article on the Property24 website has reported statements made by a leading South African real estate group that call for the Estate Agency Affairs Board (EAAB) to be scrapped and to be allowed to revert back to “self-regulation”.

The call from RE/MAX Southern Africa comes after much public criticism of the EAAB by other real estate industry members, particularly the Institute of Estate Agents of South Africa (IEASA). The allegations all focus on the EAAB as incompetent; never responding to phone calls and failing to issue fidelity fund certificates timeously, if at all.

By law, estate agents are required to be in possession of a valid fidelity fund certificate before they can claim commission. These certificates are issued on an annual basis. The CEO of the EAAB, Nomande Mapetla vehemently denies any allegation of incompetence, stating that agents are being unscrupulous and the Board’s efforts to “clean up the industry” are being resisted by estate agents.

Marketing and finance director of RE/MAX Southern Africa, Jeanne van Jaarsveldt has accused the EAAB of failing in its mandate as a public protector and also in its attempts at “gearing up the industry’s professionalism”. Mapetla’s claim that fidelity fund certificates are issued in time is also refuted, with van Jaarsveldt pointing out the fact that in June 2006, Mapetla publicly admitted that criticism of the Board’s under-performance was to some extent justified, particularly in terms of servicing the industry and dealing with customer inquiries. “Sadly, the situation since then has barely improved and I have serious reservations that under its present stewardship it will get better” (Van Jaarsveldt). Mapetla refutes this, saying “I find her remarks offensive to our professional integrity and unbecoming of a person in her leadership position,” calling upon her to substantiate her claims.

Van Jaarsveldt has recently returned from a RE/MAX International gathering in the United States and believes that the local real estate industry has indeed reached a high level of professionalism when compared to other countries, but that this is “through no fault, or encouragement or even support of the EAAB”. She believes that the industry would be better served if the Board was deregulated and disbanded.

A factor enabling self-regulation is the newly emerging Institute of Estate Agents (IEA), which has lately absorbed the National Association of Realtors (NAREA). This has resulted in a powerful industry presence, which given the strength of this revitalization will now be able to “promote and guide a deregulated industry”. Although some 80 000 estate agents were registered with the Board in 2007, the “cleansing process” and “soft market conditions” are expected to reduce the number of active agents to just 35 000. This would make the local industry one of the fittest and most professional South Africa has seen, which is “good news for both the consumer and industry”.

The information in this article is courtesy of District Mail (Property24) (“Board must go,” says RE/MAX, News24, 4 April 2008).

If you would like to buy or sell property in South Africa, please visit http://www.sahometraders.co.za/.

South African Property News

How to Insulate Your Home

In light of the current energy crisis in South Africa, it would be useful to know how to save energy at home. The Sustainable Home Design website provides some excellent information. When it comes to making your house energy efficient, the single most important measure to take is insulation. This is the material that slows down heat transfer through the external surfaces of your home, making it up to 10°C cooler in summer and 5°C warmer in winter.

When a house is not insulated, about 40% of the overall heat is lost through the roof and ceiling, while 35% is lost through the walls and floors. Minimum levels of insulation will become mandatory in homes through the energy rating legislation of 2007/2008. When it comes to bulk insulation materials, their performance is specified with an ‘R-value’, where the greater the value, the more effective the insulation. In the Cape, the recommended R-value is 3.2 for the roof and 1.7 for the walls. There are reflective foil type products available that don’t have an R-value, but are extremely effective in minimizing heat transfer. It’s important to remember that these require an associated air gap in order for them to work effectively. They are also more effective in summer than winter, due to their reflective nature.

As far as the bulk insulation materials go, there are two forms: long rolls (called blankets), which must be cut to fit the length of space, or pre-cut lengths (called batts). This is usually installed in the ceiling. Recommendations include 100mm Aerolite (fibre glass) supplied by Owens Corning (021 951 1167) or 100mm Isotherm (polyester fibre) supplied by Brits Textiles (021 577 1490). Loose fill insulation has no backing and is simply poured or pumped into a wall cavity or roof space. 100mm Thermguard is recommended here (021 557 4201). Rigid insulation comes in pre-cut boards that are used mostly in the building of new homes and are ideal for insulating raked ceilings, solid brick external walls, wooden floors and concrete slabs. The 85mm Isoboard (rigid extruded polystyrene board) supplied by Isofoam (021 930 5074), or 10mm Kulite (rigid expanded polystyrene board) supplied by Sagex (021 951 1167) and 10mm Isolite (rigid expanded polystyrene board) supplied by Isolite (021 951 6100) are recommended.

From an environmental perspective, Thermguard is recommended over the other products in the blanket and batt categories, as it is recycled paper and has less impact on the environment in production. There are several other areas where you can insulate in your home. For instance, the main pipes can be insulated with products sold at most hardware stores in South Africa. Blankets can be used to minimize heat loss from your geyser. Glazing is a more expensive option when it comes to insulation. Remember that the key is to stop the summer sun from hitting the windows and heating up the air inside, but to allow the winter sun to come in. PG SMARTGLASS provides some excellent solutions and Nordic Windows has double-glazing, which comes in wooden frames, as this is preferred over aluminium and PVC. Wood is a better insulator, as well as a renewable resource with a far lesser environmental footprint in production. Of course, replacing all window frames could be costly, so Smartglass might prove the better option.

The information in this article is courtesy of Sustainable Home Design (www.sustainablehomedesign.co.za accessed 3 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

House Prices Fall

An article on the Bloomberg News website reports that South African house prices have dropped for the first time in 8 years, as borrowing costs continue to rise, this is according to Africa’s biggest lender, Standard Bank Group Ltd.

The average price for a house in South Africa has fallen from R580 000 in 2007 to just R550 000 today. This is the first decline since June 2000. According to Standard Bank, “the persistent deterioration in the demand-side drivers of the South African economy of late has increased the chances of negative growth in residential property prices,” leaving the South African consumer “under strain” (Bloomberg).

Interest rates increased four times between June and December last year, reaching 11 percent as inflation exceeded the 3 to 6 percent target range. Standard Bank reports that house price inflation slowed to an average 8.3 percent in 2007, down from 9.8 percent in 2006.

Standard Bank holds a market share of around a third of South African home loans and calculates the index from the average house price of mortgage applications that it receives. Absa Group Ltd is the country’s biggest mortgage lender and reports that house price inflation slowed to an 8 year low of 8.7 percent in February this year. Absa also calculates the rate of inflation from the median house price of mortgage applications it receives, which is estimated at R969 000.

The information in this article is courtesy of Vernon Wessels (“South African House Prices Fall for First Time in Eight Years”, Bloomberg News, 1 April 2008).

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Commercial Property Performs Well in 2007

An article on the Engineering News website discusses the commercial property index results released on Monday 31 March 2008. While there has been growing concern about the performance of the South African property market in general, the index indicates a degree of resilience when it comes to commercial property, with a total return of 27.7% for 2007. This is the fourth consecutive year where the results have exceeded 25%.

Despite these promising results, there is a moderate slowdown expected, which is underpinned by an underlying strength in the commercial sector, particularly the office market. According to Stan Garrun, Managing Director of Investment Property Databank (IPD), “Returns in 2007 remained very strong, buoyed by surging demand combined with supply-side constraints. The retail sector dipped with slower consumer spending, but offices and industrial powered ahead. Vacancy rates are now incredibly low across the board, and the best ever rental income growth was recorded in 2007” (Engineering News).

The index was compiled by IPD and the South African Property Owners Association (SAPOA) and based on a portfolio of about 2000 retail, office and industrial properties valued at around R133bn. Last year’s return is up on the 27,1% reported for 2006, but below the 30,1% recorded in 2005. The results show that the last three years have been a period reflecting the highest returns for the index. The strong return in 2007 was largely driven by capital appreciation of 17.7% and an income return that decreased marginally from 9.2% in 2006 to 8.6% last year. There was an unbelievable income growth across all sectors of 17.6% and a further reduction in vacancy levels by 3.1%.

The top-performing sector in 2007 was industrial property, with a return of 33.6%, while offices came in at 30.8% and retail at 26%. FNB’s commercial banking property strategist, John Loos predicts that overall commercial property will slow somewhat, but that offices will emerge the top performer in 2008. CEO of Rand Merchant Bank Properties, Warren Schultze is not so optimistic about the sustainability of the four year 25% plus returns, saying that there are a number of factors working against the positive trend, including the interest rates and their material effect on property and prices, the general outlook and current business confidence, as well as the escalating construction costs and load shedding.

The information in this article is courtesy of Olivia Soraya Spadavecchia (“Commercial property performed strongly in 2007, but moderate slowdown forecast”, Engineering News, 31 March 2008).

If you want to buy or sell property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Johannesburg Rates Tariffs Approved

An article in BuaNews reports that the City of Johannesburg has approved the new assessment rates tariffs, which should come into effect on 1st July 2008. The public is able to raise objections until 27th May.

The City has said that it remains committed to implementing the new Municipal Property Rates Act in a “fair and equitable manner”. The announcement of the final recommended assessment rates will help property owners to determine how much they will paying in assessment rates from July this year (Mankodi Moitse, Executive Director of the City’s Finance Sector) and the City has made every effort to keep the new system as simple as possible.

One of the main features included in the new assessment rates system is a change in the valuation basis, from site values to full market values. The new valuation roll will take into account the current growth in the property market. The policy also proposes new property rates, which is the first significant reconsideration of property tax since well before apartheid came to an end.

The City’s Rates and Taxes Director, Erika Naude says that the intention here is not to increase the income of the City of Johannesburg, but instead “to ensure that all properties are valued based on their market value, land and improvements” (BuaNews). 20% of the City’s total income is derived from the rates levied and this money is used to fund a variety of services that benefit all residents, including emergency services, public facilities, public safety, street lights, clinics, community centres and parks (Naude).

In Johannesburg, the first R150 000 of the residential property value will be excluded from rating and certain categories of ratepayers will pay less tax than in the past. There are a number of key principles that will guide the City during the new system’s implementation:

- a principle of “revenue neutral”, meaning that no major loss or surplus will be gained to the total budget of the Council;
- equity and fairness will be ensured through all categories of property;
- an endeavour will be made to find mitigating mechanisms against the huge increases on the individual property owner.

The final draft of the Rates Policy and its by-laws were approved by the City Council in a meeting on 31 January this year. Around 155 000 sectional title property owners and around 70 000 additional properties now fall within the tax net. These properties previously fell below the threshold of the levies’ assessment rates.

The City has thanked the residents and businesses of Johannesburg for taking part in the public processes and hopes that “this constructive approach will continue to characterize the implementation in the coming months” (BuaNews).

The information in this article is courtesy of Luyanda Makapela (“South Africa: New Rate Tariffs Approved by Joburg Council”, BuaNews, Wednesday 26 March 2008).

If you are interested in property for sale in South Africa, please visit www.sahometraders.co.za.

South African Property News

SA's Top Suburbs

An article published on the iAfrica website (20 March 2008) reports the results from the annual South African Property Transfer Guide (SAPTG) ‘Top Ten’, carried out by a leading local marketing insights company, Knowledge Factory. The figures are based on the latest deeds office information, which is combined with three other proprietary datasets developed by Knowledge Factory, and gives property professionals an accurate picture of annual market activity in the country. The results specify the top ten suburbs in South Africa in 2007, focusing on the highest volume of sales, the highest sales value and the highest average sales value.

In terms of the highest volume of sales in 2007, the Sowetan suburb of Protea Glen was a clear leader, with an incredible 2406 properties traded at an average value of R128 861. The second best suburb in this category last year was the booming Cosmo City, which registered 1744 sales at an average value of R109 460. Gauteng also took third place, with Karenpark recording 1626 sales with an average value of R339 652.

In terms of Knowledge Factory’s geo-demographic segmentation tool, Protea Glen falls into the ‘Bond Battalions’ category, whereby young parents are effectively weighed down by their various responsibilities (families, bonds, rates, taxes and maintaining the second family car). Karenpark falls into the ‘Pram Pushers’ category, where South Africa is seen to be bursting at the seams from its baby-grows. Cosmo City’s placing clearly shows the tremendous metropolitan growth in 2007 and that there remains a sustained and healthy demand for entry-level housing in South Africa.

When it comes to the highest value of sales, Gauteng again took top honours with the suburb of Bryanston, generating a total value of more than R2.079bn from 1113 sales. Bryanston falls into the ‘Upper Crust’ category, where properties are large and by far the most expensive in every city. Second place also went to a Gauteng suburb, Sandown, where 729 sales were recorded at a total value of R1.6bn. Completing another Gauteng top three, Morningside showed steadily increasing activity and came in third with a total value of R1.465bn from 727 sales. Both Sandown and Morningside are reported as falling into the ‘Fashion Café Society’ category, where the population largely comprises young trendsetters, reflecting their status as prestigious and upwardly mobile families and couples. The properties are relatively small but have recently been renovated and are generally immaculate in design.

The highest annual average value of sales continued to be dominated by the more exclusive and expensive suburbs in the country. Gauteng’s Westcliffe came in first with a high overall sale value of R9.918mn. Coming in second was the affluent suburb of Llandudno in Cape Town, showing an average sales value of R8.75mn. The sought-after Steenberg Golf Estate in Cape Town’s exclusive suburb of Constantia came a close third, averaging R8.297mn in sales. All three of these suburbs are said to belong in the ‘Upper Crust’ category. Aside from the large, expensive properties, residents who fall into this category are also reportedly a highly educated group, with one of four household residents holding a university degree and the average household income being the highest in South Africa.

The information in this article is courtesy of iAfrica (SA’s Hottest Suburbs, Thursday 20 March 2008).

If you would like more information about buying or selling property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Going Green at Home

With electricity use such a problem around the country at the moment, it might help to have some useful information about what you can do at home to help. An article on “Greening your home” by Giles Griffin was published in The Property Magazine (April 2008). Environmentally friendly and energy saving design has gone in and out of fashion over the years, but it’s now safe to say that “going Green” makes a lot of sense.

Electricity isn’t the only supply that is proving unreliable and costly. In Cape Town, there are similar constraints that apply to water and waste management. Generating up to 6% more waste each year, Cape Town’s landfill sites are steadily filling up and closing fast. Out of the six sites that are currently available in the province, two have already closed and two more are nearly full. Waste is undeniably a major issue, as soon there will be nowhere for it to go.

Water demand is growing by 4% a year and is a problem throughout the country. Although water experts believe that there’s no need to worry and that there is little danger of another Eskom situation, there are now by-laws that have been established in the Cape to govern the use of water. The point is that South Africans need to act rather than just think about saving energy, waste and water. Anybody who has seen An Inconvenient Truth will have an idea of what this means.

Grace Stead (owner of environmental consultant company, Steadfast Greening) has produced an extremely practical and user-friendly Smart Living Handbook that outlines various things that can be done to save in all areas at minimal cost. Some of these include fitting a solar water heater to save energy, or installing compact fluorescent light bulbs and switching off appliances when they aren’t in use. In order to reduce waste, it’s suggested that you check the toxicity of items that you buy, compost your organic waste and follow the three Rs: reduce/recycle/reuse. To save on water, taps need to be aerated, toilets multiflushed and a water-wise garden planted.

Reinhold Viljoen, also an energy consultant, mentions making passive solar inventions in your home, such as shading, overhangs, insulation in ceilings and walls, and considering what type of glass you are using. To save water, he suggests that you harvest rainwater to flush toilets and top up pools, as well as using grey water systems for the garden.

When it comes to looking after our environment, we can start by looking after our own properties and ensuring that we are doing all we can to save on energy, waste and water. It might mean a little more of an investment upfront, as some of these alternatives are a little more expensive, but they will certainly pay for themselves in the long run.

The information in this article is courtesy of Giles Griffin, “Greening your home” in The Property Magazine, April 2008.

If you are interested in buying or selling property in South Africa, please visit www.sahometraders.co.za.

South African Property News

Farmers Vow to Fight New Legislation

The government’s Expropriation Bill has caused much consternation amongst farmers in the country, following the approval of the draft policy by Cabinet earlier this month. The Bill is due to be tabled in Parliament sometime in June this year.

A spokesperson for Cabinet says that the envisaged act will align more than a hundred pieces of legislation and ordinances, including the government’s right of expropriation, with the nation’s Constitution. A significant proposed change is from the legal principle that the land must be used for “public purpose”, to the requirement that expropriation should be “in the public interest” (Business Day). Another change is the widening of the interpretation of the constitutional requirement of “just and equitable” as not necessarily market-related.

The farmers’ union, Agri SA has expressed serious reservations about the wide powers that the new act would give the Minister of Public Works and the limitations on the rights of property owners. There is concern about the limitation of full access to courts, the possible watering-down of market-related compensation and the undue haste with which the bill is being pushed through Parliament (Business Day).

The Agriculture and Land Affairs Minister, Lulu Xingwana has repeatedly threatened to use expropriation to accelerate the land restitution process and the redistribution of land. The Minister has accused white landowners of abusing the willing buyer / willing seller principle, by demanding exorbitant prices for land. Farmers have also been accused by the Land Claims Commission of “giving it the run around” in reaching acquisition agreements (Business Day).

It has been reported however, that the delays in restitution are largely due to the tremendous inadequacies in the way that the Land Claims Commission has gone about the validation and verification of land claims (The Weekender). There have been many spurious claims, with claimant communities competing for the same land and participating in multiple claims, or claims so vague that they make no reasonable sense.

Apparently, there are about 4900 out of the original 79696 claims still to be settled, however these represent the majority of individuals waiting for restitution. They also represent a vast proportion of the total land under claim. The former Chief Land Claims Commissioner, Tozi Gwanya says that the objecting landowners have recourse in the Land Claims Court and this has been a major factor in the delays in restitution.

TAU, a predominantly white farmers’ union, has told farmers not to be too concerned, as the proposed changes may be in contravention of Sections 1, 2 and 3 of the Constitution. TAU President, Paul van der Walt regards the process as an intimidation and propaganda exercise and promises to ensure that farmers’ property rights are secure.

The information in this article is courtesy of Neels Blom, Business Day, “South Africa: Farmers Vow to Fight New Expropriation Legislation”, 17 March 2008.

If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.