Latest Stats on Market Crash
Realestateweb has published yet another article detailing the grim situation still being experienced in the South African property market, this time revealing the latest figures from RE/MAX of Southern Africa, the biggest residential real estate sales group in the industry.
The figures provide telling insight into what has been happening in the residential property market this year. The statistics were compiled by RE/MAX of Southern Africa and BetterBond and reflect the residential property buying transactions and property market performance as compared to the same period in 2007.
Sales transactions: 2008 vs 2007
According to the stats, there has been a year-on-year decrease of 38% in the amount of property sales transactions nationally (across all price brackets) between January to July 2008, compared to the same period in 2007.
The total amount of properties under R499 000 sold this year is 36% less than the same time in 2007. Overall, the number of sales transactions has dropped by 42% year-on-year for properties priced between R500 000 and R749 000. There has been a decrease of 39% for properties in the R750 000 to R999 999 price bracket and a drop of 33% for properties valued at R1m to R1,499 999.
When it comes to the higher price brackets, the biggest decrease was recorded in the R1,5 to R2,5m price bracket, where the total properties sold so far this year is nearly 50% less than the same time last year. In sales of properties over the R2,5m mark, there has been a drop of 44%.
Most Active Price Brackets
In light of the total national transactions conducted by buyers and property investors between January and July this year, the most active property price bracket with figures recorded at 43% is that of R499 999 or less. This was followed by 25% for properties priced between R500 000 and R749 000, 15% for those priced between R750 000 and R999 999, 12% for homes in the R1m to R1,499 999 region, 4% for properties valued at R1,5m to R2,5m and 1% for homes priced anywhere above R2,5m.
Regional Stats
The total number of national sales transactions in the R499 999 or less price bracket in the months from January to July, the metropolitan regions recorded the following stats: 29% for Gauteng, Limpopo, Mpumalanga and North West; 22% for the Western Cape; 18% for KwaZulu Natal; 9% for the Eastern Cape and 2% for the Freestate. The remaining 20% refers to property sales in the non-metropolitan or rural areas across all nine provinces.
In the category regarding sales valued between R500 000 to R749 999: Gauteng, Limpopo, Mpumalanga and North West recorded the highest total of 41%, with KwaZulu Natal coming in behind on 20%, the Western Cape at 18%, 4% for the Eastern Cape and just 2% in the Freestate. 13% was recorded for sales activity that took place in the non-metropolitan and rural areas throughout the nine provinces.
When it comes to properties priced between R750 000 and R999 999: Gauteng, Limpopo, Mpumalanga and North West recorded the leading figure of 39%, followed by the Western Cape at 23%, 19% in KwaZulu Natal, the Eastern Cape at 6% and the Freestate tailing with 4%. The remaining 9% was recorded in the non-metropolitan and rural areas in the country’s nine provinces.
In the R1m to R1,499 999 price range, the highest percentage recorded was again in Gauteng, Limpopo, Mpumalanga and North West at 42%, with the Western Cape reaching 25%, KwaZulu Natal recording 17%, the Eastern Cape at 3% and the Freestate at just 1%. Sales in the non-metropolitan and rural areas came in at 12%.
The property price bracket between R1,5 and R2,5m had KwaZulu Natal in the lead taking 28% of all sales transactions, followed closely by the Western Cape on 27%, Gauteng, Limpopo, Mpumalanga and North West on 20%, the Eastern Cape fetching 4% and the Freestate again at 1%. The rest summed up to 14% of the total national sales activity.
The highest property price category of over R2,5m showed the Western Cape as having the largest amount of sales transactions at 36%, with KwaZulu Natal coming in second at 32%, Gauteng, Limpopo, Mpumalanga and North West with 20%, the Eastern Cape at 4% and the leftover in the non-metropolitan/rural areas in South Africa recording 8% of total sales.
There are signs of a slight market recovery in the near future and with the effect of higher interest rates, the acceleration of consumer inflation, as well as the strict lending criteria from all major financial institutions, this has highlighted that the single most important motivation for consumers is affordability and the ability to sustain their debt exposure.
The data discussed reflects a shift towards properties priced in the lower brackets, while premium properties in excess of R2,5m in the Western Cape remains in high demand across the country. During the course of August, RE/MAX of Southern Africa has noticed a definite revival in the property market, with many branches recording their highest number of property sales for any month this year.
There is one thing that comes out clearly in all of this, the way that lending institutions look at consumer risk and debt exposure has forever altered the landscape of the real estate market and both consumers, as well as agents need to learn how to adapt to the changing environment.
The information in this article is courtesy of Jeanne van Jarsveldt (“SA’s property market crash: grim new stats”, Realestateweb, 28 August 2008).
Find property for sale in South Africa.
Friday, August 29, 2008
Thursday, August 28, 2008
South African Property Owners Can Breathe Sigh of Relief
Land Reform Bill Put on Ice
There has been vigorous debate recently concerning the government’s proposed Land Bill aimed at speeding up the land reform program in South Africa. Farmers and citizens alike can breathe a huge sigh of relief at news that the parliamentary committee has shelved the legislation, citing lack of consultation as the reason behind the decision and has said that the Bill will be reintroduced at a later date.
The government has said that it wants to redistribute nearly a third of white-owned farm land by 2014. At the end of Apartheid, almost 90% of South African land was owned by whites, who made up just 10% of the overall population at the time. So far, the land reform program has only succeeded in transferring 4% of this land to blacks.
Critics of the proposed legislation have argued that it would be unconstitutional, as it would prevent people from going to court should their property be taken. In fact, there are those who have argued that the expropriation could extend beyond agricultural property to all types of property, be it intellectual, commercial or personal.
The Land Bill was introduced by the ANC government in April this year and aimed to give the government greater powers to transfer land and property from existing owners. A committee statement said: “The decision [to shelve the bill] was reached after consultation with various stakeholders both within and outside parliament and in the interest of broader consultation and effective public participation”.
The government’s land restitution program is focused on returning land seized by whites after 1913 to the disenfranchised black population. However, earlier this year it was determined that the program had failed in its mandate. Thousands of claims are still being processed across the country for land and property that was taken unlawfully from black owners during the Apartheid era and before.
Farmers and civil society may well be pleased with the government’s decision to put the legislation on hold, but the reality remains that land redistribution continues to be a problem that needs to be addressed in South Africa. The government may have been stalled at this point, but no doubt there will be new legislation to follow.
The information in this article is courtesy of BBC News (“S Africa land reform bill shelved”, 27 August 2008).
Property for sale in South Africa.
There has been vigorous debate recently concerning the government’s proposed Land Bill aimed at speeding up the land reform program in South Africa. Farmers and citizens alike can breathe a huge sigh of relief at news that the parliamentary committee has shelved the legislation, citing lack of consultation as the reason behind the decision and has said that the Bill will be reintroduced at a later date.
The government has said that it wants to redistribute nearly a third of white-owned farm land by 2014. At the end of Apartheid, almost 90% of South African land was owned by whites, who made up just 10% of the overall population at the time. So far, the land reform program has only succeeded in transferring 4% of this land to blacks.
Critics of the proposed legislation have argued that it would be unconstitutional, as it would prevent people from going to court should their property be taken. In fact, there are those who have argued that the expropriation could extend beyond agricultural property to all types of property, be it intellectual, commercial or personal.
The Land Bill was introduced by the ANC government in April this year and aimed to give the government greater powers to transfer land and property from existing owners. A committee statement said: “The decision [to shelve the bill] was reached after consultation with various stakeholders both within and outside parliament and in the interest of broader consultation and effective public participation”.
The government’s land restitution program is focused on returning land seized by whites after 1913 to the disenfranchised black population. However, earlier this year it was determined that the program had failed in its mandate. Thousands of claims are still being processed across the country for land and property that was taken unlawfully from black owners during the Apartheid era and before.
Farmers and civil society may well be pleased with the government’s decision to put the legislation on hold, but the reality remains that land redistribution continues to be a problem that needs to be addressed in South Africa. The government may have been stalled at this point, but no doubt there will be new legislation to follow.
The information in this article is courtesy of BBC News (“S Africa land reform bill shelved”, 27 August 2008).
Property for sale in South Africa.
Wednesday, August 27, 2008
SA Property Transfer Guide Paints a Positive Picture
Not All Doom and Gloom
The South African property market may be experiencing difficult times, but data released by the South African Property Transfer Guide (SAPTG) indicates that the situation is not quite as dim as some of the latest media reports might suggest. This is according to SAPTG National Training Manager, Dieter Deppisch, whose comments were recorded in an article published by iafrica.
Deppisch says, “It’s not all ‘doom and gloom’ across the entire real estate sector. While certain segments within specific areas in South Africa have experienced a fall in prices, there is reason to believe that trading conditions will become bullish in the short-term”. He acknowledges that the residential property market in general is experiencing a sharp downturn, but Deppisch argues that this is a perfectly natural part of the cycle. “The industry is going through what economists call a ‘correction in the marketplace’,” he explains.
The data available through SAPTG’s advanced online property reports has informed Deppisch’s insistence that it is primarily the middle segment of the residential market that is feeling the worst effects of the current downturn. “SAPTG data paints an accurate picture of what is happening nationally, regionally and all the way down to street level,” he says. “The lower economic end of the market is actually experiencing growth in both value and volume of sales. Similarly, there has also been a healthy increase in the value of sales at the very top end of the market, whilst this has been tempered by a decrease in volume in most areas”.
In his illustration of conditions at the lower end of the market, Deppisch uses the example of Gauteng’s Protea Glen. “If we compare the first seven months of 2007 with the same period this year, our data indicates that the suburb has experienced excellent growth,” he argues. “Excluding transfers valued at R100 000 or below, which may typically include RDP housing and deceased estates, the volume of transfers is up from 517 last year to 548 this year”.
In fact, the average house price in Protea Glen has risen by a healthy 19%, from R239 328 in 2007 to R285 000 this year. “The data clearly shows that this large suburb hasn’t been hit by the real estate recession and is, in fact, still experiencing healthy growth,” says Deppisch. This suburb falls into the Bond Battalions category in Clusterplus, Knowledge Factory’s reputable geo-demographic segmentation tool, which denotes this category as having suburbs made up largely of young parents weighed down by their families, bonds, rates and taxes, as well as the maintenance of a second hand family car.
The SAPTG data also reveals that some suburbs in the higher end of the market are also doing well. The Upper Crust and Pearl Strings categories of Clusterplus typically feature large homes with immaculate gardens, swimming pools and tennis courts, in leafy, older neighbourhoods. These have experienced a decrease in transfer volumes since last year, but not in value.
Examples include the Johannesburg suburbs of Sandown and Bryanston, where “Sandown has seen average transfer values increase by 17.2%, while the volume of sales has dropped by 28%. Similarly, average values have increased by a vigorous 31.2% in Bryanston, even though the suburb has experienced a 10.5% drop in the volume of sales,” says Deppisch.
When it comes to an indication of healthy growth in the top end of the market, there is one suburb in particular that stands out. Also in Gauteng, Sandhurst has reflected an amazing 49.1% increase in average transfer values and only a 10% drop in volume. Deppisch explains that buyers at the high end of the market are not typically affected by the tight lending criteria of the National Credit Act and include both local and foreign cash buyers.
With 15 years of comprehensive transfer information available through the SAPTG to back up his stance, Deppisch disagrees with the pessimistic claims made by various property analysts that property values have plummeted across the board. “What is true is that there are areas in the country where prices have fallen by 30 to 40% and even more,” he notes, “but the fall in property value has been largely confined to the middle sector of the residential market. In addition, it should be noted that at times the perceived ‘decrease’ is artificial, reflecting the difference between a seller’s unrealistic wish-price and actual market value or the difference between a ‘sellers cycle’ price compared with prices in the ‘buyers cycle’. At times, even estate agents are to blame since some offer an unrealistically inflated value to a prospective seller simply to acquire a sole mandate”.
Deppisch clarifies the middle segment as consisting of properties between 140m² and 220m² that have an average transfer value of R967 000 and admits that it has been “hit pretty hard”, with volumes down by as much as 35% nationally and real growth slightly below CPIX inflation calculated year on year. Despite this, he remains adamant that the future still looks promising, even for this segment of the market.
“There is light at the end of the tunnel, even for the middle segment,” he asserts. “Most analysts agree that inflation will peak by the first quarter of next year and that the first rate cuts can be expected before the end of 2009. What this means is that the current correction could well be over within 18 months and we will begin the cyclical shift from a buyers’ to a sellers’ market again”.
The information in this article is courtesy of Property iafrica (“Some boom amidst gloom”, 27 August 2008).
Find property for sale in South Africa.
The South African property market may be experiencing difficult times, but data released by the South African Property Transfer Guide (SAPTG) indicates that the situation is not quite as dim as some of the latest media reports might suggest. This is according to SAPTG National Training Manager, Dieter Deppisch, whose comments were recorded in an article published by iafrica.
Deppisch says, “It’s not all ‘doom and gloom’ across the entire real estate sector. While certain segments within specific areas in South Africa have experienced a fall in prices, there is reason to believe that trading conditions will become bullish in the short-term”. He acknowledges that the residential property market in general is experiencing a sharp downturn, but Deppisch argues that this is a perfectly natural part of the cycle. “The industry is going through what economists call a ‘correction in the marketplace’,” he explains.
The data available through SAPTG’s advanced online property reports has informed Deppisch’s insistence that it is primarily the middle segment of the residential market that is feeling the worst effects of the current downturn. “SAPTG data paints an accurate picture of what is happening nationally, regionally and all the way down to street level,” he says. “The lower economic end of the market is actually experiencing growth in both value and volume of sales. Similarly, there has also been a healthy increase in the value of sales at the very top end of the market, whilst this has been tempered by a decrease in volume in most areas”.
In his illustration of conditions at the lower end of the market, Deppisch uses the example of Gauteng’s Protea Glen. “If we compare the first seven months of 2007 with the same period this year, our data indicates that the suburb has experienced excellent growth,” he argues. “Excluding transfers valued at R100 000 or below, which may typically include RDP housing and deceased estates, the volume of transfers is up from 517 last year to 548 this year”.
In fact, the average house price in Protea Glen has risen by a healthy 19%, from R239 328 in 2007 to R285 000 this year. “The data clearly shows that this large suburb hasn’t been hit by the real estate recession and is, in fact, still experiencing healthy growth,” says Deppisch. This suburb falls into the Bond Battalions category in Clusterplus, Knowledge Factory’s reputable geo-demographic segmentation tool, which denotes this category as having suburbs made up largely of young parents weighed down by their families, bonds, rates and taxes, as well as the maintenance of a second hand family car.
The SAPTG data also reveals that some suburbs in the higher end of the market are also doing well. The Upper Crust and Pearl Strings categories of Clusterplus typically feature large homes with immaculate gardens, swimming pools and tennis courts, in leafy, older neighbourhoods. These have experienced a decrease in transfer volumes since last year, but not in value.
Examples include the Johannesburg suburbs of Sandown and Bryanston, where “Sandown has seen average transfer values increase by 17.2%, while the volume of sales has dropped by 28%. Similarly, average values have increased by a vigorous 31.2% in Bryanston, even though the suburb has experienced a 10.5% drop in the volume of sales,” says Deppisch.
When it comes to an indication of healthy growth in the top end of the market, there is one suburb in particular that stands out. Also in Gauteng, Sandhurst has reflected an amazing 49.1% increase in average transfer values and only a 10% drop in volume. Deppisch explains that buyers at the high end of the market are not typically affected by the tight lending criteria of the National Credit Act and include both local and foreign cash buyers.
With 15 years of comprehensive transfer information available through the SAPTG to back up his stance, Deppisch disagrees with the pessimistic claims made by various property analysts that property values have plummeted across the board. “What is true is that there are areas in the country where prices have fallen by 30 to 40% and even more,” he notes, “but the fall in property value has been largely confined to the middle sector of the residential market. In addition, it should be noted that at times the perceived ‘decrease’ is artificial, reflecting the difference between a seller’s unrealistic wish-price and actual market value or the difference between a ‘sellers cycle’ price compared with prices in the ‘buyers cycle’. At times, even estate agents are to blame since some offer an unrealistically inflated value to a prospective seller simply to acquire a sole mandate”.
Deppisch clarifies the middle segment as consisting of properties between 140m² and 220m² that have an average transfer value of R967 000 and admits that it has been “hit pretty hard”, with volumes down by as much as 35% nationally and real growth slightly below CPIX inflation calculated year on year. Despite this, he remains adamant that the future still looks promising, even for this segment of the market.
“There is light at the end of the tunnel, even for the middle segment,” he asserts. “Most analysts agree that inflation will peak by the first quarter of next year and that the first rate cuts can be expected before the end of 2009. What this means is that the current correction could well be over within 18 months and we will begin the cyclical shift from a buyers’ to a sellers’ market again”.
The information in this article is courtesy of Property iafrica (“Some boom amidst gloom”, 27 August 2008).
Find property for sale in South Africa.
Monday, August 25, 2008
Rental Stocks Depleting Fast
Rentals in High Demand - ERA
A Business Report article has drawn attention to the intensifying conditions in the current property market with the demand for rental properties in South Africa literally going through the roof. This is becoming increasingly problematic, as the stocks are proving to be in limited supply.
ERA chief executive, Gerhard Kotze said that this is the broad consensus from a range of group offices around the country. He indicates that although the high interest rates and current inability to afford homes or obtain home loans are the biggest factors driving the rental market, there are also an increasing number of property owners who are opting to downsize to smaller rental accommodation and letting out their own homes to stay afloat financially.
Kotze says, “Infrastructure developments such as those for Eskom and the minerals and precious metals boom, as well as pockets of strong regional development are also creating demand for rental properties”.
According to Helene Visser of ERA Steer Blaauwberg, encompassing the Table View area, her region has had a “very active” rental market of late with a reasonable supply of long-term rental stock and some attractive rental bargains. “But there is also a strong demand for short term rentals and a shortage of furnished rental accommodation. Rentals at the lower end are around R3500 a month and at the higher end around R6500 a month,” she says.
In the East London area, Penny Lindstrom from ERA Sun Beacon Bay says that townhouses are in short supply and thus fetch a premium rental, while ERA Brakpan’s Monica van Tonder says that there is only rental stock available because various new developments are nearing completion.
At ERA Ermelo, Retha de Beer has an enormous rental portfolio, as the mining sector and Eskom’s current expansion in the area are fuelling the demand for townhouses and homes for rent. “Much of the demand is coming from senior management and technical people seconded to these projects,” she says, “and two-bedroom townhouses are renting for around R3300 a month”.
Lucille Kaplan of ERA Pretoria East reports that in Tshwane, there has been a definite increase in rental demand across the board, with prices ranging from R3800 a month to an incredible R25000 a month in some cases.
The information in this article is courtesy of Business Report (“Rental stocks drying up, says ERA”, 25 August 2008).
Property for sale in South Africa.
A Business Report article has drawn attention to the intensifying conditions in the current property market with the demand for rental properties in South Africa literally going through the roof. This is becoming increasingly problematic, as the stocks are proving to be in limited supply.
ERA chief executive, Gerhard Kotze said that this is the broad consensus from a range of group offices around the country. He indicates that although the high interest rates and current inability to afford homes or obtain home loans are the biggest factors driving the rental market, there are also an increasing number of property owners who are opting to downsize to smaller rental accommodation and letting out their own homes to stay afloat financially.
Kotze says, “Infrastructure developments such as those for Eskom and the minerals and precious metals boom, as well as pockets of strong regional development are also creating demand for rental properties”.
According to Helene Visser of ERA Steer Blaauwberg, encompassing the Table View area, her region has had a “very active” rental market of late with a reasonable supply of long-term rental stock and some attractive rental bargains. “But there is also a strong demand for short term rentals and a shortage of furnished rental accommodation. Rentals at the lower end are around R3500 a month and at the higher end around R6500 a month,” she says.
In the East London area, Penny Lindstrom from ERA Sun Beacon Bay says that townhouses are in short supply and thus fetch a premium rental, while ERA Brakpan’s Monica van Tonder says that there is only rental stock available because various new developments are nearing completion.
At ERA Ermelo, Retha de Beer has an enormous rental portfolio, as the mining sector and Eskom’s current expansion in the area are fuelling the demand for townhouses and homes for rent. “Much of the demand is coming from senior management and technical people seconded to these projects,” she says, “and two-bedroom townhouses are renting for around R3300 a month”.
Lucille Kaplan of ERA Pretoria East reports that in Tshwane, there has been a definite increase in rental demand across the board, with prices ranging from R3800 a month to an incredible R25000 a month in some cases.
The information in this article is courtesy of Business Report (“Rental stocks drying up, says ERA”, 25 August 2008).
Property for sale in South Africa.
Property Myths Exposed - To Buy or Rent?
Should You Rent or Buy?
In the current property market climate, investors are understandably shy and there are many potential buyers who are choosing to rent and rather bide their time until the market improves. However, there are experts who believe that the property market is set to hit rock bottom in the coming months and this is in fact the ideal time to make that investment.
In an article for Realestateweb, Jackie Cameron asks the question, “Is it really better to be a landlord than a tenant?” This was inspired by an American article called ‘Rent vs Buy Myths that Ruined the Housing Market’, which discussed some of the so-called myths that made people justify buying houses that they probably could not afford during the property boom in the US.
Myth 1: Renting is like throwing your money away.
Those who believe that renting is the way forward seem to think that buyers pay money to the bank for the first 5 years for the privilege of borrowing money. In contrast, renters pay for one thing each month: shelter – they don’t pay interest, tax and other property-related costs.
Myth 2: It doesn’t cost more to buy than it does to rent.
Those who decide to rent pay a deposit, while those who own spend loads of money on the initial costs, with the home needing to appreciate in value considerably before these costs become insignificant, is the argument here.
Myth 3: Buyers have assets; renters do not.
Those in favour of renting say that while they may not co-own a home with a lender, this doesn’t mean that they don’t have assets. In fact, they have extra cash to pay for these other assets.
Myth 4: Houses are a good investment.
There are some renters who believe that housing is “not an investment” and that although home prices can rise, the rate of appreciation on housing does not extend beyond inflation levels. The American article cites an annual real return on US housing gauged between 1890 and 2005 as a “pathetic 0.4% per year”. It also indicated that the gain in new prices over the last 20 years in the US is just a fraction of what the average investor in stocks would have made.
While some of these arguments may reflect sentiment currently holding force in our own country and may make for interesting reading, there seems to be a flaw in the assumption that those who rent are actually saving the money that might be going towards a bond payment. The reality is that South Africa’s relatively dismal national savings rate puts paid to that idea.
There are certainly plenty of good reasons to rent rather than buy a property, particularly in light of the limited overhead costs each month and the peace of mind that comes with knowing that your hands aren’t tied financially for the foreseeable future. However, if you manage your property carefully then it is possible for ordinary income earners to create substantial wealth through ownership.
There are plenty of people who will attest to the fact that their financial independence began with an investment in simple bricks and mortar. In the long run, at the very least you should own the roof over your head, as it may just be shelter, but it is your shelter and no one can take that away from you.
The information in this article is courtesy of Jackie Cameron (“Renting vs buying: 4 property myths”, Realestateweb, 18 April 2008).
Buy or sell property in South Africa.
In the current property market climate, investors are understandably shy and there are many potential buyers who are choosing to rent and rather bide their time until the market improves. However, there are experts who believe that the property market is set to hit rock bottom in the coming months and this is in fact the ideal time to make that investment.
In an article for Realestateweb, Jackie Cameron asks the question, “Is it really better to be a landlord than a tenant?” This was inspired by an American article called ‘Rent vs Buy Myths that Ruined the Housing Market’, which discussed some of the so-called myths that made people justify buying houses that they probably could not afford during the property boom in the US.
Myth 1: Renting is like throwing your money away.
Those who believe that renting is the way forward seem to think that buyers pay money to the bank for the first 5 years for the privilege of borrowing money. In contrast, renters pay for one thing each month: shelter – they don’t pay interest, tax and other property-related costs.
Myth 2: It doesn’t cost more to buy than it does to rent.
Those who decide to rent pay a deposit, while those who own spend loads of money on the initial costs, with the home needing to appreciate in value considerably before these costs become insignificant, is the argument here.
Myth 3: Buyers have assets; renters do not.
Those in favour of renting say that while they may not co-own a home with a lender, this doesn’t mean that they don’t have assets. In fact, they have extra cash to pay for these other assets.
Myth 4: Houses are a good investment.
There are some renters who believe that housing is “not an investment” and that although home prices can rise, the rate of appreciation on housing does not extend beyond inflation levels. The American article cites an annual real return on US housing gauged between 1890 and 2005 as a “pathetic 0.4% per year”. It also indicated that the gain in new prices over the last 20 years in the US is just a fraction of what the average investor in stocks would have made.
While some of these arguments may reflect sentiment currently holding force in our own country and may make for interesting reading, there seems to be a flaw in the assumption that those who rent are actually saving the money that might be going towards a bond payment. The reality is that South Africa’s relatively dismal national savings rate puts paid to that idea.
There are certainly plenty of good reasons to rent rather than buy a property, particularly in light of the limited overhead costs each month and the peace of mind that comes with knowing that your hands aren’t tied financially for the foreseeable future. However, if you manage your property carefully then it is possible for ordinary income earners to create substantial wealth through ownership.
There are plenty of people who will attest to the fact that their financial independence began with an investment in simple bricks and mortar. In the long run, at the very least you should own the roof over your head, as it may just be shelter, but it is your shelter and no one can take that away from you.
The information in this article is courtesy of Jackie Cameron (“Renting vs buying: 4 property myths”, Realestateweb, 18 April 2008).
Buy or sell property in South Africa.
Friday, August 22, 2008
Divergence Prominent in Light of SA Property Market Future
Views Differ on Future of Property
According to a recent article published by Business Report, economists seem to have divergent views when it comes to the property market outlook. This came to light at a fractional ownership conference in Cape Town yesterday.
Property strategist at FNB’s home loans department, John Loos forecast an improvement in sentiment, saying that now is “probably as good as it gets” in terms of the best time to buy property before prices start to recover.
Erwin Rode, of property research company Rode & Associates, had a much more pessimistic view, saying that “a long period of stagnation lies ahead” and this could last as long as five years. “That means prices of houses will lag inflation. That is, if building costs go up by 8 percent, house prices will rise by 4 percent in nominal terms,” he said.
According to Rode, this is the result of people in developed countries having lived beyond their means and surviving for many years on borrowed money. Fractional ownership is governed by the same regulations as timeshare and although there are several different models, the main difference is that it is confined essentially to the very upmarket property. Rode hoped that this would continue to be the case and that banks would stay out of financing it.
Dirk Wilson, co-founder of fractionalownership.co.za and the conference organizer, said that fractional ownership differed from timeshare in that the investors gained a share of equity in the property and not just the right to occupy the premises or let it for a certain period. Fractional sales are said to be “doing quite well” considering the state of the property market, but more participants are needed in providing properties, which have dropped from 64 six months ago to just 34 companies at present.
There has been a great deal of interest in South Africa from overseas investors and buyers looking for properties available now and not in the planning stage, such as golf estates or near the beach. There have to be hospitality and leisure facilities of a high standard, such as room service and a spa. Fractional ownership is really an investment in lifestyle and thus comes with a certain standard of living.
According to Wilson, 74 percent of enquiries about fractional title investment properties in South Africa were from overseas, including the UK, the US, Australia and the UAE. Also, a large number of South African expatriates are interested in property investment here, but “not a whole house,” as he said.
The information in this article is courtesy of Audrey d’Angelo (“Economists give widely differing views on property”, Business Report, 22 August 2008).
If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.
According to a recent article published by Business Report, economists seem to have divergent views when it comes to the property market outlook. This came to light at a fractional ownership conference in Cape Town yesterday.
Property strategist at FNB’s home loans department, John Loos forecast an improvement in sentiment, saying that now is “probably as good as it gets” in terms of the best time to buy property before prices start to recover.
Erwin Rode, of property research company Rode & Associates, had a much more pessimistic view, saying that “a long period of stagnation lies ahead” and this could last as long as five years. “That means prices of houses will lag inflation. That is, if building costs go up by 8 percent, house prices will rise by 4 percent in nominal terms,” he said.
According to Rode, this is the result of people in developed countries having lived beyond their means and surviving for many years on borrowed money. Fractional ownership is governed by the same regulations as timeshare and although there are several different models, the main difference is that it is confined essentially to the very upmarket property. Rode hoped that this would continue to be the case and that banks would stay out of financing it.
Dirk Wilson, co-founder of fractionalownership.co.za and the conference organizer, said that fractional ownership differed from timeshare in that the investors gained a share of equity in the property and not just the right to occupy the premises or let it for a certain period. Fractional sales are said to be “doing quite well” considering the state of the property market, but more participants are needed in providing properties, which have dropped from 64 six months ago to just 34 companies at present.
There has been a great deal of interest in South Africa from overseas investors and buyers looking for properties available now and not in the planning stage, such as golf estates or near the beach. There have to be hospitality and leisure facilities of a high standard, such as room service and a spa. Fractional ownership is really an investment in lifestyle and thus comes with a certain standard of living.
According to Wilson, 74 percent of enquiries about fractional title investment properties in South Africa were from overseas, including the UK, the US, Australia and the UAE. Also, a large number of South African expatriates are interested in property investment here, but “not a whole house,” as he said.
The information in this article is courtesy of Audrey d’Angelo (“Economists give widely differing views on property”, Business Report, 22 August 2008).
If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.
Thursday, August 21, 2008
Green Phenomenon Takes Hold in South Africa
Property Entering Green Era
Astute property developers, investors and entrepreneurs will no doubt already be aware of the next big era in the property, namely the profound impact that ‘green building’ practices are going to have on the industry in the foreseeable future. There are boundless business opportunities emerging as South Africa’s commercial property developers and investors join the bandwagon of what is fast-becoming a global phenomenon.
Building design is undergoing a transformation, moving away from work environments that are closed off from the outside world towards places of business designed to be at one with the natural surroundings. For instance, the power-draining air conditioners so often found in high-rise buildings and the shimmering glass towers that trap heat are set to become a thing of the past, as landlords and tenants demand real estate more reliant on renewable energy and reusable materials.
The recent IPD/Sapoa Property Investment Conference held in Cape Town recently focused primarily on the global trend towards constructing and refurbishing buildings along environmentally friendly lines. Delegates were informed that commercial property and the world’s airlines are two of the major contributors towards the production of dangerous carbon gas emissions destroying the earth’s ozone layer and as a result, contributing to the ever-looming global warming.
The South African real estate industry has only recently begun adopting green building standards, but the movement is expected to gain momentum. The Green Star Rating System is currently being introduced and although the ratings are not compulsory, pressure is anticipated to come from corporates, particularly those with international shareholders who want to be seen as socially and environmentally responsible.
According to the chairman of the Green Building Council of SA, Bruce Kerswill, “We in South Africa haven’t felt the sense of urgency on this yet. But we can expect to see stakeholder and government pressure here soon. South Africa has agreed to cut carbon emissions”. While some may not be inspired by the moral aspect, there is certainly a compelling business case for the greener option, with research showing that productivity can increase from about 5% to 15% with employees who work in a ‘green’ building.
Like all the healthier things in life, green buildings do tend to be on the expensive side when it comes to building and ultimately renting, however the cost is not quite as much as one might expect. For instance, in Australia a four-star building would cost the same as a non-green building in capital costs, while a five-star building requires more technology and would be around 5% extra in total cost. At 11% more for a six-star building, Kerswill believes this is “not a huge premium” to pay.
Buildings that promote the use of public transport rather than the use of private vehicles by being situated close to major transport nodes or because smaller cars get the best parking will earn more points than those that don’t. There is a huge emphasis on recycling and points are earned for sourcing local products rather than importing cheaper ones from elsewhere. There is another category that rewards “innovation” and this aims to “stimulate out of the box thinking” rather than simply adhering to the ratings.
Kerswill insists that this is not just a passing fad. Development director at Old Mutual Investment Group Property Investments, Brent Wilshire says that his organization has looked at their “top eight” buildings in a bid to identify areas to “make a difference”. He also produced some interesting figures indicating the extent to which these buildings ‘guzzle natural resources’. Just a 20% reduction in water use at these buildings alone would conserve enough water to fill 133 swimming pools every day.
“The important thing is you need to be able to measure then you can set targets,” Wiltshire says, highlighting the value of a green building rating system. “In our new assets, the green building principles are best practice. What is important is to get the right team in place. It’s about putting the philosophy in place upfront and making sure the team buys into it – it’s about an attitude”.
Managing director of IPD Occupiers and Management in the UK, Christopher Hedley indicates that corporate property will come under increased pressure and scrutiny for environmental performance and compliance. “Property investors face risks. Tenants will act and valuers will respond,” he says. He adds that as more green buildings come onto the market, they will start to get cheaper. “There is an increasing pressure to deliver. We have the need for accurate information. We’ve got to create monitoring and targets and need to be able to prove performance,” Hedley says.
The information in this article is courtesy of Jackie Cameron (“Making money in the new property era”, Realestateweb, 20 August 2008).
If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.
Astute property developers, investors and entrepreneurs will no doubt already be aware of the next big era in the property, namely the profound impact that ‘green building’ practices are going to have on the industry in the foreseeable future. There are boundless business opportunities emerging as South Africa’s commercial property developers and investors join the bandwagon of what is fast-becoming a global phenomenon.
Building design is undergoing a transformation, moving away from work environments that are closed off from the outside world towards places of business designed to be at one with the natural surroundings. For instance, the power-draining air conditioners so often found in high-rise buildings and the shimmering glass towers that trap heat are set to become a thing of the past, as landlords and tenants demand real estate more reliant on renewable energy and reusable materials.
The recent IPD/Sapoa Property Investment Conference held in Cape Town recently focused primarily on the global trend towards constructing and refurbishing buildings along environmentally friendly lines. Delegates were informed that commercial property and the world’s airlines are two of the major contributors towards the production of dangerous carbon gas emissions destroying the earth’s ozone layer and as a result, contributing to the ever-looming global warming.
The South African real estate industry has only recently begun adopting green building standards, but the movement is expected to gain momentum. The Green Star Rating System is currently being introduced and although the ratings are not compulsory, pressure is anticipated to come from corporates, particularly those with international shareholders who want to be seen as socially and environmentally responsible.
According to the chairman of the Green Building Council of SA, Bruce Kerswill, “We in South Africa haven’t felt the sense of urgency on this yet. But we can expect to see stakeholder and government pressure here soon. South Africa has agreed to cut carbon emissions”. While some may not be inspired by the moral aspect, there is certainly a compelling business case for the greener option, with research showing that productivity can increase from about 5% to 15% with employees who work in a ‘green’ building.
Like all the healthier things in life, green buildings do tend to be on the expensive side when it comes to building and ultimately renting, however the cost is not quite as much as one might expect. For instance, in Australia a four-star building would cost the same as a non-green building in capital costs, while a five-star building requires more technology and would be around 5% extra in total cost. At 11% more for a six-star building, Kerswill believes this is “not a huge premium” to pay.
Buildings that promote the use of public transport rather than the use of private vehicles by being situated close to major transport nodes or because smaller cars get the best parking will earn more points than those that don’t. There is a huge emphasis on recycling and points are earned for sourcing local products rather than importing cheaper ones from elsewhere. There is another category that rewards “innovation” and this aims to “stimulate out of the box thinking” rather than simply adhering to the ratings.
Kerswill insists that this is not just a passing fad. Development director at Old Mutual Investment Group Property Investments, Brent Wilshire says that his organization has looked at their “top eight” buildings in a bid to identify areas to “make a difference”. He also produced some interesting figures indicating the extent to which these buildings ‘guzzle natural resources’. Just a 20% reduction in water use at these buildings alone would conserve enough water to fill 133 swimming pools every day.
“The important thing is you need to be able to measure then you can set targets,” Wiltshire says, highlighting the value of a green building rating system. “In our new assets, the green building principles are best practice. What is important is to get the right team in place. It’s about putting the philosophy in place upfront and making sure the team buys into it – it’s about an attitude”.
Managing director of IPD Occupiers and Management in the UK, Christopher Hedley indicates that corporate property will come under increased pressure and scrutiny for environmental performance and compliance. “Property investors face risks. Tenants will act and valuers will respond,” he says. He adds that as more green buildings come onto the market, they will start to get cheaper. “There is an increasing pressure to deliver. We have the need for accurate information. We’ve got to create monitoring and targets and need to be able to prove performance,” Hedley says.
The information in this article is courtesy of Jackie Cameron (“Making money in the new property era”, Realestateweb, 20 August 2008).
If you would like to buy or sell property in South Africa, please visit www.sahometraders.co.za.
Friday, August 15, 2008
International Delegates Drawn to SA Property Course
Sapoa Course World Class
An article in Business Day draws attention to commercial property association, Sapoa and its flagship property development course, which attracted the highest number of international delegates in its history. This merely goes to show how the reputation of the program's quality is spreading beyond South Africa’s borders.
The property management program deals specifically with finance, valuation, property law, negotiation, investment, development and marketing, all in the context of property. The course is run jointly by Sapoa and the University of Cape Town’s Graduate School of Business and is an intensive program run over a two week period aimed at sharpening skills across a wide range of property disciplines.
According to Sapoa CEO, Neil Gopal, more than half of the applicants who apply each year are turned away. This year, there were 131 applications in total, of which just 64 were accepted. There are 8 international delegates that form part of this year’s program delegates, which is the highest number since the course was first offered in South Africa.
The program has lectures that cover a broad range of topics related to property, including economics and strategic thinking, town planning and valuation, marketing and property management. Instructors for the course are selected from the faculty at UCT’s Graduate School of Business, as well as a pool of specialists and professionals who are members of Sapoa.
The information in this article is courtesy of Business Day (“South Africa: International Delegates Attend Sapoa Course”, AllAfrica, 13 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article in Business Day draws attention to commercial property association, Sapoa and its flagship property development course, which attracted the highest number of international delegates in its history. This merely goes to show how the reputation of the program's quality is spreading beyond South Africa’s borders.
The property management program deals specifically with finance, valuation, property law, negotiation, investment, development and marketing, all in the context of property. The course is run jointly by Sapoa and the University of Cape Town’s Graduate School of Business and is an intensive program run over a two week period aimed at sharpening skills across a wide range of property disciplines.
According to Sapoa CEO, Neil Gopal, more than half of the applicants who apply each year are turned away. This year, there were 131 applications in total, of which just 64 were accepted. There are 8 international delegates that form part of this year’s program delegates, which is the highest number since the course was first offered in South Africa.
The program has lectures that cover a broad range of topics related to property, including economics and strategic thinking, town planning and valuation, marketing and property management. Instructors for the course are selected from the faculty at UCT’s Graduate School of Business, as well as a pool of specialists and professionals who are members of Sapoa.
The information in this article is courtesy of Business Day (“South Africa: International Delegates Attend Sapoa Course”, AllAfrica, 13 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Thursday, August 14, 2008
More and More Investors are Attracted to Liquid Options
Time to Cash In?
An article published by South African Insurance Times and Investment News poses the question: change to cash, or not? This comes in response to the current volatility and uncertainty surrounding the equity and bond markets, where cash is becoming an increasingly attractive option for concerned investors.
Joint MD of Taquanta Asset Managers and asset manager of the NedGroup Money Market Unit Trust, Stephen Rogers is of the opinion that cash should not be seen as an ‘all or nothing’ alternative. Taquanta Asset Managers is regularly ranked as South Africa’s top cash manager in a range of independent market surveys.
Rogers said, “It’s probably too late to switch from equities to cash right now. But it is time to re-weight one’s investment portfolio and to include a higher proportion of cash than before, although it may not be advisable to move all one’s equity and bond investments into cash”.
Rogers went on to say that, “If one is fortunate enough to come into new money – for example, from the sale of one’s property, an inheritance or even winning the lotto – then cash is probably the best place to put it right now, at least until some level of normality returns to the equity, bond and property markets”.
He dismisses the argument that equities remain a better investment option than cash due to rising inflation, the tax drag and self-discipline risks associated with having ‘liquid’ cash investments, such as money market funds. Rogers points out that very few investment opportunities can guarantee returns over 12% in the current climate, which is at least a positive return considering the present rate of inflation.
Rogers asked, “What else is beating inflation or is likely to beat inflation in the foreseeable future?” He added that equity unit trusts are just as susceptible to tax and self-discipline risks as money market funds. “The point is that while equities may have been able to deliver returns of above 30% in the past, negative returns are becoming something of a norm in the current volatile market,” Rogers said.
According to Rogers, there are highly divergent views on where the resources and financial counters are going, or even whether these still offer value. The pure equity fund managers who promise a positive return overcoming inflation in today’s market is likely stretching the truth, he believes. “Equity trading volumes are significantly down in the institutional space – the institutions are not going there – and that should serve as a guide to private investors,” Rogers urged.
The information in this article is courtesy of Marilyn de Villiers (“Change to cash – or not?” ITINews, 12 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article published by South African Insurance Times and Investment News poses the question: change to cash, or not? This comes in response to the current volatility and uncertainty surrounding the equity and bond markets, where cash is becoming an increasingly attractive option for concerned investors.
Joint MD of Taquanta Asset Managers and asset manager of the NedGroup Money Market Unit Trust, Stephen Rogers is of the opinion that cash should not be seen as an ‘all or nothing’ alternative. Taquanta Asset Managers is regularly ranked as South Africa’s top cash manager in a range of independent market surveys.
Rogers said, “It’s probably too late to switch from equities to cash right now. But it is time to re-weight one’s investment portfolio and to include a higher proportion of cash than before, although it may not be advisable to move all one’s equity and bond investments into cash”.
Rogers went on to say that, “If one is fortunate enough to come into new money – for example, from the sale of one’s property, an inheritance or even winning the lotto – then cash is probably the best place to put it right now, at least until some level of normality returns to the equity, bond and property markets”.
He dismisses the argument that equities remain a better investment option than cash due to rising inflation, the tax drag and self-discipline risks associated with having ‘liquid’ cash investments, such as money market funds. Rogers points out that very few investment opportunities can guarantee returns over 12% in the current climate, which is at least a positive return considering the present rate of inflation.
Rogers asked, “What else is beating inflation or is likely to beat inflation in the foreseeable future?” He added that equity unit trusts are just as susceptible to tax and self-discipline risks as money market funds. “The point is that while equities may have been able to deliver returns of above 30% in the past, negative returns are becoming something of a norm in the current volatile market,” Rogers said.
According to Rogers, there are highly divergent views on where the resources and financial counters are going, or even whether these still offer value. The pure equity fund managers who promise a positive return overcoming inflation in today’s market is likely stretching the truth, he believes. “Equity trading volumes are significantly down in the institutional space – the institutions are not going there – and that should serve as a guide to private investors,” Rogers urged.
The information in this article is courtesy of Marilyn de Villiers (“Change to cash – or not?” ITINews, 12 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Tuesday, August 12, 2008
SA Bank Responds to Criticism Over Home Loan Withdrawals
FNB Clarifies its Decision
Recently, it was reported that the Ombudsman for Banking Services fired a warning shot at FNB for its decision to withdraw home loan approvals on a large scale. An article by Realestateweb discusses the bank’s reaction to a “frank” meeting with the Ombudsman, in a bid to clarify which home loans are to be pulled.
A Big Four bank, FNB has assured developers that it will try and help those who are in financial trouble as it withdraws loan approvals for properties under construction. It also said that it will not reassess recently approved home loans that would normally take three to four months to register.
These assurances come in the wake of a “frank” meeting with the Banking Ombudsman, who recently fired a public warning at the bank, which has largely been seen as an unprecedented move. FNB’s decision to withdraw home loans on a large scale, as reported in an earlier article, will have major implications for developers, intermediaries and other players in the residential property industry.
After meeting with the Ombudsman, advocate Clive Pillay, the bank said that its “original statement on its reassessment decision may not have been clear and may have inadvertently caused unnecessary confusion and concern”. It went on to say that FNB and Pillay have since “agreed that the bank’s criteria, as now spelt out, for reassessing home loans approved in principle more than a year ago are ‘fair and equitable’”.
According to FNB, the home loan applications to be reassessed are those that take up to a year or longer to register and are of a development-type nature (excluding building bonds), not those that usually take three to four months for transfer and registration. Its intention is to “prevent customers from taking on more debt they are unable to service, resulting in an over-indebtedness position”.
The bank will only reassess applications should the following criteria apply:
- Where FNB guarantees have not already been issued;
- Any judgments or defaults evident with credit bureaus arise between the original granting of the home loan and prior to registration of the property;
- Customers confirm they are unable to afford the home loan subsequent to the original approval.
Each home loan will be reassessed “on a one-on-one basis with the intention of granting final approval for as many of the affected customers as possible. The bank will only decline applicants in cases where the client will be severely over-indebted should the transaction go ahead,” the bank said.
Customers who failed to provide their updated financial information are required to confirm their intention to go forward with the deal, otherwise FNB will contact each of the identified customers with the intention to proceed with the home loan, unless any of the above criteria are applicable.
Also, FNB is aware of the “impact its decision may have on any one developer and their financial institutions and will accordingly engage with them to find an amicable solution to mitigate any undue losses that may arise”.
The information in this article is courtesy of Realestateweb (“FNB: most new home loans “safe”, 12 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Recently, it was reported that the Ombudsman for Banking Services fired a warning shot at FNB for its decision to withdraw home loan approvals on a large scale. An article by Realestateweb discusses the bank’s reaction to a “frank” meeting with the Ombudsman, in a bid to clarify which home loans are to be pulled.
A Big Four bank, FNB has assured developers that it will try and help those who are in financial trouble as it withdraws loan approvals for properties under construction. It also said that it will not reassess recently approved home loans that would normally take three to four months to register.
These assurances come in the wake of a “frank” meeting with the Banking Ombudsman, who recently fired a public warning at the bank, which has largely been seen as an unprecedented move. FNB’s decision to withdraw home loans on a large scale, as reported in an earlier article, will have major implications for developers, intermediaries and other players in the residential property industry.
After meeting with the Ombudsman, advocate Clive Pillay, the bank said that its “original statement on its reassessment decision may not have been clear and may have inadvertently caused unnecessary confusion and concern”. It went on to say that FNB and Pillay have since “agreed that the bank’s criteria, as now spelt out, for reassessing home loans approved in principle more than a year ago are ‘fair and equitable’”.
According to FNB, the home loan applications to be reassessed are those that take up to a year or longer to register and are of a development-type nature (excluding building bonds), not those that usually take three to four months for transfer and registration. Its intention is to “prevent customers from taking on more debt they are unable to service, resulting in an over-indebtedness position”.
The bank will only reassess applications should the following criteria apply:
- Where FNB guarantees have not already been issued;
- Any judgments or defaults evident with credit bureaus arise between the original granting of the home loan and prior to registration of the property;
- Customers confirm they are unable to afford the home loan subsequent to the original approval.
Each home loan will be reassessed “on a one-on-one basis with the intention of granting final approval for as many of the affected customers as possible. The bank will only decline applicants in cases where the client will be severely over-indebted should the transaction go ahead,” the bank said.
Customers who failed to provide their updated financial information are required to confirm their intention to go forward with the deal, otherwise FNB will contact each of the identified customers with the intention to proceed with the home loan, unless any of the above criteria are applicable.
Also, FNB is aware of the “impact its decision may have on any one developer and their financial institutions and will accordingly engage with them to find an amicable solution to mitigate any undue losses that may arise”.
The information in this article is courtesy of Realestateweb (“FNB: most new home loans “safe”, 12 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Top Economist Predicts Interest Rate Drop in SA
Interest Rates to Drop Soon
An article published by Realestateweb predicts that interest rates will begin to fall fast from later this year, according to a top economist. Inflation is set to drop more than it has risen and is expected to be back in the South African Reserve Bank’s target range of 3-6% by the time the 2010 World Cup kicks off.
What this means is that you can expect interest rates to start falling later this year, putting some of the purchase power back into the pockets of already struggling consumers. This breath of optimistic fresh air comes from FNB’s chief economist, Cees Bruggemans, who spoke at the annual Rode conference on property in South Africa, held in Stellenbosch on Monday.
The FNB economist is not alone in his thinking that the worst of the interest rate saga is over. Just last week, investment strategist for Investec Securities, Brian Kantor said that R157 (a government bond) was shedding important clues that the worst could certainly be over for interest rates.
Bruggemans believes that Reserve Bank Governor Tito Mboweni may well press the pause button at the next Monetary Policy Committee meeting. Mboweni has used interest rates as the primary tool to manoeuvre towards his target of 3-6%. Bruggemans’ analysis indicates that the first interest rate cut might come in December, which means a prime interest rate of 15% by the end of the year and a prime interest rate of 13% by the end of 2009.
However, he went on to emphasise that his view is dependent on a number of variables, which include the oil price not producing another shock. Since June, the oil prices and agricultural prices have dropped due to the stability of the rand. Lower than expected economic growth, with a sacrifice in large parts of the economy already being advanced, is also a factor.
The current account deficit at 9% of Gross Domestic Product is extremely worrying, as this places South Africa as a high-risk country from the perspective of foreign investment and might easily produce a withdrawal of funds.
“We are running a high interest rate defence policy and it has worked to this day,” said Bruggemans, in light of the rand’s value. “The nice folks at StatsSA are making a few imaginative changes…that is really knocking inflation down,” was Bruggemans’ comment about changes to national inflation measures. “We are suddenly looking at an inflation projection that goes down faster than the rise ever was. That starts between now and November,” he said.
The R157 was trading at a yield of 10.9% in June and recently, it has been trading around 9.3%. According to Kantor, these figures are in “recognition” that the South African Reserve Bank won’t push interest rates any higher. The bond’s market reaction reflects the notion that SARB has come to the end of its interest rate hiking.
Dries du Toit, of Dries du Toit Consult CC agreed with Kantor, saying that the bond yields “act like a barometer” and indications are that they have been falling over the past five weeks. “People price listed property on the back of bonds. Since November [listed property] fell by 35% up to the first week in July. Already it has turned around and increased by 15%,” du Toit said at the Rode conference.
Du Toit went on to say that, “If we are successful in getting interest rates down, the future will exceed all our expectations. I’m not talking about house prices, but commercial, direct and listed property”. He said, “No one rings a bell at the bottom. Ding-a-ling-a-ling – we have already seen the bottom in listed property prices”.
According to du Toit, listed property may not be a “super buy”, but it is still a buy, while he believes that there is still worse to come for the residential property market.
The information in this article is courtesy of Realestateweb (“Interest rates to come down fast – top economist”, 11 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article published by Realestateweb predicts that interest rates will begin to fall fast from later this year, according to a top economist. Inflation is set to drop more than it has risen and is expected to be back in the South African Reserve Bank’s target range of 3-6% by the time the 2010 World Cup kicks off.
What this means is that you can expect interest rates to start falling later this year, putting some of the purchase power back into the pockets of already struggling consumers. This breath of optimistic fresh air comes from FNB’s chief economist, Cees Bruggemans, who spoke at the annual Rode conference on property in South Africa, held in Stellenbosch on Monday.
The FNB economist is not alone in his thinking that the worst of the interest rate saga is over. Just last week, investment strategist for Investec Securities, Brian Kantor said that R157 (a government bond) was shedding important clues that the worst could certainly be over for interest rates.
Bruggemans believes that Reserve Bank Governor Tito Mboweni may well press the pause button at the next Monetary Policy Committee meeting. Mboweni has used interest rates as the primary tool to manoeuvre towards his target of 3-6%. Bruggemans’ analysis indicates that the first interest rate cut might come in December, which means a prime interest rate of 15% by the end of the year and a prime interest rate of 13% by the end of 2009.
However, he went on to emphasise that his view is dependent on a number of variables, which include the oil price not producing another shock. Since June, the oil prices and agricultural prices have dropped due to the stability of the rand. Lower than expected economic growth, with a sacrifice in large parts of the economy already being advanced, is also a factor.
The current account deficit at 9% of Gross Domestic Product is extremely worrying, as this places South Africa as a high-risk country from the perspective of foreign investment and might easily produce a withdrawal of funds.
“We are running a high interest rate defence policy and it has worked to this day,” said Bruggemans, in light of the rand’s value. “The nice folks at StatsSA are making a few imaginative changes…that is really knocking inflation down,” was Bruggemans’ comment about changes to national inflation measures. “We are suddenly looking at an inflation projection that goes down faster than the rise ever was. That starts between now and November,” he said.
The R157 was trading at a yield of 10.9% in June and recently, it has been trading around 9.3%. According to Kantor, these figures are in “recognition” that the South African Reserve Bank won’t push interest rates any higher. The bond’s market reaction reflects the notion that SARB has come to the end of its interest rate hiking.
Dries du Toit, of Dries du Toit Consult CC agreed with Kantor, saying that the bond yields “act like a barometer” and indications are that they have been falling over the past five weeks. “People price listed property on the back of bonds. Since November [listed property] fell by 35% up to the first week in July. Already it has turned around and increased by 15%,” du Toit said at the Rode conference.
Du Toit went on to say that, “If we are successful in getting interest rates down, the future will exceed all our expectations. I’m not talking about house prices, but commercial, direct and listed property”. He said, “No one rings a bell at the bottom. Ding-a-ling-a-ling – we have already seen the bottom in listed property prices”.
According to du Toit, listed property may not be a “super buy”, but it is still a buy, while he believes that there is still worse to come for the residential property market.
The information in this article is courtesy of Realestateweb (“Interest rates to come down fast – top economist”, 11 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Sunday, August 10, 2008
Green Seems to be Building's New In Colour
An Engineering News article has drawn attention to the recent trend in South Africa where property investors are set to place more emphasis on green building. This comes after the United Nations identified property development as one of the primary contributors to global warming.
According to the UN, buildings consume between 40% and 50% of the world’s energy, 30% of raw materials and 20% of its water resources. However, it has also been identified as the one sector that has the potential to make the biggest impact on reducing energy consumption.
The adoption of green building practices, such as water recycling, solar heating, more energy-efficient air conditioning systems, could reduce energy consumption from 30% up to 70%. The property development sector’s unique position to effectively reduce the effects of climate change suggests that corporate property will now come under increased scrutiny for environmental performance.
IPD Occupiers UK director, Christopher Hedley addressed delegates at the sixth annual IPD/Sapoa Property Investment Conference held in Cape Town last week and explained that not many property investors were now tackling the issue of green building, as they placed more emphasis on investment returns than environmental sustainability.
In fact, statistics revealed that just half of property investment companies in South Africa were addressing the issue of climate change and green building. However, things are soon to change, as property investors will begin to receive pressure for greener buildings from tenants, governments and stakeholders, pushing them to integrate environmental sustainability into their future investment projects.
Old Mutual Property Investments business development executive, Brent Wilshire agreed with Hedley and argued that investors should think of climate change as a market transition, rather than an environmental issue. He added that it was essential for property investors to integrate green building practices into their investment portfolios because energy and utility costs are set to “explode”, infrastructure will be scarcer and the South African government may introduce green legislation in the future.
The green building initiative has been gathering momentum around the globe for the past five years. According to Bruce Kerswill, executive chairperson of the Green Building Council of South Africa, the real impetus for this initiative has been global warming. South Africa has not received the same pressure as other world nations to tackle the issue and is thus lagging behind the rest of the world in terms of implementing green building practices.
The recent electricity supply crisis in the country has given the green building movement in South Africa a push in the right direction, as this has forced property owners to seek out new ways of conserving energy in building techniques. Another factor playing an important role is that large multinational tenants have now started to demand environmentally friendly buildings and are willing to pay a premium to lease them, said Kerswill.
Also, Kerswill explained that the growing operational costs of transitional buildings have ensured that green building continues to gain in popularity. The operational costs of green buildings are significantly less, which is due to the lower electricity and water consumption, so the construction of such buildings is increasingly being seen as a better alternative in the long term.
The information in this article is courtesy of Jade Davenport (“Property investors urged to place more emphasis on green building”, Engineering News, 8 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
According to the UN, buildings consume between 40% and 50% of the world’s energy, 30% of raw materials and 20% of its water resources. However, it has also been identified as the one sector that has the potential to make the biggest impact on reducing energy consumption.
The adoption of green building practices, such as water recycling, solar heating, more energy-efficient air conditioning systems, could reduce energy consumption from 30% up to 70%. The property development sector’s unique position to effectively reduce the effects of climate change suggests that corporate property will now come under increased scrutiny for environmental performance.
IPD Occupiers UK director, Christopher Hedley addressed delegates at the sixth annual IPD/Sapoa Property Investment Conference held in Cape Town last week and explained that not many property investors were now tackling the issue of green building, as they placed more emphasis on investment returns than environmental sustainability.
In fact, statistics revealed that just half of property investment companies in South Africa were addressing the issue of climate change and green building. However, things are soon to change, as property investors will begin to receive pressure for greener buildings from tenants, governments and stakeholders, pushing them to integrate environmental sustainability into their future investment projects.
Old Mutual Property Investments business development executive, Brent Wilshire agreed with Hedley and argued that investors should think of climate change as a market transition, rather than an environmental issue. He added that it was essential for property investors to integrate green building practices into their investment portfolios because energy and utility costs are set to “explode”, infrastructure will be scarcer and the South African government may introduce green legislation in the future.
The green building initiative has been gathering momentum around the globe for the past five years. According to Bruce Kerswill, executive chairperson of the Green Building Council of South Africa, the real impetus for this initiative has been global warming. South Africa has not received the same pressure as other world nations to tackle the issue and is thus lagging behind the rest of the world in terms of implementing green building practices.
The recent electricity supply crisis in the country has given the green building movement in South Africa a push in the right direction, as this has forced property owners to seek out new ways of conserving energy in building techniques. Another factor playing an important role is that large multinational tenants have now started to demand environmentally friendly buildings and are willing to pay a premium to lease them, said Kerswill.
Also, Kerswill explained that the growing operational costs of transitional buildings have ensured that green building continues to gain in popularity. The operational costs of green buildings are significantly less, which is due to the lower electricity and water consumption, so the construction of such buildings is increasingly being seen as a better alternative in the long term.
The information in this article is courtesy of Jade Davenport (“Property investors urged to place more emphasis on green building”, Engineering News, 8 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Friday, August 8, 2008
SA Banks Share Different Views on Credit
FNB Criticised for Credit Withdrawals
An article by Realestateweb has drawn attention to the Ombudsman for Banking Services' recent warning shot fired at First National Bank (FNB)’s decision to withdraw home loan approvals “on a large scale”. ABSA has since revealed that it is those professionals who are self-employed that are being hardest hit by the severe downcycle in the property market.
FNB released the news about its home loan shock this week, saying that it was pulling the plug on property credit in the current economic climate, where inflation continues to rise and property prices are falling. The reason given for this decision is that levels of affordability have “deteriorated considerably”.
The decision involves the reassessment of certain loans that have already been approved; however those that have been lodged in the Deeds Office or registered will not be affected. Spokesperson for FNB, Xolisa Vapi said, “We continue to reassess offers. The need has become more acute now, given the fast-changing circumstances”.
Vapi admitted that this action is “unusual” and has not been carried out in a long time, “but has always been a possibility because the bank’s offers to provide credit include a clause allowing it to exit if necessary”. He went on to say that every contract has a clause allowing the bank to reassess its offer.
The focus of the reassessment is on home loan approvals that have been granted in the last year and have not yet been registered. Although Vapi could not divulge statistics for the amount of approvals the bank is set to withdraw, he did say that it is “on a large scale”.
The Ombudsman for Banking Services, Clive Pillay has taken an unprecedented step in his public criticism of the move by FNB. In a statement made to the media on Wednesday, Pillay argued that it was “sound and prudent to reassess bonds granted in principle,” but “cautioned that each matter be reassessed in a manner that does not unduly prejudice the customer”.
Pillay outlined the following scenario, which would “severely prejudice the purchaser” – where a home loan has been granted and the buyer then pays a deposit to the seller. “While the parties are awaiting registration, the bank withdraws the bond, either completely, or offers the purchaser a smaller bond. Because of the bank’s decision, the purchaser is unable to proceed with the transaction”.
What happens then is the seller insists that the buyer “fulfill his contractual obligations” and in so doing, the “seller retains the deposit paid and sues the purchaser for the balance of the purchase price”. In such a situation, said Pillay, the bank “should consider alternatives to assist the customer”.
Even so, Pillay said that reassessment is in compliance with the National Credit Act, which enforces strict new credit criteria and this is partly responsible for the dramatic decrease in property deals over the last year. Pillay urged bank customers who are unhappy with the outcomes of their related disputes to approach his office: 0861 662 2837.
Managing executive for ABSA’s home loans, Gavin Opperman is reported as saying that he spends more than half of his day collecting and recovering. This is true of self-employed professionals in particular, he said, such as lawyers and those in the medical field, who are “really battling” in tight economic conditions, but not necessarily the “guy who has a café on the corner”.
What seems to be happening is that consumers are now not going to doctors and dentists and are no longer paying their medical aids, according to Opperman. He referred to an example of a property he had recently handed over to the Alliance Group for auction after a medical professional could no longer keep up with his debts, having put down a deposit of R3m plus costs and was paying off the balance of R7m with a mortgage.
This particular individual paid R10m about 18 months ago for his home and was struggling to meet home loan repayments of around R100 000 per month. Even more discouraging is the fact that the owner can expect around 50 to 60% of that market value on auction. Opperman stressed that this is by no means an isolated case and that ABSA would assist individuals in similar situations if they contact the bank as soon as they anticipate financial trouble.
“These people will bounce back. We’ll restructure the debt and he will rent for a while,” said Opperman of the medical professional who is about to lose his home at auction. He went on to say that those in the affordable housing sector were not as hard hit as the upper income earners.
Opperman may be spending much of his time looking at debt recovery, but he remains optimistic about property because “you are effectively saving” when you invest in bricks and mortar. Also, saving money in a home loan makes better financial sense than saving it elsewhere. “We don’t believe interest rates will escalate further. So affordability calculations for mortgages now shouldn’t be a problem,” said Opperman.
Saul Geffen, chief executive officer of South Africa’s biggest mortgage originator, Ooba, said that FNB began reassessing and withdrawing home loan approvals at the end of July. “In the cases where a reassessment of our clients’ financial position has become necessary, we are expediting the process by contacting our clients and assisting them with completing the required documentation,” he said.
Geffen indicated that Ooba would try and secure alternative bond finance through a different lender where FNB makes a withdrawal. “Presently, banks do have different appetites for risk and we therefore find that an application declined by one bank is often granted by another bank,” said Geffen.
The information in this article is courtesy of Realestateweb (“Ombudsman fires public warning shot at FNB”, 7 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article by Realestateweb has drawn attention to the Ombudsman for Banking Services' recent warning shot fired at First National Bank (FNB)’s decision to withdraw home loan approvals “on a large scale”. ABSA has since revealed that it is those professionals who are self-employed that are being hardest hit by the severe downcycle in the property market.
FNB released the news about its home loan shock this week, saying that it was pulling the plug on property credit in the current economic climate, where inflation continues to rise and property prices are falling. The reason given for this decision is that levels of affordability have “deteriorated considerably”.
The decision involves the reassessment of certain loans that have already been approved; however those that have been lodged in the Deeds Office or registered will not be affected. Spokesperson for FNB, Xolisa Vapi said, “We continue to reassess offers. The need has become more acute now, given the fast-changing circumstances”.
Vapi admitted that this action is “unusual” and has not been carried out in a long time, “but has always been a possibility because the bank’s offers to provide credit include a clause allowing it to exit if necessary”. He went on to say that every contract has a clause allowing the bank to reassess its offer.
The focus of the reassessment is on home loan approvals that have been granted in the last year and have not yet been registered. Although Vapi could not divulge statistics for the amount of approvals the bank is set to withdraw, he did say that it is “on a large scale”.
The Ombudsman for Banking Services, Clive Pillay has taken an unprecedented step in his public criticism of the move by FNB. In a statement made to the media on Wednesday, Pillay argued that it was “sound and prudent to reassess bonds granted in principle,” but “cautioned that each matter be reassessed in a manner that does not unduly prejudice the customer”.
Pillay outlined the following scenario, which would “severely prejudice the purchaser” – where a home loan has been granted and the buyer then pays a deposit to the seller. “While the parties are awaiting registration, the bank withdraws the bond, either completely, or offers the purchaser a smaller bond. Because of the bank’s decision, the purchaser is unable to proceed with the transaction”.
What happens then is the seller insists that the buyer “fulfill his contractual obligations” and in so doing, the “seller retains the deposit paid and sues the purchaser for the balance of the purchase price”. In such a situation, said Pillay, the bank “should consider alternatives to assist the customer”.
Even so, Pillay said that reassessment is in compliance with the National Credit Act, which enforces strict new credit criteria and this is partly responsible for the dramatic decrease in property deals over the last year. Pillay urged bank customers who are unhappy with the outcomes of their related disputes to approach his office: 0861 662 2837.
Managing executive for ABSA’s home loans, Gavin Opperman is reported as saying that he spends more than half of his day collecting and recovering. This is true of self-employed professionals in particular, he said, such as lawyers and those in the medical field, who are “really battling” in tight economic conditions, but not necessarily the “guy who has a café on the corner”.
What seems to be happening is that consumers are now not going to doctors and dentists and are no longer paying their medical aids, according to Opperman. He referred to an example of a property he had recently handed over to the Alliance Group for auction after a medical professional could no longer keep up with his debts, having put down a deposit of R3m plus costs and was paying off the balance of R7m with a mortgage.
This particular individual paid R10m about 18 months ago for his home and was struggling to meet home loan repayments of around R100 000 per month. Even more discouraging is the fact that the owner can expect around 50 to 60% of that market value on auction. Opperman stressed that this is by no means an isolated case and that ABSA would assist individuals in similar situations if they contact the bank as soon as they anticipate financial trouble.
“These people will bounce back. We’ll restructure the debt and he will rent for a while,” said Opperman of the medical professional who is about to lose his home at auction. He went on to say that those in the affordable housing sector were not as hard hit as the upper income earners.
Opperman may be spending much of his time looking at debt recovery, but he remains optimistic about property because “you are effectively saving” when you invest in bricks and mortar. Also, saving money in a home loan makes better financial sense than saving it elsewhere. “We don’t believe interest rates will escalate further. So affordability calculations for mortgages now shouldn’t be a problem,” said Opperman.
Saul Geffen, chief executive officer of South Africa’s biggest mortgage originator, Ooba, said that FNB began reassessing and withdrawing home loan approvals at the end of July. “In the cases where a reassessment of our clients’ financial position has become necessary, we are expediting the process by contacting our clients and assisting them with completing the required documentation,” he said.
Geffen indicated that Ooba would try and secure alternative bond finance through a different lender where FNB makes a withdrawal. “Presently, banks do have different appetites for risk and we therefore find that an application declined by one bank is often granted by another bank,” said Geffen.
The information in this article is courtesy of Realestateweb (“Ombudsman fires public warning shot at FNB”, 7 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Thursday, August 7, 2008
SA to Adopt Green Building Practices
Green Building Rating Tool in SA
An Engineering News article draws attention to the expected launch of South Africa’s green building rating tool in Cape Town in November. The Green Star rating tool will be launched at the inaugural Green Building Council of South Africa (GBCSA) convention and exhibition.
The rating tool applies to green building in offices and will be followed by specific tools that apply to retail, multi-unit residential and other building types, in order of market demand. Part of the GBCSA’s mandate is the running of its first Green Star SA Accredited Professional Course on November 5 this year, which is after the close of the main convention.
Established in 2007, the GBCSA recently launched for general membership and is an emerging member of the World Green Building Council. The council’s mission is the promotion of green building practice, to act as a resource centre for the industry, the development and operation of the green building rating system and the provision of training and education to ensure developers and investors are quickly brought up to speed on the various practices, this according to Bruce Kerswill, chairperson for the GBCSA.
The Green Star rating tools have been adapted from the rating system in Australia and similar tools have marked the mainstream adoption of green building in a number of markets overseas, which would be a crucial step in the GBCSA’s mission in South Africa, the council indicated.
The accreditation of new and refurbished developments in line with green building practices is a challenge that has already been taken up by property developers and investors around the globe, which is due largely to the demand from tenants for more productive spaces.
According to Kerswill, “The challenge to the South African commercial and industrial development industry is to see how quickly and effectively they are able to embrace the need for green accreditation”. The council noted that, “Detailed, practical guidance on green building techniques will also be showcased as a key element of the convention, using both local and international case studies”.
There are a number of international speakers lined up for the convention, including Che Wall, past chairperson of the World Green Building Council and managing director of Lincolne Scott, a building services consultancy practicing in Australia and Asia Pacific; Richard Fedrizzi, president, CEO and founding chairperson of the US Green Building Council; as well as Andrew Borger, managing director of Leighton Properties, who will have key members of his consulting team to present a case study on the 5 Star Green Star project in Queensland.
Speakers specializing locally include Indresen Pillay, managing director of Davis Langdon SA and a member of the same company’s global international Sustainability Group, who is scheduled to discuss the costs involved with green building. The GBCSA will also present a range of green building technologies, products and services, alongside the convention.
The information in this article is courtesy of Christy van der Merwe (“Green building rating tool to be launched in November”, Engineering News, 5 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An Engineering News article draws attention to the expected launch of South Africa’s green building rating tool in Cape Town in November. The Green Star rating tool will be launched at the inaugural Green Building Council of South Africa (GBCSA) convention and exhibition.
The rating tool applies to green building in offices and will be followed by specific tools that apply to retail, multi-unit residential and other building types, in order of market demand. Part of the GBCSA’s mandate is the running of its first Green Star SA Accredited Professional Course on November 5 this year, which is after the close of the main convention.
Established in 2007, the GBCSA recently launched for general membership and is an emerging member of the World Green Building Council. The council’s mission is the promotion of green building practice, to act as a resource centre for the industry, the development and operation of the green building rating system and the provision of training and education to ensure developers and investors are quickly brought up to speed on the various practices, this according to Bruce Kerswill, chairperson for the GBCSA.
The Green Star rating tools have been adapted from the rating system in Australia and similar tools have marked the mainstream adoption of green building in a number of markets overseas, which would be a crucial step in the GBCSA’s mission in South Africa, the council indicated.
The accreditation of new and refurbished developments in line with green building practices is a challenge that has already been taken up by property developers and investors around the globe, which is due largely to the demand from tenants for more productive spaces.
According to Kerswill, “The challenge to the South African commercial and industrial development industry is to see how quickly and effectively they are able to embrace the need for green accreditation”. The council noted that, “Detailed, practical guidance on green building techniques will also be showcased as a key element of the convention, using both local and international case studies”.
There are a number of international speakers lined up for the convention, including Che Wall, past chairperson of the World Green Building Council and managing director of Lincolne Scott, a building services consultancy practicing in Australia and Asia Pacific; Richard Fedrizzi, president, CEO and founding chairperson of the US Green Building Council; as well as Andrew Borger, managing director of Leighton Properties, who will have key members of his consulting team to present a case study on the 5 Star Green Star project in Queensland.
Speakers specializing locally include Indresen Pillay, managing director of Davis Langdon SA and a member of the same company’s global international Sustainability Group, who is scheduled to discuss the costs involved with green building. The GBCSA will also present a range of green building technologies, products and services, alongside the convention.
The information in this article is courtesy of Christy van der Merwe (“Green building rating tool to be launched in November”, Engineering News, 5 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Wednesday, August 6, 2008
South Africans Face Loss of Property Rights
Land Bill Has Wide Implications
An article published by Realestateweb has drawn attention to the government’s proposed Land Bill and the possibility that it could be about more than just real estate, potentially allowing the government to take everything you own, including your intellectual property.
This message about the proposed land expropriation bill soon to come before parliament came from a group of well-respected economic and constitutional thinkers at a conference on the implications of the Land Bill held in Cape Town on Monday.
The conference delegates discussed how the Bill has ominous implications for the country’s economy, as well as South African society. The Bill’s main problem when it comes to property ownership is that it gives the state the right to take your house and land without paying a market-related price for it. In other words, it becomes a “take now, fight about the details later” approach.
South African farmers raised the alarm about the Bill initially, as much of the focus is on agricultural land in a bid to speed up the land redistribution program. Those in the know predict that food security and a loss of investor confidence, similar to what has happened in nearby Zimbabwe, can be expected if the new law is enacted.
Dave Steward, executive director of the FW de Klerk Foundation that played host to the conference, highlighted a “particularly nasty clause”, which gives the Minister the right to appropriate any property. This obviously has much wider implications than those specifically related to land reform.
“It could be shares. It could be on behalf of any juristic person…this could be a company where they have tried to negotiate and failed,” said Steward, indicating that this “looks like a massive expansion of BEE (Black Economic Empowerment)”. Steward goes on to say that, “It is horrifying in its implications,” and that there could be a BEE company, which could simply ask the Minister to expropriate shares.
Dr Leon Louw of the Free Market Foundation said that the Bill “is about all forms of property, including intellectual property,” and cited examples of software copyright, school text book copyright, pharmaceutical company rights over medicines and shares, as being among the types of property that might be expropriated in terms of the proposed law.
Former head of the Afrikaanse Handelsinstituut and chief economist at Transnet, Ulrich Joubert warned that the South African economy is particularly vulnerable to the loss of capital and skills. The economic growth in the 1990s and 2000s was spurred on to a large extent by consumer spending. Foreign investment is largely based on portfolios and this means easy withdrawal from South Africa.
Joubert asserted that South Africa needs to avoid adding to the risk perceptions already making investors nervous by threatening property rights entrenched in the constitution. “We need to create an environment where investors can be confident of getting a return on investment – without being expropriated,” he urged.
Schlemmer, a constitutional expert, believes that it takes a long time for events surrounding legislature to “penetrate through to the population”. At the moment, only a small number of South Africans are actually aware of the looming threat and its implications. Considering the already growing negative sentiment, he suggests that now would be a “very bad time to start messing with land ownership and property”.
He went on to say that the government appears to be disguising the lack of capacity of government departments and the lack of delivery around the land question with this new legislation. Compared to the government’s housing challenge, the land issue is a relatively “small problem”, Schlemmer said in reference to a provision in the Bill for the expropriation of real estate in towns and cities.
A number of political leaders also attended the conference, including Democratic Alliance leader Helen Zille. She referred to the legislation as a “wedge issue”, which the ANC “uses before elections to mobilize people on the basis of race to vote for the ANC”. Zille went on to say that, “There are people in the ANC who are as appalled. What we are seeing around expropriation is symptomatic of what we will be seeing in the years ahead. What we are seeing is a government claiming to represent the will of the majority – it is not in the interests of the majority…it isn’t the will of the majority. We have a venal minority posing as a righteous majority – using the race card”.
The ANC did not attend the conference and when asked for an explanation, Steward said, “We invited people from their portfolio committee and relevant government departments. I guess they are all busy on a Monday afternoon.”
The Bill was meant to go in front of the National Assembly this week, but the “fact they decided to postpone it might be a positive indication,” said Steward.
The information in this article is courtesy of Jackie Cameron (“Mind losing your house, business, shares and book royalties?”, Realestateweb, 4 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article published by Realestateweb has drawn attention to the government’s proposed Land Bill and the possibility that it could be about more than just real estate, potentially allowing the government to take everything you own, including your intellectual property.
This message about the proposed land expropriation bill soon to come before parliament came from a group of well-respected economic and constitutional thinkers at a conference on the implications of the Land Bill held in Cape Town on Monday.
The conference delegates discussed how the Bill has ominous implications for the country’s economy, as well as South African society. The Bill’s main problem when it comes to property ownership is that it gives the state the right to take your house and land without paying a market-related price for it. In other words, it becomes a “take now, fight about the details later” approach.
South African farmers raised the alarm about the Bill initially, as much of the focus is on agricultural land in a bid to speed up the land redistribution program. Those in the know predict that food security and a loss of investor confidence, similar to what has happened in nearby Zimbabwe, can be expected if the new law is enacted.
Dave Steward, executive director of the FW de Klerk Foundation that played host to the conference, highlighted a “particularly nasty clause”, which gives the Minister the right to appropriate any property. This obviously has much wider implications than those specifically related to land reform.
“It could be shares. It could be on behalf of any juristic person…this could be a company where they have tried to negotiate and failed,” said Steward, indicating that this “looks like a massive expansion of BEE (Black Economic Empowerment)”. Steward goes on to say that, “It is horrifying in its implications,” and that there could be a BEE company, which could simply ask the Minister to expropriate shares.
Dr Leon Louw of the Free Market Foundation said that the Bill “is about all forms of property, including intellectual property,” and cited examples of software copyright, school text book copyright, pharmaceutical company rights over medicines and shares, as being among the types of property that might be expropriated in terms of the proposed law.
Former head of the Afrikaanse Handelsinstituut and chief economist at Transnet, Ulrich Joubert warned that the South African economy is particularly vulnerable to the loss of capital and skills. The economic growth in the 1990s and 2000s was spurred on to a large extent by consumer spending. Foreign investment is largely based on portfolios and this means easy withdrawal from South Africa.
Joubert asserted that South Africa needs to avoid adding to the risk perceptions already making investors nervous by threatening property rights entrenched in the constitution. “We need to create an environment where investors can be confident of getting a return on investment – without being expropriated,” he urged.
Schlemmer, a constitutional expert, believes that it takes a long time for events surrounding legislature to “penetrate through to the population”. At the moment, only a small number of South Africans are actually aware of the looming threat and its implications. Considering the already growing negative sentiment, he suggests that now would be a “very bad time to start messing with land ownership and property”.
He went on to say that the government appears to be disguising the lack of capacity of government departments and the lack of delivery around the land question with this new legislation. Compared to the government’s housing challenge, the land issue is a relatively “small problem”, Schlemmer said in reference to a provision in the Bill for the expropriation of real estate in towns and cities.
A number of political leaders also attended the conference, including Democratic Alliance leader Helen Zille. She referred to the legislation as a “wedge issue”, which the ANC “uses before elections to mobilize people on the basis of race to vote for the ANC”. Zille went on to say that, “There are people in the ANC who are as appalled. What we are seeing around expropriation is symptomatic of what we will be seeing in the years ahead. What we are seeing is a government claiming to represent the will of the majority – it is not in the interests of the majority…it isn’t the will of the majority. We have a venal minority posing as a righteous majority – using the race card”.
The ANC did not attend the conference and when asked for an explanation, Steward said, “We invited people from their portfolio committee and relevant government departments. I guess they are all busy on a Monday afternoon.”
The Bill was meant to go in front of the National Assembly this week, but the “fact they decided to postpone it might be a positive indication,” said Steward.
The information in this article is courtesy of Jackie Cameron (“Mind losing your house, business, shares and book royalties?”, Realestateweb, 4 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Monday, August 4, 2008
There's More to Owning Property than Meets the Eye
Owning Property Costs Add Up
An article published on the property iafrica website indicates that the there is more than meets the eye when it comes to owning property. The current gap between asking prices and selling prices continues to widen, but while this may create more value for money investment opportunities in the residential property market, it does not necessarily mean that you can afford to buy that dream home. This is because the cost of home ownership could be a lot more than you might think.
Marketing director at Betterbond, Deon Lessing says that many people renting property often think that they could easily buy a home and pay the money that would have gone towards rent as their monthly bond. “But what prospective buyers need to understand is that the true cost of home ownership involves a lot more than just a monthly bond payment,” he adds. “Underestimating the true costs of owning and maintaining a house and the land on which it sits is one mistake first-time buyers often make,” Lessing asserts.
Putting interest rate increases aside; there are a number of expenses that homeowners need to take into consideration:
Homeowners insurance: This is a prerequisite when it comes to applying for a home loan. Homeowners insurance cover (HOC) protects owners of property from damage caused to the actual building and all the fixtures and fittings therein. The cover includes fire damage, lightning, explosions, storms, earthquakes, water, hail and even accidental damage to sinks, toilet bowls or other sanitary ware.
Rates and taxes/levies: Homes that are free-standing are subject to rates and taxes determined by the municipality, which cover the collection of rubbish, electricity and water, while sectional title units or complexes charge each unit a levy to cover these costs. Often these levies may include water, but exclude electricity.
Household contents insurance: While this form of insurance is optional, it covers all your personal belongings contained in your home and with the ever-increasing level of crime in South Africa, many households opt for this kind of insurance cover.
Security: Putting in burglar bars or paying an alarm company to fit a security system linked to armed response is considered a necessity, even if your home is located within a security complex.
Maintenance costs: When you own a home, it becomes your responsibility to take care of all the repair work and maintenance costs. There will no longer be a landlord to help you on this. While the cost of maintaining your home may vary depending on the size, Lessing suggests that putting aside R1000 a month is generally a good average amount. Remember that if you do not keep up with the maintenance then the costs could grow exponentially. A house that is in less than perfect condition tends to be on the market longer and sells for less than a house that has been impeccably maintained. Other areas of a home that require maintenance include the garden, swimming pool, painting, carpet repair and replacement, as well as other incidentals that are bound to come up through the ownership cycle.
According to Lessing, “When calculating your total cost of home ownership, you should add up to 40 percent to your base bond payment and that is the amount that you will eventually have to pay. The best way to be ready for the cost of owning and maintaining your home is to plan for it”.
The information in this article is courtesy of Property iAfrica (“True cost of ownership”, 4 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article published on the property iafrica website indicates that the there is more than meets the eye when it comes to owning property. The current gap between asking prices and selling prices continues to widen, but while this may create more value for money investment opportunities in the residential property market, it does not necessarily mean that you can afford to buy that dream home. This is because the cost of home ownership could be a lot more than you might think.
Marketing director at Betterbond, Deon Lessing says that many people renting property often think that they could easily buy a home and pay the money that would have gone towards rent as their monthly bond. “But what prospective buyers need to understand is that the true cost of home ownership involves a lot more than just a monthly bond payment,” he adds. “Underestimating the true costs of owning and maintaining a house and the land on which it sits is one mistake first-time buyers often make,” Lessing asserts.
Putting interest rate increases aside; there are a number of expenses that homeowners need to take into consideration:
Homeowners insurance: This is a prerequisite when it comes to applying for a home loan. Homeowners insurance cover (HOC) protects owners of property from damage caused to the actual building and all the fixtures and fittings therein. The cover includes fire damage, lightning, explosions, storms, earthquakes, water, hail and even accidental damage to sinks, toilet bowls or other sanitary ware.
Rates and taxes/levies: Homes that are free-standing are subject to rates and taxes determined by the municipality, which cover the collection of rubbish, electricity and water, while sectional title units or complexes charge each unit a levy to cover these costs. Often these levies may include water, but exclude electricity.
Household contents insurance: While this form of insurance is optional, it covers all your personal belongings contained in your home and with the ever-increasing level of crime in South Africa, many households opt for this kind of insurance cover.
Security: Putting in burglar bars or paying an alarm company to fit a security system linked to armed response is considered a necessity, even if your home is located within a security complex.
Maintenance costs: When you own a home, it becomes your responsibility to take care of all the repair work and maintenance costs. There will no longer be a landlord to help you on this. While the cost of maintaining your home may vary depending on the size, Lessing suggests that putting aside R1000 a month is generally a good average amount. Remember that if you do not keep up with the maintenance then the costs could grow exponentially. A house that is in less than perfect condition tends to be on the market longer and sells for less than a house that has been impeccably maintained. Other areas of a home that require maintenance include the garden, swimming pool, painting, carpet repair and replacement, as well as other incidentals that are bound to come up through the ownership cycle.
According to Lessing, “When calculating your total cost of home ownership, you should add up to 40 percent to your base bond payment and that is the amount that you will eventually have to pay. The best way to be ready for the cost of owning and maintaining your home is to plan for it”.
The information in this article is courtesy of Property iAfrica (“True cost of ownership”, 4 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Residential Property Still Declining in Value
House Prices Still Dropping
An article by I-Net Bridge published in The Times indicates that Standard Bank’s median house price dropped to R570 000 in July, which reflects a contraction of 2.6% year-on-year.
The banking group’s five-month moving average growth rate in the median house price was recorded at 8.2%. In June, the median house price figure stood at R550 000. This is essentially the middle price on Standard Bank’s home loans portfolio and can be considered a reasonably accurate picture of national house price trends, given the group’s market share in the national mortgage industry.
Standard Bank said that this figure is an improvement on the negative growth rates seen in the three months prior. “South Africa’s intensifying economic slowdown and the positive developments on the inflation front suggest that we may be nearing or at a peak in monetary policy tightening. However, the residential property market is unlikely to exit its quagmire in the near term, essentially due to the precarious state of household finances,” according to the group.
The bank said that recent point estimates in the Standard Bank median house price have exaggerated the extent of the fall in national residential property prices. This has been a result of the National Credit Act-induced base effect, which was established in the months prior to the Act’s implementation last year.
There is uncertainty around the possibility of more stringent credit granting criteria, which led to a bigger proportion of higher valued houses in the underlying sample of home loans from which the median house price was calculated.
Since then, the reduced affordability of housing has resulted in a decline in the demand for residential property and a significant softening in the growth of house prices. This has only been exacerbated by the base effect, resulting in deep negative year-on-year growth rates in the last few months of 2008.
“We had anticipated that, in the second half of 2008, outcomes in the median house price would present a clearer portrayal of house price trends at the national level as the distorting impact of the high base effect alluded to earlier diminishes. The July outcome is, in our view, a better reflection of aggregate house price trends,” said the bank.
The factors primarily driving the residential property market are interest rates, inflation, employment growth and consumer sentiment. Currently, these factors suggest that the housing market will continue to remain weak over the next 12 months. South Africa’s intensifying slowdown in growth will continue to negatively impact the residential property market. Standard Bank added that the residential property market would remain under pressure for the rest of the year and possibly for the first half of 2009.
The information in this article is courtesy of I-Net Bridge (“Standard Bank: July house prices down”, The Times, 1 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article by I-Net Bridge published in The Times indicates that Standard Bank’s median house price dropped to R570 000 in July, which reflects a contraction of 2.6% year-on-year.
The banking group’s five-month moving average growth rate in the median house price was recorded at 8.2%. In June, the median house price figure stood at R550 000. This is essentially the middle price on Standard Bank’s home loans portfolio and can be considered a reasonably accurate picture of national house price trends, given the group’s market share in the national mortgage industry.
Standard Bank said that this figure is an improvement on the negative growth rates seen in the three months prior. “South Africa’s intensifying economic slowdown and the positive developments on the inflation front suggest that we may be nearing or at a peak in monetary policy tightening. However, the residential property market is unlikely to exit its quagmire in the near term, essentially due to the precarious state of household finances,” according to the group.
The bank said that recent point estimates in the Standard Bank median house price have exaggerated the extent of the fall in national residential property prices. This has been a result of the National Credit Act-induced base effect, which was established in the months prior to the Act’s implementation last year.
There is uncertainty around the possibility of more stringent credit granting criteria, which led to a bigger proportion of higher valued houses in the underlying sample of home loans from which the median house price was calculated.
Since then, the reduced affordability of housing has resulted in a decline in the demand for residential property and a significant softening in the growth of house prices. This has only been exacerbated by the base effect, resulting in deep negative year-on-year growth rates in the last few months of 2008.
“We had anticipated that, in the second half of 2008, outcomes in the median house price would present a clearer portrayal of house price trends at the national level as the distorting impact of the high base effect alluded to earlier diminishes. The July outcome is, in our view, a better reflection of aggregate house price trends,” said the bank.
The factors primarily driving the residential property market are interest rates, inflation, employment growth and consumer sentiment. Currently, these factors suggest that the housing market will continue to remain weak over the next 12 months. South Africa’s intensifying slowdown in growth will continue to negatively impact the residential property market. Standard Bank added that the residential property market would remain under pressure for the rest of the year and possibly for the first half of 2009.
The information in this article is courtesy of I-Net Bridge (“Standard Bank: July house prices down”, The Times, 1 August 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
Friday, August 1, 2008
Market Trends and their Predictions for the Future
Should You Rely on Market Trends?
An article published in Business Day has drawn attention to market sentiment, suggesting that it may not be as reliable a short-term barometer as many investment commentators seem to think.
Apparently, the favoured test of its accuracy is the future correlation of share prices and the growth of earnings. If the market trend happens to change, this indicates that much the same trend will occur with companies’ investment fundamentals.
Ben Temkin, author of the article in Business Day, is not convinced that this is the case. Over the years, he has noticed that a bull trend ends when shares are overbought and vice versa. This kind of situation, he says, is not only true of shares, but also the residential property market, where house prices kept rising as long as demand met supply. When it suddenly became evident that supply was outdoing demand (which in the stock market would mean that shares are overbought), prices began to stick at first and then fall.
The residential property market is in a bear trend now, but it didn’t become a bear trend ahead of the hike in interest rates. In fact, house price levels were resistant to interest rates for quite some time.
Even more interesting to note is the fact that the line chart of the JSE electronics and electrical index has had (over the past two years), almost the same shape as the JSE real estate index. If the barometer thesis is to be followed, this would mean that the current weakness in the JSE real estate index is a warning that a bear market in commercial and industrial property is expected and there should be significant falls in earnings in the affiliated companies in the electronics and industrial index.
Temkin can accept that the supply of office, retail and factory space can, or already has, overtaken demand because of the current economic slowdown. However, he finds it much more difficult to believe that the demand for infrastructural growth is suddenly to going to slow down and drastically stunt the growth of Altech and Reunert, as the barometer would suggest.
In his experience of the stock market, Temkin has seen that a change in its trend does not necessarily signal good or bad news. However, it does tell us when good or bad news has been digested and that this process can often be uncomfortable, which pushes the trend too far and too fast.
Temkin goes on to describe the market as a crowd, using the recent example of crowd behaviour in Sasol’s share price trend. For obvious reasons, Sasol’s share price is correlated with the price in oil. The crowd often tends to forget though that Sasol is not only about oil. The Private Investor portfolio bought shares in Sasol in December at R315.70 and the oil price was then just $95 a barrel.
When the oil price peaked at $140 towards the end of last month, Sasol’s share price hit the roof at R506 in May, which was well before the peak in the oil price. Currently, oil is priced around $125, which is 10% below its peak and Sasol’s share price is about R400, 20% below its peak. This merely proves the market lied on Sasol’s way up or is lying now. The point here is that you cannot rely on market sentiment to be an early warning sign of future investment fundamentals, which obviously include plenty of gambling.
The information in this article is courtesy of Ben Temkin (“South Africa: Market Trends Not That Reliable”, Business Day, 30 July 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
An article published in Business Day has drawn attention to market sentiment, suggesting that it may not be as reliable a short-term barometer as many investment commentators seem to think.
Apparently, the favoured test of its accuracy is the future correlation of share prices and the growth of earnings. If the market trend happens to change, this indicates that much the same trend will occur with companies’ investment fundamentals.
Ben Temkin, author of the article in Business Day, is not convinced that this is the case. Over the years, he has noticed that a bull trend ends when shares are overbought and vice versa. This kind of situation, he says, is not only true of shares, but also the residential property market, where house prices kept rising as long as demand met supply. When it suddenly became evident that supply was outdoing demand (which in the stock market would mean that shares are overbought), prices began to stick at first and then fall.
The residential property market is in a bear trend now, but it didn’t become a bear trend ahead of the hike in interest rates. In fact, house price levels were resistant to interest rates for quite some time.
Even more interesting to note is the fact that the line chart of the JSE electronics and electrical index has had (over the past two years), almost the same shape as the JSE real estate index. If the barometer thesis is to be followed, this would mean that the current weakness in the JSE real estate index is a warning that a bear market in commercial and industrial property is expected and there should be significant falls in earnings in the affiliated companies in the electronics and industrial index.
Temkin can accept that the supply of office, retail and factory space can, or already has, overtaken demand because of the current economic slowdown. However, he finds it much more difficult to believe that the demand for infrastructural growth is suddenly to going to slow down and drastically stunt the growth of Altech and Reunert, as the barometer would suggest.
In his experience of the stock market, Temkin has seen that a change in its trend does not necessarily signal good or bad news. However, it does tell us when good or bad news has been digested and that this process can often be uncomfortable, which pushes the trend too far and too fast.
Temkin goes on to describe the market as a crowd, using the recent example of crowd behaviour in Sasol’s share price trend. For obvious reasons, Sasol’s share price is correlated with the price in oil. The crowd often tends to forget though that Sasol is not only about oil. The Private Investor portfolio bought shares in Sasol in December at R315.70 and the oil price was then just $95 a barrel.
When the oil price peaked at $140 towards the end of last month, Sasol’s share price hit the roof at R506 in May, which was well before the peak in the oil price. Currently, oil is priced around $125, which is 10% below its peak and Sasol’s share price is about R400, 20% below its peak. This merely proves the market lied on Sasol’s way up or is lying now. The point here is that you cannot rely on market sentiment to be an early warning sign of future investment fundamentals, which obviously include plenty of gambling.
The information in this article is courtesy of Ben Temkin (“South Africa: Market Trends Not That Reliable”, Business Day, 30 July 2008).
Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.
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