SA Commercial Industrial Property Market Still Strong

Still Booming Says Rode

An article released by the South African Insurance Times and Investment News website argues that despite the prevalent doom and gloom currently being experienced in the residential property market, commercial and industrial markets are still booming. This is according to the latest issue of Rode’s Report on the South African Property Market.

As Erwin Rode says, “Industrial rentals in particular are sustaining the robust growth we saw during the first quarter of 2008. For example, nominal rentals for prime industrial space in the Central Witwatersrand have shown a particularly impressive year-on-year growth of 27%”.

The report indicates that other industrial nodes that have performed well include the Cape Peninsula with a growth of 24%, Durban at a growth of 22% and Port Elizabeth growing by 14%.

According to Rode, “This is particularly impressive when one takes into account building-cost inflation: even though this is expected to have grown by 20% on a year ago, we nevertheless still saw real-rental growth in all of these industrial areas, barring Port Elizabeth”.

Although the building industry was expected to reflect a slowdown, the latest Rode’s Report shows that non-residential building activity (represented by real gross fixed capital formation or GFCF) was up by 14% in the last quarter of 2007, while residential GFCF, which has actually been slowing since the end of 2005, grew by 6.4%.

However, Rode concedes that it still remains to be seen what effect Eskom and its moratorium on new developments could have on the industry. The report shows that office rentals in certain areas have done quite well too, with rentals in Johannesburg up by 16% and in Pretoria and Cape Town, decentralized figures up by 15%. Taking into account building-cost inflation of 20%, it is unlikely that these decentralized office nodes will reflect positive real growth over the last year.

Flat rentals in Johannesburg were also doing well, with nominal rentals ending on an average 26% higher year-on-year, which far exceeds the growth rate in consumer inflation of 9%. However, other metros did not fare so well, with the lowest being achieved in Cape Town and Pretoria at only 8%.

When it comes to the listed property sector, the report shows that investors are now insisting on higher income returns, which has in turn led to price drops in the market. Since the end of 2007, the historic income yields on listed property have weakened (increased) from about 6% to over 8% during May this year, resulting in an average price growth of –6% year-on-year during the first quarter of 2008.

With regard to capitalization (‘cap’) rates for prime office property, the report also indicates that this sector of the market is still reflecting some strength in the first quarter of 2008, although the cap rates on industrial leasebacks and shopping centres have weakened.

Rode says, “The non-residential market has been a sellers’ market since 2003, but under the current circumstances, it could now turn to being a buyers’ one. However, the prospects of strong rental growth could still provide a negotiating lifeline for sellers”.

Where property investors are concerned, the report indicates that a total return (income return plus capital appreciation) of around 15-15.5% was expected during the first quarter of 2008. “One of the ways of determining the value of an income-producing property is by discounting the expected future income stream by a required hurdle (opportunity-cost) rate,” Rode explains.

Essentially, the sharp decrease (or strengthening) in hurdle rates since 2000 acts as an indication of how favourable investor sentiment has been towards non-residential properties. Rode goes on to say that this was not just a result of the strong business-cycle upswing in the South African economy at the time, but also the structurally low, stable inflation and interest rates, which promised lower, risk-free opportunity costs.

However, in the current economic environment, investors may soon require higher minimum income and total returns in order to convince them to acquire directly held property. There is also little relief expected for the housing market – in May this year, national house prices in the middle segment of the market showed a growth of only 4% year-on-year. Even more concerning is the fact that house prices were 0.1% lower in May 2008 than they were a month earlier.

According to John Lottering, an economist at Rode & Associates, “We have year to see the impact of the interest-rate hikes experienced not only in April of this year, but those as far back as October and December 2007, as the full impact of these hikes is only truly revealed in the market up to three quarters of a year beyond their occurrence. We are of the opinion that by the end of this year, average prices could contract by up to 10% compared to December 2007”.

The information in this article is courtesy of Lynette Smit (“Rode’s Report on the SA Property Market 2008:2”, ITInews, 17 July 2008).

Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.

SA Consumers Still Optimistic

Latest Consumer Confidence Index

A recent article discusses the results of the latest Master Card Worldwide Index of Consumer Confidence for the latter half of 2008, which shows that South Africans remain impressively optimistic, despite significant increases over the past 6 months.

The bi-annual survey also indicated an understandable drop in consumer confidence year-on-year, when compared to last year’s score of 80.7 for the second half of 2007. “The index provides valuable understanding in the shifts of South African consumer sentiment, as well as the identification of market trends over time. The current Index score shows that consumers remain positive despite a considerable drop in confidence over the last six and twelve months,” according to Eddie Grobler, senior vice president and general manager for Africa, Master Card Worldwide.

The survey is conducted on behalf of Master Card by a third party research company and is designed to gauge consumer sentiment for the six months ahead. Respondents are interviewed by phone and the information relates to consumer perceptions on economic trends only. It is not a projection of the business or financial performance of Master Card Incorporated or any of its affiliates.

The selected markets where the survey is conducted include South Asia, the Middle East and Africa (SAMEA). The eight markets surveyed comprise Egypt, India, Kuwait, Lebanon, Qatar, Saudi Arabia, South Africa and the UAE, with scores based on answers to questions relating to five key economic indices. These indices are employment, economy, regular income, stock market and quality of life. A score above the midpoint of 50 indicates that consumers are optimistic about the overall economic climate, while a score below 50 indicates pessimism.

The South African survey focused on the major cities of Johannesburg, Cape Town and Durban, revealing that Johannesburg, with a score of 75.9, is the most optimistic of the three urban areas. Durban recorded a score of 73.8, while Cape Town reflected a score of 72.9, with consumers in Durban experiencing the biggest decline in confidence, having previously been the most optimistic of the three cities.

“It is my opinion that the golden era of consumer confidence in South Africa is beginning to lose its shine,” said Mike Schussler, chief economist at T-Sec. “While it is important to note that the Index is still positive at 74.3, the fact remains that the Index dropped by 6.4 points year-on-year and by 9.4 points in the last six months. This makes South Africa the third least optimistic of the eight countries surveyed”.

The economy proved to be the category that experienced the biggest decline in confidence. When asked whether they expected the country’s economic performance to improve, remain the same, or worsen over the next six months, nearly 48% said that they expected it to remain the same or get worse. 52% of the respondents were more optimistic and said that they expected it to get better.

According to Schussler, “My sense is that, in general, consumers are still confident about the prospects of South African economic growth – they just feel that it will now grow at a much more leisurely rate”. He noted that this feeling may be due in part to the recent drop in South Africa’s GDP growth rate, which has gone from a rate of 5.3% in the last quarter of 2007 to just 2.1% in the first quarter of 2008.

Other noteworthy results compared to the previous Index include the stock market indicator (83.0 six months ago, now 69.8), the quality of life indicator (82.9 six months ago to 71.2) and the employment indicator (81.9 six months ago and now 72.9).

“Again, though, it is important to note that the stock market reached record highs immediately after the survey period, so we expect the stock market indicator to remain positive in the future. And, year-on-year, consumers’ view of the stock market actually improved by over two points, reflecting the highs that the stock market has achieved during 2007/8,” said Schussler.

When it comes to the decline in the employment indicator, Schussler believes that this has more to do with the fact that employment growth in South Africa has slowed down considerably and rumours of job losses in the mining and manufacturing sectors has received a lot of attention in the media.

A surprising result seems to be that the respondents’ expectation of an increase in their regular income remains extremely optimistic. Schussler suspects that this is probably due to the fact that social welfare payments have not been affected by the current economic slowdown.

The Index score of 74.3 may indicate that South African consumer confidence is still optimistic, it is significantly lower than its peak of 91.1 for the second half of 2006 and below the historical average of 80.1 – highlighting the fact that optimism is not as high as it has been in the past. Currently only Lebanese and Egyptian consumers are less optimistic than their South African counterparts, with South Africa dropping from fourth to sixth place out of eight in the last six months.

The information contained in this article is courtesy of the Supermarket website (“South Africans feeling the pressure”, 16 July 2008).

Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.

South African Property a Buyers Market

Why Buyers Should Invest Now

An article published by the Daily Dispatch Online discusses the current trend in the property market and urges buyers that the time to invest in a fixed asset like property is about six months away, when the market finally hits rock bottom.

Many homeowners may refute this and say that it would be mad to touch property investments in a climate where house prices continue to fall. Why would anyone want to buy an asset that is steadily losing value?

Senior economic analyst at ABSA, Jacques du Toit said, “In real terms, property prices have already declined since late last year, which implies that, on average, a property owner who has bought property during the past two years is set to make no profit, or even a loss, if he sells now”.

On the back of a global economic slump, ABSA predicts real house price growth to fall by around 6% in 2008 and by another 3.3% in 2009. Du Toit anticipated that the best time to invest in property would be the second half of this year and early 2009, especially in terms of a buy-to-let perspective.

Marriott Income Specialists chief executive, Simon Pearse agreed that six months from now would be a prime time to invest in property, as prices still have to lose some momentum. “You need to buy when the interest rate is at its highest and inflation at its most. When no one wants to buy property, that is the best time to buy…and then you will make the most money,” according to Pearse.

He added that if property investors do not have cash reserves right now, they should try and convince their bank to loan them the maximum amount available under the tight conditions and purchase a bargain property. “You are not borrowing for the sake of borrowing, but buying an asset,” he urged, and the asset value will begin to rise just as interest rates start to fall.

Effectively, the situation created is one where the investor’s bond payments would decrease on an asset that continues to rise in value. When is the right time to leave the property market? The simple answer would be when interest rates start to rise again or when everyone at the local pub informs you what a great investment property is, said Pearse.

Taking this advice into account, Marriott developed the first commercial property fund for private investors in South Africa in 1997, when the property market was at its lowest ebb in the past twenty years. This fund recorded a 200% return on investment between 1997 and 2005, when the property boom began to taper off.

According to Pearse, property will always be a sound long-term investment because property values and rental income are linked to inflation, which means that prices continue to rise over time. During the first part of this year, rentals in East London increased by 50%, this according to the Trafalgar National Rental Index.

Du Toit warns that investors in the property market should not anticipate any positive real capital growth in the next 18 to 24 months. “In view of property being medium to longer-term investment – five years and longer – property investors should look through the current downward cycle and focus on income returns, with a view of achieving positive real capital appreciation from 2010,” he said.

The information in this article is courtesy of Roux van Zyl (“Buyers can benefit from property’s fall”, Daily Dispatch Online, 16 July 2008).

Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.

A New Trend Taking Form in SA

Green Building Way Forward

An article published on the Engineering News website has drawn attention to the successful introduction of ‘green’ building systems into the industry by steel framework building company, Vela Steel Building Systems.

Vela Steel MD, Brent Harris says that the company will extend its ‘green’ building system across all sectors and is confident about the decision, particularly in light of the fact that many developers and builders in the private market are becoming aware of the advantages of steel framed building, which consists of a reduced building program, cost savings and improved thermal qualities.

Steel is fully recyclable and building a house on an elevated platform essentially minimizes the impact on its surroundings. Transporting an entire house on a truck reduces the number of heavily laden vehicles on the road.

According to Harris, “Many houses have already been built using our lightweight steel frame system. Property developers are starting to realize that houses that are built with a steel framework as opposed to conventional brick and mortar offer better insulation during the winter and are cooler in the summer. Another advantage that a steel framework offers is the fact that it is easily erectable, offering quicker turn around times and is built to customer specifications”.

Vela Steel uses computer aided design (CAD) software in the design of these frameworks. “With the CAD software the company is able to factor all variables into the building of a house, so that the customer can specify the look and feel they require,” explains Harris.

The company has been involved in a number of residential projects recently. Towards the end of March this year, a project was completed at the Vaal Dam near Vereeniging, just south of Johannesburg. It required the construction of a 450m² luxury home using lightweight steel frames and roof trusses.

“Once the framework had been erected the external walls were clad with OSB board and Vermont plank and internally with gypsum board. The insulation in the wall cavity provided the thermal insulation. Vela SBS was awarded the contract towards the end of November 2007, construction time was about four months with completion of the project in March this year,” said Harris.

Another project involved the erection of a steel framework and roof trusses for a home in Fourways. “The project was very similar to the Vaal project. The only difference being that GDS [a property development company] opted to cover the outer steel framework with a combination of a single brick skin and Vermont plank. GDS approached Vela SBS with the project towards the end of 2007 and like the Vaal project, the house in Fourways took three months to complete. Both developers are currently building their second steel framed house. The second Fourways house is a double storey plus loft, which has proved to be quite challenging, yet our system has proved to be more than capable,” Harris added.

Considering the latest global trend towards being more ‘green’ conscious, this move by Vela Steel could well be the way of the future. Already, architects are being challenged to design homes that mould into their environment and make use of natural light and shade to supplement warmth in winter and protect from the harsh sun during summer. Builders are also coming up with innovative ways to insulate homes and make them less of a strain on the natural environment.

The information in this article is courtesy of Jonathan Faurie (“Building company introduces green building system”, Engineering News, 11 July 2008).

Please visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.

Light at the End of the Tunnel for Property Market in SA

Property Slump Felt Globally

An article in the Weekend Post has highlighted the fact that while South Africans are currently under increased financial pressure due to rising inflation and interest rates, as well as the steady drop in house prices, the situation is not isolated and is being experienced elsewhere in the world.

After the property boom in South Africa four years ago, the bottom has literally fallen out of the market, with sellers in the Cape having to settle for up to 30% less than asking price. Many homeowners are finding themselves ‘out of pocket’ in a buyers’ market and some are even being forced to put their homes up for auction in a bid to get the highest possible sale price.

The latest trend in the residential property market has seen buyers literally ‘shopping around’ for the best deals. FNB property economist, John Loos indicated that a recent survey of estate agents by the bank showed that up to 83% of sellers nationally were having to accept offers lower than asking price.

“This is not surprising. During the property boom in 2004, only 30% of sellers had to accept lower offers. It has increased dramatically since then and I think that is indicative of lean times,” said Loos.

According to Ian Olivier of Ian Olivier Properties, Port Elizabeth’s residential property market has seen up to 90% of homes selling for less than asking price – with some sellers taking 30% cuts or more.

Olivier said, “On average, we’re finding that sellers are accepting offers of 10% less than their original listing price, with some dropping substantially more. Among recent examples is a townhouse in Lorraine, which the seller initially priced at R575 000 against the advice of his agent. It is now being marketed at R390 000, five months down the line”. He adds that a house in an upmarket suburb listed at R3.7m recently sold for a million rand less.

Ken Ralph, national vice president and chairman of the southeastern region of the Institute of Estate Agents of South Africa has advised homeowners who are struggling to meet financial demands with the ever-increasing cost of living, petrol and high interest rates, to seek out their bank’s assistance before choosing to sell their homes.

According to Ralph, “Banks don’t want to repossess properties because the market is so saturated”. He added that South Africans are not the only ones experiencing this kind of pressure. “If you look at Australia and New Zealand, the property market is the same. Prices have fallen (in those countries) by up to 20%”.

Hanilie Bassingthwaighte, principal of Pam Golding Properties in East London said that the more correctly priced the properties, the higher the likelihood of achieving a successful sale. “On the rising market, sellers took it for granted they would get what they were asking. However, given the decline in the market, they cannot ask the same,” she said.

Buyers are no longer restricted by choice as they were during the boom years, when the stock of property on the market was in short supply. Buyers are now controlling the market activity by submitting offers lower than asking price and setting the bottom line when it comes to negotiations over price.

“This means that sellers who are not prepared to entertain pricing advice from their listing agents are effectively knocking their properties right out of the market,” said Olivier, adding that sellers should be aware that buyers are invariably walking away from deals rather than committing themselves financially.

Realistically priced homes are still likely to sell within the globally accepted benchmark period of 3 months. “It is not unheard of for homes to sell within a month either – if they are properly priced. What is indisputable is that uptake of over-priced properties has dropped to almost zero,” said Olivier.

Despite all the perceived ‘doom and gloom’, Ralph argued that, “We went through a similar period in 1998, but what goes up must go down. It’s not all negative, there is still light at the end of the tunnel”.

There are still those who have an immense amount of faith in the South African economy and Ralph is privy to many successful clients who are currently in the process of buying more properties, as well as overseas buyers taking advantage of the local opportunities available.

The information in this article is courtesy of Melody Brandon (“Desperate times as home prices plummet”, Weekend Post, 12 July 2008).

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

Tenants Ask for Rental Reductions

Tenants Want Rent Reduced

An article published on the Cape Business News website draws attention to the plight currently being experienced by tenants in the retail industry. The current economic situation in South Africa has resulted in some tenants struggling to meet monthly rental payments.

These indications are according to Marc Edwards, general manager of Spire Property Management, who says that a market shift has been seen in their retail portfolio. “Office rentals in areas such as Cape Town’s Southern Suburbs remain consistently high due to space shortages in AAA office buildings. However, with consumers tightening their belts, retailers are taking strain and some are therefore starting to call for relief in the form of lower rentals,” says Edwards.

Edwards adds that, “Landlords need to take a realistic look at the strategic value of individual tenants in a shopping centre. It is extremely important for a centre to maintain the right tenant mix and to avoid having a lot of space standing vacant, so it makes sense to try and assist valued tenants through difficult times”. He has a point in that having tenants close their doors will benefit no one at the end of the day.

When it comes to ways that landlords can assist tenants is to enforce a turnover clause with lower basic rentals. This will give tenants more flexibility when times are tough, but allows the landlord to benefit progressively when the tenant’s turnover exceeds the set figure.

Edwards also suggests that tenants take a “realistic look at their business” and then make an informed decision about where their premises should be located, whether it should be in a shopping centre or whether they could achieve similar benefits in a small factory or other premises where rentals are relatively low.

Essentially, attracting more customers needs to be a collaborative effort between landlords and tenants, as landlords are effectively stakeholders in each shop within their complex and can play an important role in bringing more customers to the centre. Edwards insists that, “Today, more than ever, owners, tenants and property managers need to work together to find ways to make the centre more attractive and ensuring that shoppers’ needs are properly met”.

A prime example would be the Dean Street Arcade in Cape Town’s upmarket suburb of Newlands, where some of the tenants were moved around in the centre in a bid to maximize their exposure to potential customers. A strategic decision included improving the tenant mix by placing a pharmacy in the arcade, which has a tendency to trade well in all conditions and will attract more shoppers to the centre, consequently benefiting other tenants.

The information in this article is courtesy of Cape Business News (“Tenants Call for Rental Reductions”, 7 July 2008).

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

Globalisation Affects Investment

Diversify Your Assets?

An article published in Newsweek brings up an interesting notion as it discusses the recent hype surrounding globalization making the world a smaller place, with barriers falling and fear of foreign markets diminishing. The latest trend with small investors is the diversification of assets on a global scale, as they search the world for big returns.

The adage ‘don’t put all your eggs in one basket’ dates back to 17th century Italy, but investors have only just started to catch on. Financial advisors have been warning clients to diversify for years, but typical investors are only recently starting to venture beyond their local markets. Spreading your bets should apply not only to stocks versus bonds and real estate, but also the United States versus Europe, as well as Japan and emerging markets like South Africa.

A major reason for the growing trend towards global investment is simply because advancements in technology make it possible. Restrictions on the movement of capital are beginning to fall away and the Internet makes it easier to track what is happening in remote places. Historically, it has been low interest rates that have pushed investors to seek profit further afield, particularly as emerging markets have become more open to welcoming them.

While daytraders dabble in Thai baht and South African rand online, chat rooms compare the merits of blue chips from Boston to Beijing and Budapest, with US workers pouring their savings into emerging market funds and Britons seeking out real estate in the sunny African climes. The International Monetary Fund (IMF) released its world economic outlook this month and reported that foreign portfolio holdings as a percentage of market capitalization have increased in many developed countries around the world.

The crux of the matter seems to be that while it is probably sensible to invest in what you know, the reality is that investors often think they know a lot more about their local market than they really do. Americans in particular have been left with a bitter taste after recent experience, which perhaps explains the growing tendency to invest abroad. In light of the current South African market, perhaps it would serve small investors well to diversify their assets globally.

The information in this article is courtesy of Newsweek (“Money Travels: As Barriers Fall and Fear of Foreign Markets Diminishes, Small Investors Go Global in the Search for Big Returns”, 2 July 2008).

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

South African Homeowners Face Troubled Times

Homeowners Feel the Pinch

An article in The Times reports that more repossessions are bound to be on the cards as South Africans face yet another interest rate hike. There is simply no good news for homeowners trying to sell their property, as the latest house price survey reflects a dip that has not been seen since 1999.

To make matters worse, if you have put your house on the market, you can expect to get up to 40% less than your initial asking price by year-end. The property boom bubble of previous years is steadily deflating in the current down cycle.

ABSA’s House Price Index, which was released yesterday, recorded single digit year-on-year nominal growth of 4.3% in May, down 1.2% from the 5.5% recorded in April – this translates into the slowest house price growth in 9 years. The average price of a mid-sector house dropped to about R960 700 in May, from an average R974 000 in April.

The ABSA index bases its figures on the total purchase price of houses in the 80m² to 400m² size category, valued at around R2.9m or less in 2007, including any home improvements and for which loan applications were approved.

The Bank expected the Reserve Banks’ Monetary Committee to introduce a 100 basis point interest rate hike next week, with the potential for further rate hikes if the CPIX (inflation mortgage costs) remained “stubbornly high”.

Property analyst for ABSA, Jacques du Toit said that more people were selling homes than there were buyers in the market, as the broad economic conditions started to have an effect on the affordability levels of consumers.

“We anticipate and expect property repossessions to pick up, but coming from a low base. The repossessions would not be isolated to a particular market segment; it would affect virtually all segments of the residential property market. The increase of stock in the market is a reflection of the financial difficulties that people are going through,” du Toit said.

Lew Geffen, head of Lew Geffen Sotheby’s International Realty said, “It’s a question of being truthful to your clients to save them severe pain by procrastinating and not accepting the offer today. Today’s low offer is tomorrow’s miracle price. This market is not going to recover any time soon”.

Geffen believes that the property market will come down by a significant 40% from the unbelievable highs of 2007, adding that there are already 60% less buyers in the market today, compared with the same time last year. Looking at the bank requisite of between 5% and 25% equity for property purchases ranging from R800 000 to R4m, indications are that the market is expected to drop another 25% on top of the current estimate of 15%.

As Geffen says, “Take into account that today a man who wants to purchase a R2m property, which is the average selling price in our company, will have to earn more than R87 000 gross per month in order to qualify; and if the market drops by 25% that same person will need to earn R65 200 gross, which is also no picnic”.

The Tenant Profile Network (TPN) is a registered credit bureau that provides tenant rental payment profiles for property managers and landlords and reports an increase in demand for rentals as compared to a year ago.

Managing director of TPN, Michelle Dickens said that the company had also witnessed a trend towards six month versus twelve month lease periods, in a bid to increase rentals and meet mortgage repayments. National rental averages are up to R4000 per month. There has also been an increase in properties initially put up for sale that have now been put up for rent to cushion the longer period of waiting for an offer to purchase.

“Demand for rental property is far outstripping market availability. Estate agents are now at the reverse effect of a property sales boom and are sitting with an over-supply of stock,” said Dickens.

The Alliance Group specializes in auctions and reports that countrywide they have a thousand houses up for sale from execution, repossession and insolvency. The company predicts that thousands of families will lose their homes by the end of the third quarter of the year.

The information in this article is courtesy of Xolile Bengu and Simpiwe Piliso (“Homeowners feeling down”, The Times, 1 July 2008).

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

Emerging Markets Taking Viable Steps to Fight Global Inflation

Emerging Markets Rising Inflation

An article published on the Sify website has highlighted increasing inflation in a number of emerging markets over the last year. While this problem is also being experienced in developed markets, rising inflation is especially acute in emerging markets because food tends to account for a much larger percentage of consumer price indexes.

To add insult to injury, many countries are working close to full capacity because investment has not kept up with economic growth, which consequently pushes up wage inflation. Official statistics may actually mask the true extent of inflationary pressures in some cases, but there is evidence that the skyrocketing food and energy prices are seeping through to core inflation (in other words, having an effect on other inflationary factors).

Concern has also been raised in terms of the effect of price increases and the various official responses to the situation. Vietnam reported a year-on-year inflation rate of 25% in May, which has seen a proliferation of labour strikes in reaction to this and growth forecasts have since been cut. China is also experiencing a core problem with rising food prices. Even Egypt has hiked public sector wages by 30% in a bid to prevent social unrest. Indonesia is said to be willing to spend a fifth of its annual budget to shield citizens from energy price increases.

Without a doubt, the inflation pressures being experienced by emerging markets seem much worse than in developed countries. Such a development is certainly worrying, as measures including subsidies, price controls and export bans can only provide short term relief at best, while probably just storing up long term problems for the future.

However, there has been a responsible approach taken by various authorities in many countries affected that is somewhat encouraging. For example, Egypt’s decision to pay for the state sector’s wage hikes by curtailing tax exemptions for firms operating outside of ‘free zones’, imposing taxes on interest earned from Treasury bills and cutting state fuel subsidies.

Indonesia announced recently that it would reduce fuel subsidies by 30%, while Taiwan has decided to abandon them entirely. Continuing the trend, Malaysia and India have also decided to reduce fuel subsidies. The current policies will go a long way towards stabilizing the finances of these countries and help direct necessary resources to other parts of their economies.

While moves by central banks in South Africa to raise interest rates in a bid to quell inflation are generally considered bad news for stocks, when it comes to the long term, it is encouraging to see the increasing credibility that these banks have acquired in battling rising prices. The same policies have been applied by banks in Korea and Chile, which ensures that the responsibility for dealing with inflation is taken out of the hands of politicians.

It is important to keep the threat of inflation in context, as policy makers in some emerging markets insist that the spike in inflation is due in part to a short term supply stock in food and energy that will soon ease as higher prices lead to increased supply. There is merit to such arguments and while recent developments are concerning, inflation should not yet be seen as a ‘crisis’ that poses a threat to the overall attraction of the world’s fastest growing economies.

Some countries have also pegged their currencies to the US dollar and successive cuts in interest rates in the US have made the inflationary problems in these countries worse, while already struggling with their economies in overdrive. How long this policy remains in place depends largely on the economy in question, as well as the priority each central bank puts on inflation control.

In general, local currency appreciation and higher interest rates should really help combat inflation. It is believed that the prospect of currency appreciation will not exacerbate the problems being experienced by emerging markets by pulling in more capital, simply because there a number of emerging market currencies are still relatively undervalued.

Equity investors are concerned about emerging markets partly because of the possible severity of measures implemented by governments in an effort to cool the economy and partly because of the cost pressure that local manufacturers might face as a result of price increases. Of course, another concern is the depreciation in value of future money. However, in places like Latin America and Russia, the recent spike in global inflation has been concentrated in commodities and this has actually helped stock indexes.

While the price of commodities may drop from their peaks, these prices are not foreseen to reach extremely low levels in the near future. This is due in part to the continued demand from emerging markets and the relatively inelastic supply. Thus commodity companies should remain in a profitable position and constitute an attractive investment opportunity.

The information in this article is courtesy of Mark Mobius (“Rising inflation in emerging markets”, Sify Finance, 29 June 2008).

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

Estate Living Increasing in Popularity in South Africa

Estate Living On Rise in SA

A transcript published on the Business Day website outlines a discussion by the Property Experts on South Africa’s Home Channel on DSTV. The debate centred around estate living, why it has become so popular in South Africa over recent years and what this is doing to housing in general. Bruce Whitfield hosted guests including Jeanine Fincher from Chas Everitt International Property Group and Leza Kotze from Edward Nathan Sonnenbergs.

Jaenine Fincher believes that the situation is a response to the escalating crime in South Africa and that there probably aren’t enough estates at the moment. Estates tend to be found quite some distance outside of the cities (Bruce Whitfield). Fincher suggests that what may happen in future is more people in the suburbs will start blocking property and selling it off to create more estate living in the suburbs.

When asked about the trend of people moving out of the suburbs, from places where they feel vulnerable, to places where a higher level of security is perceived, Leza Kotze agreed that crime has had an immense impact on property development in terms of this trend. Various suburbs have compensated for this by putting up boom gates and forming a community watch organization, but there remains a big difference between what this can provide in contrast to true estate living. Estates not only provide a high level of security, but some kind of entertainment as well, whether it be a golf course, stables or even private school. There is a whole lifestyle that comes into estate living, which is essentially what gives it such an appeal.

When it comes to the unbelievable expense that goes along with buying into an estate, Fincher believes that while the demand is there and people are paying, there is just not enough in the right price range. She insists that more estates need to be built, but a lot cheaper and not necessarily so big. It’s unnecessary to purchase immense stretches of land; one can go smaller and still manage to have the community surrounded by walls for security purposes. Levies in estates are also high, considering that there is so much more to maintain, from the grounds, to the roads, the infrastructure and so on.

Whitfield also highlights the trend towards densification that seems to be following suit, with townhouse complexes and units getting smaller and being built closer together. Kotze says that this places a huge strain on municipal resources to provide basic services, which is one of the biggest challenges that needs to be addressed when it comes to densification in Johannesburg and Cape Town in particular. All this is doing though is bringing South African cities in line with all the major cities around the world, where property is expensive and a scarce and limited resource.

The information in this article is courtesy of Business Day (“Ask the Property Experts”, 24 June 2008).

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

Bad News for Estate Agents in SA

Tough Times for Estate Agents

An article published on the Business Report website has indicated that the severe slowdown in residential property sales is leading to a number of estate agents leaving the industry and the worst is yet to come, say industry players.

The principal of the Seeff Properties office in Centurion, Steve van Wyk said last week that where his office had 53 agents a year ago, there are now just 42. “I think that the numbers will reduce further, particularly over the course of this year,” he said.

Van Wyk added that the Property Trader, which many estate agencies use to market houses for sale, has shrunk from 130 pages last year to about 80 pages this year. This, he attributed to the fact that many of the smaller estate agencies are closing and the bigger agencies are cutting back on marketing outlay, in a bid to see themselves through the “tough times”.

Managing director of Seeff Pretoria East region, Gerhard van der Linde reported that the number of his agents has remained stable, but that agents from smaller agencies are “gravitating towards the brands and companies”.

Andrew Golding, chief executive of Pam Golding Property, said that his company had “not yet” experienced a decline in the company’s number of agents, but added that it was still too early to know how bad it was going to get for the more marginal agents.

When it comes to the decline in the volume of house sales this year, Seeff Properties estimated a drop of about 35%, while Pam Golding Properties indicated that volumes were down about 30% over the past two years.

Both companies rejected claims made by the Estate Agency Affairs Board (EAAB) that 26 000 of the 82 000 estate agents who were licensed last year had not renewed their licenses this year.

Chief executive of the EAAB, Nomonde Mapetla said that the reduction was most likely due to the slowdown in the property market because of the series of interest rate hikes over the last two years, as well as the implementation of the National Credit Act in June last year.

Van Wyk argued that in February this year, 29 of his agents had not yet received their fidelity fund certificates, despite having paid in full. “I know, I have proof of payment,” said van Wyk. “I spent two hours at the EAAB’s office going through it with them. I gave them a copy of the agent’s identity document and the proof of payment, but [we] are still sitting with nine agents without certificates”.

In order to practice legally and to earn commission on sales, estate agents must all have a fidelity fund certificate issued by the EAAB. Once new training requirements for agents are implemented, van Wyk believes that there will be between 15 000 and 20 000 left operating in the country. These new compulsory qualifications will essentially be a barrier to entry into the property industry, with prospective agents expected to attend formal training courses for a year and passing a sequence of exams.

Golding is fully in support of the new training requirements, but believes that the implementation of such a new curriculum in the industry will cause chaos, unless it is well thought out. His Property Group is preparing to have its 2000 agents fully accredited within the next five years, but the threat has come from the lack of clarity about requirements and the lack of confidence in the new system, according to Golding.

He asks, “Are there enough assessors and are the procedures robust enough for example, on the recognition of prior learning?”

The information in this article is courtesy of Roy Cokayne (“Property industry faces tougher times”, Business Report, 19 May 2008).

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

How to Benefit from High Interest Rates in SA

Make the Most of High Interest Rates

A press office feature released by Mazars Moores Rowland has given some valuable advice on how to make the most of the high interest rates. The current situation can benefit you if you do a reshuffle of your current investment portfolio, making adjustments with “an eye on tax efficiency, cost effectiveness and wealth enhancement”.

Marius Fenwick, a financial advisor with Mazars Moores Rowland says that depending on your age and current portfolio mix, the improved yields that result from higher interest rates may produce greater tax liability. The key to avoiding this is knowing where to start shuffling your portfolio.

The advisor suggests, “Take a look first at your retirement annuities and consider moving some underlying investments into a money market fund where yields are now close to 12%. The interest earned within the annuity won’t be taxed”. This doesn’t mean that all the underlying investments should go into a money market fund though.

According to Fenwick, for long-term growth you need to invest in equities, which is an asset class that has outperformed bonds and property over time. “And remember too, that once the interest rate cycle peaks and turns down, the stock market will start to run,” he adds. This approach is said to make sense particularly for living annuitants in a somewhat volatile market.

Say that you’re drawing down 8% of your annual investment value as a pension. Putting some of the underlying investment into a money market fund at a yield of about 11.5% will mean that fewer equity units within the annuity will have to be sold to produce the desired income from the drawdown of 8%.

“It may be worth considering shuffling the portfolio to ensure two years’ worth of income will be generated from an allocation to a money market fund while the rest is invested in a balanced portfolio and allowed to produce an inflation-beating real return over time,” believes Fenwick.

Of course, there will be those whose tax rates are such that an interest-bearing investment in their own individual rights will not be efficient. Individuals and trusts of a high net worth (including a 40% flat tax rate) would benefit from considering an investment in dividend income funds, which are yielding up to 9,4% tax-free after fees – and preserving capital at the same time, this according to the financial advisor.

For those who are willing to put money away for a period of 5 years, a lump sum investment in an endowment product built on an interest-bearing instrument will produce around 9.3% return, which is tax-free and guaranteed for the full term.

The pressure exerted on our currency by high interest rates may make offshore investment a sensible option. Part of your portfolio shuffle should include a look at offshore-linked funds and an additional investment outside of the country, either directly or through an asset swap.

Fenwick also stresses that while prices in the listed property sector have dipped significantly in an environment of high interest rates, property fundamentals still remain sound. This option is particularly popular as an income producer for retirees.

Those who invest in property should remember that it is a long-term investment that produces a steadily rising income and that they should continue through the period of volatility, rather than secure a loss on their investment by selling shares prematurely.

Also, given that the performance of listed property tends to track that of bonds, “the time for bonds to shine will come again” and consequently, so will the opportunity for investors to consider income funds with bond exposure.

The trick is not to try and time the market and to get your selection of asset classes right, rather than your choice of asset managers. A solid-performing and balanced portfolio is said to be the solution and it is advised to let your advisor make the calls on asset classes over the long term.

The information in this article is courtesy of Claire Densham (“Making the most of high interest rates”, Mazars Moores Rowland, Itinews, 16 May 2008).

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

SA Lodge Goes Totally 'Green'

Eco-Tourism Lodge 100% Green

An article published in BuaNews has highlighted the incredible eco-friendly inventions of Dr Hans Hahn, who runs an eco-tourism lodge based in Soutpansberg. The Moshavehla Lodge is detached from Eskom’s power grid and runs entirely on alternative, renewable and sustainable energy sources, essentially a combination of solar power and thermal gasification.

According to Dr Hahn, thermal gasification involves the extraction of gas by burning wood and then recycling the waste to power generators. He has also recently established a factory, which manufactures solar panels and when combined with a wood-burning boiler, this is used to heat water and power equipment.

“My invention works so well that our 700 litre tank of water starts boiling after just 30 minutes,” says Dr Hahn, adding that the recent Tourism Indaba was highly beneficial to businesses, as it exposed them to local and international visitors. He is now working towards establishing a golf course at Moshavehla, which is to be landscaped with only indigenous plants and irrigated by wastewater from the lodge.

Hahn’s daughter, Ingrid believes that her father’s sound knowledge in renewable energy could benefit the country. They intend to approach the Department of Minerals and Energy (DME) with a number of prototypes for the generation of green power.

Eskom has been struggling to provide the country with sufficient energy supply following the unsustainable increase in the use of electricity, exacerbated by the fact that South Africa has a massive infrastructure drive ahead of the 2010 Soccer World Cup. The power utility has pleaded with businesses and the public to decrease their dependency on coal-generated electricity and implement energy-saving measures in their offices and homes.

Moshavehla, which means “place where the drums beat”, is situated between mountains and amid an unspoiled biodiversity that boasts over 600 types of tree, thousands of plant species and a multitude of wildlife, including leopard, hyena, warthog and kudu. It has always been a dream of Dr Hahn to establish a conservancy on his farm to protect the indigenous fauna and flora in the area and his daughter is helping him to achieve this.

The Lodge also has a community upliftment focus to it. “We only employ local Vendas and all our furniture and arts and crafts is made locally. The community is aware of the vision we have for the property as well as the community, making them aware of the environment and how to protect it and ensure future generations can benefit from it,” said Ms Hahn.

Such a story should surely inspire others to do the same in their homes, offices and communities. There is no doubt that South Africa faces a situation where the creative implementation of renewable energy sources is necessary.

The information in this article is courtesy of BuaNews (“South Africa: Limpopo Lodge Goes 100 Percent ‘Green’”, 13 May 2008).

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

Perhaps Silver Lining for SA Property Market

Standard Bank Downplays Market Slump

An article published on the Business Report website reports that Standard Bank expects a “relatively mild cyclical downturn rather than a full-blown recession” when it comes to the residential property market. The Bank made this prediction despite releasing its own property gauge results, where the median house price fell from R550 000 in March to just R530 000 in April. At this rate, prices would fall by nearly 44% in a single year.

The decline since the same time last year translated into a negative annual growth rate of 8.6% and minus 2.8% has been recorded for the five month moving average growth rate year-on-year. However, the Bank insists that its figures should not be taken at face value and interpretations should be made with caution before making assumptions.

Leon Barnard, director of Standard Bank’s personal and business banking products, says that property is still one of the best investments and has shown good results over time. However, he added that, “There is no denying that South African consumers are starting to feel the pinch of increasing inflation and the higher interest rate environment. Property prices have cooled off dramatically in the past few months as a consequence of these environmental pressures”.

Barnard acknowledges that the current figures may “raise some concern”, but on closer inspection, he believes that they reveal a more graduated picture. “Firstly, it is the uppermost sector of the property market that has cooled off the most. We are starting to see increased levels of activity in the lower property segments. It’s not all doom and gloom. Standard Bank is actually pleased with the performance and resilience being seen in the lower spectrums of the property market”, this according to Barnard.

Standard Bank has indicated that the base value from which its most recent and pending year-on-year growth rates have been calculated was set at a relatively high level last year. This was due primarily to the temporary upward adjustment in the distribution of mortgages entering the home loans sector in the months leading up to the National Credit Act’s implementation.

The residential property gauge showed that the risk of national house price deflation had risen further and that there were areas possibly already experiencing price deflation, albeit from a high base point. Houses were increasingly being sold for less than the asking price and were staying on the market for longer periods of time. There was also anecdotal evidence of an increase in the stock of houses for sale and an indication of more distress selling.

The Bank says, “This suggests that sellers have to revise their price expectations downwards, placing downside risk to house prices”.

The information in this article is courtesy of Wiseman Khuzwayo (“Standard Bank downplays house slump”, Business Report, 11 May 2008).

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

High Potential for Fractional Ownership in SA

Fractional Ownership vs Timeshare

An interesting article in the Business News section of the Bangkok Post highlights the latest trend in international property investment: fractional ownership. It’s important to differentiate fractional ownership from timeshare, which endured much criticism in Britain and has since ruined the image of timeshare as an investment vehicle.

Fractional ownership targets the same market – those who want a second home, but don’t want to pay the full price for what could be an extravagant expense. The fractional ownership of luxury holiday homes has proven a much more promising alternative to timeshare, mainly due to the fact that buyers actually own a portion of the property.

Thailand, with its booming tourism industry, is seen as a high-potential location for fractional ownership investment. There are developments in motion as we speak, with a boutique condominium in Nakalay, Phuket, a luxury apartment in Soi Bangla, Phuket and a luxury hotel with a range of exclusive units in Thong Krut on Koh Samui.

Darron Guy, co-founder of Leisure Solutions, a company working on two projects in Phuket and one in Samui, has said that although fractional ownership is somewhat new to the Thai market, it is a fairly mature market in places like North America, South Africa and Europe. “The roots do come from timeshare and what [operators] have found is that these opportunities for fractional far outweigh the benefits of timeshare” (Guy).

The fractional business has its roots in the partial ownership of assets such as yachts and planes. Guy insists that, “Fractional is often confused with timeshare”. The high-end market in North America is estimated at US$3bn a year, covering all fractionals and a concept known as a private residence club, which refers to properties of exceptional quality.

While the article focuses on fractional ownership in the Thai market, it’s interesting to note that there is already an established market in South Africa. It is believed that “lowering the price point” also attracts the “middle to high income” demographic and that “if the yield through management and rental is wrapped around that” then the model becomes even more attractive (Guy). Perhaps it’s the perfect time to consider investing in one of the fractional ownership models available in South Africa. Not only do you benefit from owning part of a luxury holiday home at a fraction of the price, all maintenance and running costs are shared between the various owners and you can sell off your share for a guaranteed profit at any time.

The information in this article is courtesy of Nina Suebsukcharoen (“A new approach to owning property”, Bangkok Post, 12 May 2008).

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

More Doom & Gloom for SA Property Market

ABSA Predicts House Price Fall in Real Terms

An article in Business Day reports that soaring interest rates and rising inflation are continuing to worsen residential property woes, with house prices in the middle segment of the market dropping 2.5% in real terms year on year in March.

According to ABSA’s latest house price index, growth slowed to just 6.8% year on year in April, which is the lowest level recorded in over 8 years. To top it off, the worst isn’t over yet, with more bad news expected in the short term and further real terms price drops anticipated during the year.

Senior property analyst for ABSA Home Loans, Jacques du Toit has said that, “Currently we are looking at an overall drop in real terms of just over 4% (for the year). In nominal terms, growth of between 5% and 6% is expected for this year”.

He added that higher interest rates were forcing real prices down and that households were also under increased pressure from rising food and fuel prices. But apparently there is a silver lining in that people who are looking for property can expect prices to become more realistic as the year progresses.

Du Toit said, “Towards the end of this year and into 2009 will be the time to buy property because we expect the property cycle to bottom out in 2009. Following this there will be a gradual recovery when interest rates start to drop”.

Property economist for Viruly Consulting, Francois Viruly expressed little surprise at the state of the current figures, but did say that the lower end of the residential property market had “kept on doing relatively well”. He expects the downturn to be a “fairly short term dip”.

Viruly believes that, “The market is adjusting downwards…during the course of next year, we will start seeing interest rates declining and this scenario is going to turn around and next year should be moving back into double digit growth”.

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty pressed that it was important to remember that, “until January there were no real problems in terms of price decreases”. The panic is said to have set in then and during the last three months, the real damage has been done (Geffen).

Geffen believes that ABSA’s figures are somewhat “skewed” due to the fact that they are using “year-on-year growth” with three quarters of the year having experienced a “normalized” property market. “I think we are definitely in a property recession. I think it’s exacerbated by sentiment,” but there are positives in that people will become used to the “status quo and sentiment should improve by the year end” (Geffen).

Nominal house price growth topped more than 35% at the end of 2004 and since then growth has been on a downtrend, as the relatively expensive property market caused demand to taper off. Over the last two years, the rise in interest rates has further hampered growth prospects in the residential property market.

The information in this article is courtesy of Nick Wilson (“South Africa: House Prices to Fall in Real Terms – Absa”, Business Day, 9 May 2008).

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

SA Government to Restrict Coastal Development

Coastal Development to be Restricted

According to Reuters News, the South African government has made a move to curb the development of coastal property in a bid to protect the vast stretches of coastline from environmental damage.

The property boom experienced in South Africa in previous years resulted in the development of multi-million rand apartment blocks, mansions, golf and equestrian estates in coastal areas, primarily aimed at the foreign tourist market.

Parliament has introduced a new bill detailing a comprehensive national system for the planning and managing of the country’s extensive coastal areas. According to the Minister of Environmental Affairs, Marthinus van Schalkwyk, “Our coastline is currently not being managed and developed in a way that optimizes its resources and opportunities”.

The Minister adds that, “Economic and social opportunities for wealth creation and equity are being missed while coastal ecosystems are being systematically degraded (and) this bill sets out to correct this”.

The proposal aims to declare seashore, coastal waters, including estuaries, as well as the country’s territorial seas as “coastal public property”. This will give government the power to prevent the development of property too close to the sea and various coastal “protection zones” will be declared, within which certain activities will be prohibited.

“These measures are important not only to preserve the beauty of coastal landscapes but also to respond to threats posed by, for example, rising sea-levels associated with climate change or dynamic coastal processes,” said Van Schalkwyk.

The information in this article is courtesy of Reuters Africa (“S.Africa moves to restrict coastal development”, 8 May 2008).

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

South African Property News

Power Shortage Not to Affect New Developments

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

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

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

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

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

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

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

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

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

South African Property News

How to Insulate Your Home

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

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

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

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

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

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

South African Property News

House Prices Fall

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

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

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

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

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

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