YOUR HOUSE WILL BE WORTH LESS BY XMAS

Sapa
28 July 2009

Latest property predictions

Nominal house price deflation is set to continue for the rest of 2009, starting to slow down towards the end of the year, Absa said on Tuesday.
House prices were forecast to decline by about 3.5 percent in nominal terms this year after growing by 3.7 percent in 2008, Absa analyst Jacques du Toit said in the bank's latest housing review.
In real terms (where the effects of inflation have been factored in) prices were set to drop by around 10.0 percent this year, taking into account projections for consumer price inflation and nominal price growth.
This would be the second consecutive year of lower real house prices, Du Toit said.
"The lagged effect of lower interest rates and a moderate recovery in the economy later this year are factors which will contribute to an expected gradual improvement in residential property market conditions from early 2010," he said.
The average nominal price of affordable housing increased by 1.6 percent year-on-year in the second quarter of 2009, compared with price growth of 3.7 percent year-on-year in the first quarter, Du Toit noted.
In real terms prices declined by 5.8 percent year-on-year in the second quarter.
According to Du Toit, middle-segment house prices dropped by a nominal 3.9 percent year-on-year in the second quarter of the year, after declining by 1.9 percent year-on-year in the first quarter.
In real terms prices dropped by 10.9 percent year-on-year in the second quarter, after declining by 9.5 percent year-on-year in the preceding quarter, he said.
The affordability of housing improved further in the first quarter of the year, based on the ratio of house prices and mortgage repayments to household disposable income.
"However, in view of current economic conditions, which impact many consumers, few households are in the position to take advantage of the improved affordability of housing," Du Toit said.

NEW RECORD FOR HOUSE SELLERS

2009/07/16 09:18:00 AM
Johannesburg - A mild recovery in residential property demand from late last year is continuing, shows the FNB Residential Property Barometer survey released on Wednesday.
But don't get "too excited" at this stage, warned FNB Home Loans strategist John Loos.
The second quarter results of the survey showed a "stuttering" in the recent trend in demand activity levels.
Estate agents surveyed reported an almost insignificant decline in demand activity from 4.8 in the previous quarter to 4.79 on a scale of 1 to 10.
Loos said seasonal factors might be largely responsible for this.
If one compared the second quarter's activity level with the corresponding quarter a year ago, it had risen by 8.4%, the first year-on-year rise since the first quarter of 2007.
This suggested, seasonal factors excluded, that the mild recovery in residential demand was continuing.
Loos warned that a 4.79 level on a scale of 1 to 10 remained "on the weak side".
Though estate agents surveyed believed interest rate cuts had done some good, they still thought the ongoing strict banks' lending criteria were a major constraint on demand.
"In addition, estate agents believe that financial stress selling may have worsened in the second quarter, helping to sustain an oversupply of property on the market," said Loos.
Asked why sellers were selling property, the survey group estimated that about 34% of them were doing so to downgrade due to financial pressure.
"The situation appears particularly bad on the lower income end, where this estimated percentage rises to 41% of total sellers," Loos said.
The ongoing imbalance between demand and supply would continue for some time, translating into some further house price deflation in the second half of the year.
"Indeed, data from the Property Barometer appears to support this view, with estate agents surveyed estimating that of all investment properties returned to the market, 36% had been sold for lower than their previous purchase price."
This percentage was sharply up from the 13% of the previous quarter, Loos said.
Two further barometer results supported the notion of an oversupply on the market, as well as pointing to continued unrealistic expectations on the part of sellers.
The average time a property spent on the market prior to sale increased to a new record high of 21 weeks and one day.
An unchanged 86% of sellers were required to drop their asking price in order to make the sale, the survey found.
On the positive note, Loos said emigration selling looked to be contributing far less to the oversupply of property on the market in recent times, compared to last year.
"In the second quarter, an estimated eight percent of sellers were selling in order to emigrate, which is significantly down from the 20% peak reached in the third quarter of last year."
Loos said this was anticipated, as emigration surges that typically followed major political changes, such as those that took place in Polokwane during 2007, usually subsided over time.
"In addition, job prospects in popular emigration destinations look less rosy at present," he said.
- Sapa

HOME LOANS: FNB BREAKS RANKS

2009/07/16 09:34:00 AM
Elma Kloppers
Johannesburg - In a market environment where banks' strict lending criteria are strangling the housing market, First National Bank (FNB) has taken the first step to make buying a house easier, by reducing its deposit requirements.
At the same time the bank has come up with a rapid sales plan for sellers under pressure, in which their houses are sold by an estate agent rather than on auction.
Other banking groups have not yet followed FNB's footsteps and are still keeping to their strict deposit requirements.
Sean O'Sullivan, head of sales and marketing at FNB's home loan division, says the bank currently requires a deposit of 5% of the purchase price and could possibly move towards requiring a 2% deposit.
The chief executive at FNB's home loan division, Jan Kleynhans, points out that considerations in determining the deposit include the quality of the suburb where the purchase is required and the market conditions.
In areas over which the bank has reservations a larger deposit may be required.
On Wednesday Luthando Vutula, managing director at Absa home loans, declared that Absa still requires a 15% deposit from Absa clients and 30% from other clients.
Standard Bank spokesperson Ross Linstrom notes that for new loans of up to R300 000 Standard Bank clients with a cheque account need a deposit of 5%, for loans of R300 000 to R2.5m a deposit of 10%, and for those above R2.5m a deposit of 20%.
FNB's new rapid sales plan involves the houses of sellers in financial straits being sold by appointed agents, so as to get the best price for the seller, instead of selling them on an auction where properties fetch 20% less.
For buyers of these houses 100% mortgage finance is available from FNB if they meet certain criteria. O'Sullivan explains this is in order to help buyers who have previously not had access to the market. The properties are valued by professional valuer and some 300 such properties are currently being sold a month.
- Sake24.com

NAH, WE'RE NOT DESPERATE SELLERS!

Denise Mhlanga
08 July 2009

Most upmarkert properties are on auction for "convenience, not distress" - sellers.

In the current market, trying to sell a property is hard enough as potential buyers cannot get home loans from banks.
As a result, many properties sit on the market for longer and at times, the sellers resort to renting them out rather than settling for less than their asking price.
Auctions it would seem are becoming the trendiest and quickest method of selling property.
Recently, the Alliance Group reported an increase of ultra-luxury homes being forced into distressed property sales channels thanks to the economic crisis.
Wealthy suburbs such as Sandhurst, Clifton and Hyde Park were said to be no longer immune to the downward correction in house prices, according to the Alliance Distressed Asset Index for the first quarter of 2009.
Rael Levitt, chief executive officer of the Alliance Group told Realestateweb.co.za this week that these luxury properties are still coming through to the auction market.
Levitt noted that there has been no drop in asking prices for these upmarket properties, but there has been an increase in sales activity lately.
Asked whether owners in wealthy suburbs resort to auction because they cannot afford to wait for their house to be sold by an estate agency, Levitt said top-end properties come through to the auctions because this method of selling is quicker and is a good barometer for measuring market value.
In fact, more people are turning to auctions because of great values being achieved and for convenience, he added.
Sandhurst - probably South Africa's poshest residential suburb and almost certainly the most sought-after address in Johannesburg - has seen a spate of properties being auctioned and, later this month, there are more properties in Sandhurst to be auctioned by new auction company, Savile Row Auctions.
Mark Kleynhans, managing director of Savile Row Auctions, said his company does not believe that affluent owners are selling on auction largely because of financial pressure.
Talking about the properties in Sandhurst, he said owners elected to auction as they are aware of benefits of the auction process. "In the current market conditions, auction is the best process to sell property."
According to Lightstone, Sandhurst is ranked number one suburb nationally with a mean valuation of R13m for freehold homes.
Buyers may be disappointed to learn that many of these residential auctions have few bargains as some sellers are still overpricing their properties, said Auction King auctioneer, Garth Botton.
Botton argued that although auctions are becoming a popular way of selling property, buyers still need to be educated on how auctions work and what to expect.
There are some sellers who unrealistically price their properties, making it difficult to always snap up bargains. Bargains are to be mostly found when a property being auctioned has been repossessed.
He too said selling an upmarket property the auction route does not mean the owners are battling financially.
What happens is that because these luxury properties are well-furnished and are family homes, owners would rather sell the property quickly rather than putting their houses on show several times without getting results.
For these owners, auctions are about a quick and convenient method of selling and some have realised that estate agents are sitting with too much stock which is not selling, he said.
When a property is priced right, it sells quickly. What is often difficult is to auction a property that has been on the market for a while and never sold.
The auction arena is booming and potential buyers should attend auctions and get a sense of what happens, he said.

ZIMBABWE: NOT ALL FARMS WILL BE TAKEN

Sapa
09 July 2009

President Mugabe says some white farmers would be spared under his controversial land reforms.

Zimbabwe's President Robert Mugabe on Thursday said some white farmers would be spared under his controversial land reforms and urged Britain to compensate owners of property seized for redistribution.
"It's not every white farm which will be taken. Not necessarily," Mugabe said in reply to the leader of the predominantly-white Commercial Farmers Union (CFU) at a conference to lure investors.
"The responsibility of compensation rests on the shoulders of the British government and its allies," he said.
"We pay compensation for developments and improvements. That's our obligation and we have honoured that. Above all Zimbabwe upholds the sanctity of property rights.
"Sure there must be some compensation. Let's join hands and appeal to the British."The land reforms launched in 2000 aimed to resettle blacks on 4,000 white-owned commercial farms, but the process was marred by politically-charged violence.
The scheme has drastically reduced agricultural production, which once accounted for 40% of the economy, as most of its beneficiaries lacked both farming equipment and expertise.
Mugabe's statements came as the CFU reported fresh invasions of white-owned farms.
He accused the farmers of taking sides with the British, whose relations with Zimbabwe were strained over the land reforms launched ostensibly to redress historical land imbalances.
"The farmers have let themselves down," he said. "They have tended to side with the British."Mugabe said conditions in Zimbabwe favoured investment following the formation of a coalition government with his long-time rival Morgan Tsvangirai and opposition faction leader Arthur Mutambara.
"The formation of the inclusive government has strengthened our stable political environment making us more conducive to investment promotion," he asserted.
The international investment conference aimed at attracting local and foreign investment will end on Friday.

RESERVE PRICES AT PROPERTY AUCTIONS "ON THEIR WAY OUT"

Paul Winterstein*
09 July 2009

Auctioneer reckons open outcry property sales "without reserve" benefit sellers.

Will selling property on auction without a reserve price become a significant alternative for the South African market? Aucor's Paul Winterstein, head of the group's property division, believes that South African sellers should embrace this method, used successfully in the United States.
The concept was discussed by Ben Hudson, chairman of Atlanta-based Hudson & Marshall, one of America's leading real estate auction firms. Known in the USA as absolute property auctions - ie selling to the highest bidder, regardless of price - the approach has been known to increase selling prices by as much as 20%. "Although the concept is a difficult one to convince sellers to follow, selling this way reinforces the fact that that a property will sell," Hudson said.
"An absolute sale is the strongest signal a seller can send to the marketplace. It attracts purchasers from the broadest geographic region because buyers can justify their time and efforts to inspect, bid, and buy, knowing there is no question the property will be sold," he explained.
"These are times like never before. We're in uncharted waters," Hudson said. He mentioned that there are currently 700 000 foreclosed properties and 360 000 in default (in the US), and it's estimated that 2010 will see 3m foreclosures. The US government and the banks are doing all they can to minimise these numbers. However, across the US, banks repossessed 63 900 homes during April, the final step in the foreclosure process, with reports of over 1.3m homes being lost to foreclosure since August 2007.
Hudson said that in 2008 his company had 16 000 residential properties on its books for auction, 12 000 of which were sold and closed at 78% of current valuation figures. However, while this may have been the case for certain regions, it contrasted with some boom-and-bust areas such as California, Arizona, Nevada and Florida that have consistently have ranked in the top five for the highest foreclosure rates in the US over the past three years. In these areas prices increased exponentially in the last few years, but sellers are now struggling to get 50c in the dollar. Some areas where the market has bottomed out, such as Michigan, Detroit, which has sharply felt the effects of a declining auto industry, once the staple of Detroit employment, houses which would sell for $100 000 in California, are selling for a tenth of that.
Hudson says that difficult times require a different approach. Hudson & Marshall recently completed an auction for a Michigan bank, where 38 of 40 properties on offer were sold. The bank was offering a standard 6% mortgage rate for a 30-year bond but in this instance, offered a sweetheart mortgage rate of 4%. "The auction itself was extremely successful, and the added benefit for the bank was it no longer had to concern itself with taxes, upkeep, insurance or carrying costs."
Another approach by banks is financing on the spot once the pre-approved seller has put down a 10% deposit. This has the benefit of ensuring that the auction in question only attracts qualified, willing buyers.
I believe selling without reserve has merit and should be seriously considered. We have consistently sold big-ticket loose items without reserve, and while sales without reserve are not order of the day when it comes to property, we believe that, based on our previous experience, it could be a viable, sustainable option for the South African property market.

RENTING YOUR HOME TO 2010 SOCCER NUTS

Jackie Cameron*
10 July 2009

Money tips for the brave and greedy.

Some home-owners are expecting to earn staggering sums in exchange for handing over their keys to 2010 soccer visitors.
A number of estate agents have reported putting homes on their rental books for astonishing daily sums of tens of thousands of rands. And, as they breathlessly trot out dramatic public statements to this effect, many of us are considering joining the short-letters set to make a pretty penny next year.
Of course: what owners want for their homes and what they'll get could easily be two different things. The proof will be in the pudding.
One can't help wondering where all this demand for accommodation of R20 000/night and more is supposed to come from. After all, while the top soccer players may be filthy rich, the average fan is not.
Which brings me to the next point: Soccer, fairly gentlemanly on the field, seems to attract head-butters and aggressive beer-guzzlers who often battle to control themselves. I recall scenes that look ominously like social unrest being broadcast to the world on TV news over the years from international soccer tournaments.
So much so, hordes of footie fans have got themselves beaten up by baton-wielding law-enforcers and occasionally banned from watching at stadia. So why, I wonder, would they behave themselves in my - or your - spruced-up home?
Now, let's assume these throngs are indeed saving their dwindling earnings or even dole money amid the grip of a bitter global recession in order to pay the equivalent of my bond repayment several times over just to kip somewhere near their favourite team. And, let's assume they will do little more than come home, have a cuppa, maybe have a quick dip in the pool before settling in for a quiet night.
My next question, then, is: How would I get my property into those foreign currency-earning hands without sharing a whack of the rental with the middle people who have got in on the soccer tournament act?
So far Match, the FIFA agency tasked with securing 55 000 rooms for the games, hasn't got close to that figure, which makes many feel hopeful they can add to the list of accommodation put under the noses of soccer fans first.
But there has been much grumbling about the finer details about working with Match. Tourism Minister Marthinus van Schalkwyk says we have more than 1m graded hotel rooms - more than enough to cope with the expected influx of visitors - but that Match contract conditions are unattractive.
Industry players have "raised concerns about the price level offered by Match as well as its escape clause", Van Schalkwyk is quoted as saying in a daily newspaper.
With Match playing hard ball with the big guns in the short-term letting game, the smaller people who want to become temporary landlords for that period have little chance of negotiating a fair deal.
It is a free market so there is nothing stopping us from leaving Match out of the loop on the home loan rental front during this period.
You could give your property to one of those enthusiastic agents, who frankly have little or no experience in dealing with soccer-loving tourists.
Or you could go it alone, advertising your rental on the internet where soccer visitors are likely to search for pads. For example, Realestateweb has a rental hub in partnership with Private Property, and there are many other sites here and elsewhere where you could list your home.
Being a part-time landlord comes with its challenges, but it isn't rocket science. For starters, the product must be right and what you have promised your tenants. So, clean, enough fresh linen, with all the mod cons you have advertised.
A lease will be of limited value if you are renting to a foreigner because laws are expensive to enforce across borders. Full payment upfront plus extra as a fully refundable deposit upon departure will help you safeguard against damage and theft. Make an inventory and get it signed on arrival so you can agree with what's in the home and the condition of items if there is a disagreement later over the deposit.
Staying in town while your visitors are here will help, too. You can casually flit in and out to change the towels or drop off courtesy rusks and biltong as a way of keeping an eye on the place. In extreme circumstances, you might even have time to call in the police.

MORTGAGE ADVANCES TO SLOW FURTHER

2009/06/30 12:11:00 PM
Johannesburg - Despite interest rates having been cut by a total of 450 basis points since December last year, mortgage advances growth is expected to slow down further in the near term on the back of prevailing economic conditions, according to property analyst at Absa Home Loans, Jacques du Toit.
Du Toit says weak economic conditions are a contributing factor in the relatively low demand for housing and mortgage finance.
This comes after it was announced on Tuesday that the year-on-year (y/y) growth in the value of total mortgage advances by monetary institutions (the net outstanding balance on mortgage loans at these institutions) slowed down to 9.4% in May 2009 from 10.6% in April.
"This was the lowest and also the first single-digit year-on-year growth in outstanding mortgage balances since September 2000. On a month-on-month basis the outstanding balance on mortgage loans was marginally higher in May, after growth of 0.1% was recorded in April compared with March," said Du Toit.
- I-Net Bridge

FNB LOWERS HOUSE DEPOSIT

2009/07/01 03:01:00 PM
Johannesburg - In 2008, high interest rates, the National Credit Act (NCA), the lending policies of commercial banks and a global financial crisis were all held accountable for poor property sales and falling house prices.
Now, a year later, conditions have hardly improved. Property sales remain poor and prices continue to slide. Yet, interest rates have reduced significantly back to 2006 levels and many commentators are saying that the worst of the financial crisis may be behind us.
"This gridlock in the industry can only be attributed to a series of deep- seated misconceptions in the minds of owners, buyers, agents and even some property market commentators," says Jan Kleynhans, CEO of FNB Home Loans.
"Rocketing prices and rapidly expanding demand some three to four years ago have left many people with a deep-seated belief that these conditions will return and they should therefore price to sell and bid to buy accordingly. Sellers - specifically - have difficulty in accepting that the value of their house is falling and are extremely wary of selling in a low market if they believe a recovery is around the corner."
FNB's recent Residential Property Barometer (Q1-2009) agents that were surveyed indicated that the percentage of properties sold at less than asking price remains above 80%, suggesting that many sellers are still not realistic in their pricing.
FNB's view is that recovery will be slow and that further weakness will extend into 2010. It is this scenario that is partially shaping the bank's decision-making when it considers an application for residential mortgage finance.
"Property values need a number of preconditions for growth. The most important of these is underlying economic vitality. And this condition has been lacking for some time, particularly in terms of consumer affordability levels and sluggish income growth or even income contraction. This is exacerbated by lower consumer confidence levels as the average potential property buyer is concerned about losing their job or at best a reduction in income growth.
"It should come as no surprise, then, that prices continue fall in consecutive surveys reported in the FNB Property Barometer and every other report on the residential property market. Thus one finds an oversupply of properties, typically by those needing to sell and sluggish demand due to low consumer confidence levels," says Kleynhans.
"Financing residential property remains an active business. Across the banks, thousands of new mortgages are granted every week. While FNB is not a dominant mortgage-granter and secures about 15% of the market, we are slowly increasing our market share and continually seeking new business opportunities despite the lackluster business environment," says Kleynhans.
Recent statements in the media suggesting that banks are actively withholding residential lending to the point that a lack of credit is undermining the market are, however, far from the truth. FNB's decline ratio stands at around 50% of all applications and this level has only increased moderately in the past 12 months.
Lower deposit
More than 50% of people applying to FNB Home Loans are declined due to a combination of excessive debt, high living costs or poor credit records.
For customers in good standing however, FNB is currently reviewing its earlier requirement of a 10% to 15% deposit "across the board".
While deposits will continue to be a requirement in mortgage finance, lower deposit requirements will aid affordability without either compromising the customer's debt ratio or exposing the bank potential losses arising from a non-performing loan.
"We have lived through such a rapid transition from boom-times to a recession that we all need to review our attitudes towards our financial affairs. In boom-times when asset prices were rising, it made little sense to save. In a recession, exactly the opposite is true," asserts Kleynhans.
"Consumers need to adopt a habit of saving. It may take a year to two to accumulate a deposit, but that is exactly the sort of change in behaviour South African consumers need to make. South Africa's traditionally low savings rate has been exacerbated by previously low deposit requirements on mortgage loans," says Kleynhans.
Property Economist at FNB Home Loans, John Loos is cautiously optimistic about the immediate future. "Although interest rate cuts may well spark a mild rise in new loans granted, it will probably be a long time before the growth in the total mortgage or household credit outstanding turns the corner due to leads and lags between new lending trend changes and capital repayments catching up.
"Given the shaky global and local economic conditions, any rise in new lending is expected to be mild, as it is unlikely that lending institutions will come 'out of the starting blocks' quickly this time around."
- I-Net Bridge

JULY FEE INCREASE FOR SA PROPERTY LAWYERS

Siegie Heiriss*
30 June 2009

Some recommended fees have doubled; no change for others. New property transfers, mortgage bond fees - at-a-glance.

In my conveyancer's diary of 8 June 2009, I mentioned that the Association of Law Societies had published a new recommended fee guideline for conveyancing matters.
This guideline, which will probably be followed by most conveyancers, will apply to new instructions received by the conveyancer as from 1 July 2009.
I have attempted to summarize the fees for transfers and mortgage bonds in a table, which I attach.
Bear in mind:
1. The heading "General Notes" to the guidelines, sets out what the fee is supposed to include. It does now include the attendances for "obtaining, preparation and signature of documents to ensure compliance with the provisions of the Financial Intelligence Centre Act and the signature of ancillary documents required by a mortgagee in terms of the National Credit Act". [A mortgagee is usually the bank].
2. The fees were last revised in 2002, so an increase was long overdue. Some firms had increased their fees in line with inflation but others had not done so. This may level the playing fields a bit.
3. It is still only a guideline and not a fixed tariff. The fees are negotiable and can be adjusted upwards or downwards by the conveyancer.

HOME LOANS: BANKS STINGIER THAN EVER

Realestateweb reporter
30 June 2009

Latest stats confirm that buyers are struggling to secure mortgage finance. Worst growth rate in 9 years.

Latest statistics confirm that buyers are struggling to secure mortgage finance from banks. Mortgage advances growth is at its lowest level in nine years.
Said Jacques du Toit, senior property analyst at Absa Home Loans: "The latest mortgage advances data released by the South African Reserve Bank indicate that year-on-year growth in mortgage advances slowed down to 9,4% in May this year - the lowest and also the first single-digit growth since September 2000."
"On a month-on-month basis the outstanding balance on mortgage loans was marginally higher in May, after growth of 0,1% was recorded in April compared with March. Growth in the value of mortgage advances to households, mainly related to
residential property, tapered off to 6,8% y/y in May from 7,7% y/y in April." Noted Du Toit: "The amount of outstanding mortgage balances in the household sector was slightly down to R708,3bn in May, from R708,4bn in April. Household mortgage advances had a 72,1% share in total mortgage debt in May, while having a share of 69,8% in total credit extended to the household sector in May."
The recession is taking its toll on households. According to Du Toit, the ratio of outstanding household mortgage debt to disposable income was marginally higher at 49,5% in the first quarter of 2009, from 49,3% in the fourth quarter of 2008.
"This was the net result of markedly lower year-on-year growth in both mortgage advances to households and nominal disposable income in the first quarter compared with the final quarter of last year. The cost of servicing household mortgage debt as a percentage of disposable income was 7,1% in the first quarter this year, down from 7,6% in the preceding quarter, mainly due to declining interest rates in the first quarter."
Unfortunately for mortgage originators, who rely on home loan commissions, and estate agents who need deals to go through in order to finalise property sales, the picture is set to get worse before it gets better.
Du Toit said: "Despite interest rates having been cut by a total of 450 basis points since December last year, mortgage advances growth is expected to slow down further in the near term on the back of prevailing economic conditions, which are a contributing factor in the relatively low demand for housing and mortgage finance."