Ikonic Real Estate

House price growth still low - Absa

2011-07-29T01:09:00.000-07:00

Jul 28 2011 08:29

I-Net Bridge

Johannesburg - Growth in nominal house prices remained low, or was in negative territory in some segments of the market in the second quarter of 2011, according to Absa's calculations.
In some instances prices were rising steadily on a quarterly and annual basis, the bank said in its latest housing review.
"With consumer price inflation picking up during the second quarter, some real house price declines occurred on a quarterly as well as a year-on-year basis in the past quarter.
"House price trends varied at a geographical level in the country's provinces, metropolitan areas and major coastal regions. Price growth was evident on an annual as well as a quarterly basis in some regions in the second quarter of 2011.
"However, nominal price declines were recorded in a number of regions, while rising inflation caused prices to remain under pressure in real terms in the second quarter," Absa said.
It noted that the affordability of housing had improved further in the first quarter of 2011, impacted by low house price growth, slightly lower interest rates and rising household disposable income in the quarter. This is according to the latest trends in the ratios of house prices and mortgage repayments to household disposable income, it pointed out.
"Based on house price trends in the first half of 2011, and prospects for the economy and household finances, nominal house price growth of between 1% and 2% is forecast for 2011, rising to about 4% in 2012," the bank forecast.
"In consideration of the outlook for nominal price growth and the projection of consumer price inflation averaging 5% this year and 6% next year, house prices are set to decline in real terms in both 2011 and 2012," it added.

Banks' Hesitancy Pulling Down House Prices

2011-07-26T23:51:00.000-07:00

*This article was first published by Rode & Associates Property Consultants

After peaking in the first half of 2010, the yearly growth in the value of new mortgage loans granted for residential property has been heading strikingly south. In fact, the deceleration in growth has been so sharp that in March 2011 the value of new loans granted was actually lower than what it was a year earlier. Naturally, contractions in mortgage loans granted, act as a restraining factor on price movements. This is illustrated by the graph, which depicts a robust correlation between the growth in house prices and the growth in the value of new mortgage loans granted.

The residential mortgage and house markets can at least take heart from the solid growth (+8%) in nominal household disposable income recorded in 2011q1. What’s more, the trend for hikes in wages and salaries to exceed inflation by a wide margin seems to be neverending — never mind the eventual value-destroying consequences. For now, however, financiers will continue to be constrained by the still frustratingly high ratios of debt to disposable income, which have not come down by much since the peak of the boom. Naturally, this forms an important brake on the granting of mortgage bonds. In addition, the looming interest rate hikes in the wake of rising inflation are not going to improve affordability. Add to this the litany of sharp increases in utility charges, toll roads, rates and taxes on property, and the introduction of National Health Insurance.

And then we haven’t even considered the problems that the fiscus will face in years to come.

Thus, we stick to our forecast that real house prices will keep declining for another few years.

LOCATION AND PRICE MOST IMPORTANT TO SA HOME BUYERS

2010-05-04T23:48:00.000-07:00

04 May 2010

PropertyGenie poll reveals.

Nearly 80% of respondents to a new PropertyGenie poll hosted on behalf of ooba - South Africa's leading bond originator - cited location and price as the most important factors to them when buying a home.
44% of respondents put location of the property at the top of their list of deciding factors, while 34% chose price. Views were most important to 10% of respondents, while proximity to work / school received 7% of the votes. Parking received 3%, while 2% said the fact that a property was newly refurbished was the key factor in their purchasing decision.
According to Craig Deats at ooba, the old adage of location, location, location still rings true for many South African homebuyers.
"While it is no secret that location plays a crucial role in determining the value of a property, many people still choose to ignore this fact, which can be extremely costly when buying primarily for investment purposes."
He adds that it is also important to get some idea of what the area you are looking to buy in will look like 10 years down the line. "The demographics of an area can change relatively quickly. What could be classed as a vibey student area today could be on its way to becoming either a chic and trendy neighourhood or an urban slum. Doing some research into the recent and planned infrastructure and building projects in the area as well as the general upkeep on the existing houses may help you in this regard."
Deats says that not too much emphasis should be placed on the fact that only 34% of respondents ranked price as the most important factor. "Price is almost always a crucial element in any purchasing decision, especially in big ticket items such as property. In addition, most of the respondents who chose location as the most important factor have already factored in the price ranges of property in the various areas they are considering living in.
"Buying a home is a long term investment and is often likely to be one of the biggest purchases that most people make in their life, so it is important that buyers look at all the factors involved when making this decision," says Deats.

GOOGLE TO HELP SA HOUSE HUNTERS

2010-04-19T01:02:00.000-07:00

Apr 16 2010 16:38
Leani Wessels
Johannesburg - House hunters tired of spending Sundays in the car will soon be able to view homes, and their surrounds, from the comfort of the couch.
Google Street View, which will be available in South Africa before the World Cup kick-off, will offer users a 360 degree street level view of all major cities in the country.
"Real estate agencies in Australia are using the technology successfully to enhance their clients' house-hunting experiences," said Re/Max CEO Adrian Goslett.
"Each year an increased number of South Africans are searching online for property, so this is a natural progression."
According to Goslett, Street View will allow potential buyers to check out amenities such as open spaces, shopping areas and parking near or in the suburbs they are interested in.
Street View cars were seen since September last year, collecting data that will be used to compile a three-dimensional map of the country's streets.
Johannesburg, Pretoria, Durban, Port Elizabeth and Cape Town have been mapped since last year using millions of photographs, but the going has been slow with limited information available on street addresses and business locations.
"[Street View] will provide clients with the opportunity to narrow down the selection of homes to the point where the few that we show will actually be bought," said Herschel Jawitz, CEO of Jawitz Properties.
"It will be good for the client in reducing search time and irritation and good for the agent from a cost and efficiency point of view," said Jawitz.
According to Jawitz and Goslett, each year an increasing number of South Africans search online for property. "So this is a natural progression," said Goslett.
- Fin24.com

HOME PRICES SURPRISE EXPERTS

2010-01-19T21:20:00.001-08:00

Jan 18 2010 12:15Joan Muller
Johannesburg - It appears that property economists have underestimated the strength of the housing recovery, with the home price dip experienced in 2009 turning out to be milder than anticipated.
Figures released on Monday by Absa Bank, South Africa's biggest mortgage lender, showed house prices fell by an average -0.2% in 2009 (+4.1% in 2008). In September 2009, Absa property analyst Jacques du Toit still expected a 3% drop in average house prices for 2009.
FNB's housing index also ended 2009 on a better-than-expected note. House prices for the year dropped -3.9% for the year overall as recorded by FNB's mortgage book, but had already returned to positive growth territory in November. FNB property strategist John Loos said he had not expected house prices to start rising again before early 2010.
FNB recorded a year-on-year price rise of 2.7% in December. Said Loos: "While [this is] nothing to be over-excited about yet, the trend points towards a significantly better 2010 for those of us involved in the residential property market."
Meanwhile, mortgage originator Ooba's house price index, also released on Monday, reflected few signs of last year's housing recession. It recorded an overall price rise of 1.8% for 2009.
Ooba bases its housing data on successful home loan applications. It therefore tends to react more speedily to market changes than banks, which capture data only once a housing sale has been registered in the deeds office.
Analysts more upbeat on growth
Ooba CEO Saul Geffen said the steady improvement in house prices in 2009 came on the back of lower interest rates filtering through to consumers, and banks relaxing their lending criteria.
The fact that the housing market appeared to be recovering at a quicker pace than previously anticipated prompted both FNB's Loos and Absa's Du Toit to upward adjustment of their house price growth forecasts for 2010.
Loos has changed his initial 5% growth forecast upwards to 8% while Du Toit now expects growth of 6% to 7% for 2010, up from 3% to 4% previously.
However, industry players cautioned that the housing recovery may well start to loose steam by year-end. Du Toit said the Reserve Bank is likely to start hiking interest rates again late in 2010 in an attempt to keep inflation under control, which will dampen housing demand.
Loos had a similar view, citing persistently high debt levels as another key reason why the housing recovery could be relatively short-lived. He said the double-digit house price growth experienced during the boom years of 2004 to 2006 is still a long way off.
"High debt levels will restrict the rate at which households can increase their borrowings for the time being," Loos said. "In fact, it could be a few years before we reach the kind of low household debt-to-income levels needed to fuel a more impressive property boom."
- Fin24.com

HOUSING RECOVERY SHORT-LIVED

2009-11-03T21:34:00.000-08:00

2009/11/03 01:50:00 PM
Joan Muller
Johannesburg - Two leading property economists have warned that rising job losses and sky-high debt levels may delay a turnaround in the housing market.
This is despite monthly house price indices published by First National Bank (FNB) and Standard Bank this week pointing to an improvement in the rate of October house price declines.
According to FNB's House Price index, average prices fell by -1% in October year-on-year, a marked improvement on the -3.6% deflation rate recorded in September. Standard Bank's housing index points to a drop of -4.6% in October, also an improvement on the -5.2% recorded in both August and September.
FNB's John Loos said the bank's latest data suggested that house prices were probably only one month away from resuming growth on an annualised basis.
Johan Botha, a property economist for Standard Bank, expected house prices to return to positive growth territory by the second quarter of 2010.
However, Loos said the housing market could lose steam in the second half of 2010 when the next upward cycle in interest rates was expected to begin.
"By mid-2010, the stimulus of lower interest rates would have fully fed through, which means that an important driver of the residential market recovery will no longer be there," he said.
Average house price growth would reach about 5% in 2010, but would flatten out again in late 2010 as the interest rate stimulus wears thin, Loos said.
Even if the recession were nearing its end, households would still be paying off debt and were therefore unlikely to "spend" the economy to far greater gross domestic product (GDP) growth heights of about 2% in 2010.
Said Loos: "That would not offer a huge stimulus to the housing market, so the up cycle promises to be short and moderate."
Botha had a similar view, saying that despite the return of signs of interest in residential property, the economy was under such tremendous strain that the housing market could not be expected to flourish.
"A general lack of improved consumer and business confidence as well as a constrained labour market with deeper job losses will make for a tame recovery in the residential property market," he said.
SA top of property growth pops
Notwithstanding the muted outlook for house price growth over the next year or two, homeowners who have not been forced to sell during the downturn are still sitting pretty over the longer term. FNB data show that on a cumulative basis, the average house price was still 149% higher in October 2009 than in October 2002, at the start of the property boom.
Moreover, the South African housing market has over the past decade delivered better returns than most of its international counterparts.
Latest data from financial magazine The Economist indicate that South Africa was the best performer among 20 countries in terms of both nominal and real (after inflation) price growth over the past 10 years.
According to The Economist, South Africa delivered cumulative house price growth of about 125% (nominal) in the 10 years to the second quarter of 2009. The Economist's figures are based on Absa's housing index.
After South Africa, the next best performer was Spain with 75% growth, while Britain and Australia both notched up price gains of about 70% over the same time.
Japan was the biggest loser in The Economist's house price rankings, with nominal house prices falling by 30% in that country over the 10-year period, the magazine said.
- Fin24.com

HOME OWNERS GET MORE

2009-10-27T22:51:00.000-07:00

2009/10/27 01:22:00 PM

Johannesburg - The average property rental price has increased by 11.5% over the past 12 months, according to the latest TPN Rental Payment Monitor.
TPN Credit Bureau says good news for property investors and property managers of all sizes throughout South Africa is that rental payment trends have continued to improve slightly through the second and third quarters of 2009.
Year-on-year figures show an improvement of 6% of tenants in good standing, with a 3% improvement from Q2 alone.
Tenants considered to be in good standing are those tenants who pay in full either on time or by the end of the month.
According to TPN, the national average of tenants who do not pay anything towards their rent had declined from 19% to 12%.
"At TPN Credit Bureau, we are of the opinion that the majority of tenants want to pay their rent on time and in full. Unfortunately the current economic climate has created external factors that have added extraordinary pressure onto many tenants' abilities to meet their entire monthly financial obligations including rent, such as retrenchments, pay cuts or shorter working weeks.
"We have nevertheless noted that property investors or managers who follow strict and appropriate tenant acquisition and affordability assessments are best placed with quality tenants and quality collections, in addition to instituting proper collection and management processes; systems, statements, communications and banking support," TPN said.
- I-Net Bridge

HOUSE PRICES 'GRADUALLY IMPROVE'

2009-09-28T22:49:00.001-07:00

2009/09/28 09:19:00 PM
Johannesburg -
Lightstone's repeat sales annual national house price inflation, based on Deeds Office transactions, continued on its upward trend, reaching -1.1% in May 2009, after bottoming at its lowest level of -3.1% in January 2009.
According to the latest Lightstone House price index released on Monday, extending the index forward to August 2009 using bank application data showed that annual house price inflation had reached 0.2%.
Should this trend be confirmed as the Deeds Office data starts to come in for the June to August period, it will show that South Africa has actually just moved into positive nominal house price appreciation for the first time since July 2008, said Lightstone.
According to the index, at a segment level, the Eastern Cape/Nelson Mandela Bay area was showing strength with inflation moving to between 4% and 5% year on year.
Tshwane appeared to be lagging the other metropolitans while on a value- based view, the luxury market was the worst performing.
The hardest segment to interpret appeared to be the Affordable segment, which despite showing good annual growth this month (+12.1%) had been very volatile over the last few months.
"We will continue to monitor its performance closely," said Lightstone's director, Andrew Watt.
- I-Net Bridge

BUY A HOUSE WHILE BARGAINS LAST

2009-09-28T06:55:00.001-07:00

2009/09/23 08:04:00 PM
Svetlana Doneva
Johannesburg - South Africans looking for property bargains in the residential market should strike while the iron is hot, according to FNB Home Loans property strategist John Loos.
"It's a relatively good time to buy. Although things are turning for the better, there is a high level of financial stress selling and that is where the opportunistic buyer can cash in," said Loos, speaking to Chris Gibbons on Fin24.com's podcast AM Stock Take on Wednesday.
Loos added that another reason why South Africans may want to have a look at the residential market is because the economy is at the bottom of the interest rate cycle - or very close to it.
The South African Reserve Bank's Monetary Policy Committee (MPC) left the key repo rate unchanged at 7% at their September meeting. The prime lending and mortgage rates are also steady at 10.5%.
The market consensus is that there will be no more major rate cuts this year. The MPC has cut rates by a collective 500 basis points since December 2008.
The local residential market is currently in a deflationary mode. House prices fell 3.4% in August 2009, compared to the same month last year and a 3.7% year-on-year drop in July, according to Absa Home Loans calculations.
However, property economists see house price inflation returning next year.
"Oversupply will be mopped up in the second half of the year and then house price inflation can resume in 2010 with moderate single digit inflation," said Loos, adding that there will be "no fireworks in the recovery".
Jacques du Toit, senior property analyst at Absa Home Loans, saw nominal house price growth of just under 3% over the course of next year.
Meanwhile Dr Andrew Golding, CEO of the Pam Golding Property group, said that lending institutions will need to relax their lending criteria in order to breathe some life into the market place.
"Unquestionably, the reduced availability to finance is the single biggest factor holding back the housing market now," said Golding.
- Fin24.com

ABSA FOLOWS STANDARD'S LEAD

2009-09-10T00:16:00.000-07:00

2009/09/08 09:05:00 AM
Elma Kloppers
Johannesburg - Competition is alive in the banking sector and consumers are reaping the benefits, reckon industry players.
This is particularly so in the home-loan market, where Absa has followed Standard Bank by also relaxing its lending criteria for home loans.
"This step is probably because banks have recently been under tremendous pressure to resuscitate the housing market," comments Stuart Grobler, a senior general manager at the Banking Association of South Africa (Basa).
He says Absa's response is one of the benefits of competition. Banks have for some time been sharply criticised because their deposit requirements constitute a principal reason for the pressure on the housing market in the past year, despite the series of interest-rate cuts since December 2008.
But Absa is being less generous than Standard Bank, which last week made 100% mortgages available for new home loans of up to R1.5m.
Absa still requires a 5% deposit for loans of up to R1.5m for Absa clients using the bank's internal channels, and a 10% deposit for those using external channels, such as mortgage originators. Deposits of 15% were previously required.
But Absa clients wishing to buy repossessed houses from the bank will qualify for 100% loans.
Erwin Rode, a property valuer and economist at Rode & Associates, says this makes sense because these houses can be bought at a healthy discount, possibly as much as one-third below market value.
Buyers of cheap houses will be the biggest beneficiaries of Absa's new lending criteria. The bank is making 110% loans available for prospective buyers with a monthly household income of up to R11 000.
Luthando Vutula, managing executive of Absa Home Loans, says this applies to mortgages of up to R250 000.
But, despite the lower interest rates, he points out that the economy remains under pressure and Absa still encourages deposits. "It's important to have equity in a home loan, especially when house prices are falling."
Commentators agree that this is good news for the house market. Betterbond marketing director Dr Deon Lessing says it is becoming easier to buy a house since a smaller deposit is now required.
He expects this, together with the lower interest rates, to stimulate the housing market.
Adrian Goslett, deputy regional director of Re/Max, says this is creating a fresh platform for competition between lending institutions, and will benefit both consumer and the housing market.
Rode says prospective buyers will still have to meet the criteria of the National Credit Act. "That way, banks will be able to manage their risk."

STANDARD BANK OPENS THE CREDIT GATES

2009-09-02T01:19:00.000-07:00

01 September 2009

They're back! 104% home loans for R1m homes - and more.

Announcement
Johannesburg 1 September 2009 - Standard Bank has recently increased its risk acceptance rate in its Home Loan, and Credit Card divisions. The changes made to Standard Bank's risk appetite have been specifically designed to benefit first-time entrants into the housing and general credit markets.
Peter Schlebusch, Standard Bank CEO Personal and Business Banking South Africa says: "It is important that we support and provide access to finance to the lower end of the economic spectrum. People in this sector have been hardest hit by higher inflation, job losses and the general slowdown in the economy. Standard Bank is committed to providing access to finance and financial services to the low income market, while continuing to focus on prudent risk, capital and liquidity management."
The following adjustments have been made:
Jump Start bonds (first-time home owners) up to R1m home loans and who are using this as their primary residence are now able to qualify for a cost-inclusive 104% LTV (loan-to-value) loan.
Affordable housing: Standard Bank is now allowing LTVs of 100% (up from 90-95%).
Standard Bank has upwardly revised its LTVs on new home loans. Customers using internal Standard Bank channels with home loans of under R1.5m can qualify for LTVs of 100% (up from 90-95%). Houses of R1.5m-R2.5m will however still require a 10% deposit, and >R2.5m home loans will still require a 20% deposit.
Standard Bank has started accepting low-risk non-cheque Standard Bank customers, and low-risk non Standard Bank customers for home loans.
In Credit Card, Standard Bank is increasing its risk appetite by raising the "acceptable" bad debt ratio by 3% on new business written in a select entry-level segment of the portfolio.

Sim Tshabalala, Standard Bank South Africa CEO says: "We believe that an economic recovery will be slow but we see medium term improvement among households, as affordability improves on the back of lower interest rates. We have taken proactive steps to capitalise on this improvement."
Standard Bank has accepted the tender proposals for origination business from BetterBond, Bond Choice and Multinet, all three of which commenced submitting Home Loan applications from 24 August 2009. Standard Bank believes the new rates negotiated with mortgage originators will allow for a sustainable long term business model.

PROPERTY WON'T GET MUCH CHEAPER

2009-09-02T01:18:00.001-07:00

Sapa
01 September 2009

More signs of a house price recovery - bank stats

House price growth was likely to improve towards the end of the year as the effect of interest rate cuts impacted on the economy and the property market, the Standard Bank said on Tuesday.
It was releasing its latest residential property gauge.
The bank said growth in its median house price index decreased by 5.2 percent year-on-year in August, averaging 3.9 percent year-on-year in the first eight months of 2009.
"Important drivers of overall growth in the economy, such as the level of household income and debt, as well as the medium-term economic and financial outlook, are such that a quick turnaround in the housing market is unlikely," Standard Bank said.
"The best that we can hope for is for price declines to stabilise towards the end of the year as the recent interest rate cuts work their way through the economy and overall consumer and business sentiment improves."
It said that the potent mix of industry-wide loan-to-value restrictions, negative income growth and concerns about job security would weigh on the property market.
Furthermore, in the short-term, any easing in credit-granting criteria would be mild, as upside risks regarding uncertainty in job security and income growth continued.
Standard Bank said the cumulative interest rate cuts that commenced in December 2008 would still have to filter fully through the economy.
"The full impact of interest rate cuts on economic growth could take as long as 12 to 18 months, implying that it may be too early to expect substantial economic growth this year," Standard Bank said.
In the short term, the economic outlook was expected to remain lacklustre.
However, relatively positive developments on the inflation front, the global economy and the full impact of lower interest rates would support the property market in time to come, the bank said.
It was anticipated that house price growth would be negative over the short to medium term, but was likely to improve towards the end of the year.

SHARP RISE IN LIQUIDATIONS

2009-08-25T23:15:00.001-07:00

2009/08/25
08:21:00 AM
Johannesburg - The total number of liquidations recorded for the first seven months of 2009 increased by 35.8% (from 1 752 to 2 379) compared with the first seven months of 2008, Statistics South Africa reported on Monday.
The total number of liquidations recorded for July 2009 increased by 33.8% (from 320 to 428) compared with July 2008.
The 35.8% increase in the total number of liquidations for the first seven months of 2009 was due to increases of 36.2% in voluntary liquidations (from 1 589 to 2 165) and 31.3% in compulsory liquidations (from 163 to 214).
When comparing the first seven months of 2009 with the first seven months of 2008, there were increases of 38.5% in company liquidations (from 794 to 1 100) and 33.5% in close corporation liquidations (from 958 to 1 279).
But the total number of insolvencies recorded for the first six months of 2009 decreased by 17.9% (from 1 735 to 1 425) compared with the first six months of 2008.
The total number of insolvencies recorded for June 2009 decreased by 48.8% (from 389 to 199) compared with June 2008.

RATES: 'DON'T FIX YOUR BOND'

2009-08-17T01:11:00.001-07:00

2009/08/14 04:40:00 PM
Jana Roos
Johannesburg - The SA Reserve Bank's (Sarb's) decision on Thursday to cut interest rates has ushered in a period when the cost of money is expected to remain low, which is why you should not fix the rate on your bond right now, said economists.
"Don't do it," said Dawie Roodt, economist at the Efficient Group. "If your interest rate is fixed and Sarb cuts rates further, you will end up paying even more." Banks usually allow their clients to fix their rates at a premium to the prevalent rate for a predetermined period.
Roodt said the only time you should consider doing this is when you can't afford to pay more than the fixed rate.
Michael Bouchier, MD of Credit Health, said bond holders may consider fixing their rates in three to six months' time, if there are indications that rates will rise. "The effects of the crunch will hit us hard then," he said. "This will be a rough year."
FNB property strategist John Loos said a rate cut shouldn't necessarily sway home owners one way or the other. "The important point is rather what your general appetite for risk is - and how near the edge you are financially."
Johan Rossouw, group economist at Vunani Group, agreed that risk tolerance should be the determining factor. However, in most instances a fixed rate would have cost you more by the time you reach the end of the predetermined time span, he said.
"In the long run you will probably see that you end up paying much less if you leave it at the fluctuating rate. It all comes down to cash flow - to fix it helps with peace of mind," Rossouw said.

YOUR HOUSE WILL BE WORTH LESS BY XMAS

2009-07-29T05:19:00.000-07:00

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

2009-07-20T06:11:00.000-07:00

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

2009-07-20T06:10:00.000-07:00

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!

2009-07-16T03:58:00.001-07:00

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

2009-07-16T03:57:00.000-07:00

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"

2009-07-16T03:56:00.000-07:00

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

2009-07-16T03:55:00.000-07:00

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

2009-07-02T00:17:00.000-07:00

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

2009-07-02T00:15:00.001-07:00

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

2009-07-01T01:49:00.001-07:00

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

2009-07-01T01:46:00.001-07:00

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."

WORST PRICE FALLS IN 23 YEARS

2009-06-09T23:19:00.003-07:00

Realestateweb reporter
08 June 2009

More ugly house price data - and that's after home loan rates have been slashed 4,5% since December. New Absa stats.

SA Reserve Bank Governor Tito Mboweni's dramatic slashing of interest rates over the past six months has failed to halt the trend of falling residential property prices. And there's no good property price news expected from the bank this year.
More ugly house price data has been released this week, showing the biggest year-on-year fall in residential prices in 23 years.
Absa's House Price Index up to May 2009 shows "nominal house prices in the middle segment of the market declined by 3,6% year-on-year in May, which was the biggest price drop since late 1986".
Jacques du Toit, Absa's sectoral analyst of secured lending for Absa Retail Bank, predicts that house prices are set to decline by a nominal 3%-4% in 2009.
Absa's figures suggest your home is now worth what it was in early 2007 and put the average house as priced at about R930 000.
You can place the blame for the erosion in market value of your home largely on the recession - the first since 1992 and which has made banks nervous about granting credit to home loan applicants.
In his note, Du Toit said: "Nominal year-on-year house price deflation, which commenced in December 2008, continued in May this year, while in real terms prices are declining on a year-on-year basis since January 2008."
The Absa break-down of house prices in terms of home sizes shows:
* The average nominal price of middle-segment housing was down by 3,6% year-on-year (y/y) to R932 000 in May 2009, after declining by a revised 3,2% y/y in April. The May price decline was the biggest since September 1986, when it was also -3,6% y/y. On a month-on-month basis, nominal house prices were 0,5% lower in May compared with April. These trends contributed to nominal house prices in the middle segment to be R35 300 lower in May 2009, after peaking at R967 300 in May last year."
Du Toit said middle-segment house prices were down by a real 10,7% y/y in April, after declining by a revised 10,2% y/y in March. "This was the biggest real year-on-year price
decline since September 1992," he said, noting that real house price calculations are based on the consumer price index (CPI) for all urban areas, available from January 2008, as
published by Statistics South Africa and used by the South African Reserve Bank
for monetary policy purposes.
Before this date the calculations are based on the historical CPI for metropolitan areas, linked to the CPI for all urban areas, he said.
* In the category for small houses (80m²-140m²), the average nominal price dropped by 4,0% y/y in May this year, after a revised -3,2% y/y was recorded in April. "This brought the average price of houses in this segment to about R658 200. In real
terms prices dropped by 10,7% y/y in April (-10,0% y/y in March)," said du Toit. The average nominal price of medium-sized houses (141m²-220m²) declined by 2,0% y/y in May 2009 (-2,0% y/y in April), which brought the average price in this
category of housing to around R930 000. The average price of medium-sized houses was down by a real 9,6% y/y in April this year.
Nominal year-on-year house price deflation, which commenced in December 2008, continued in May this year, while in real terms prices are declining on a year-on-year basis since January 2008, said the top property analyst.
* The average nominal price of large houses (221m²-400m²) declined by 3,5% y/y to around R1 344 400 in May this year, after declining by a revised 3,6% y/y in April. This caused the average price of a large house to be R53 200 below the peak of R1 397 600 reached in March last year. Prices of large houses were down by a real 11,0% y/y in April this year, after declining by 10,9% y/y in March.

BANK BASHING: WHY IT'S NECESSARY

2009-06-09T23:15:00.001-07:00

Realestateweb
05 June 2009
Analysis of latest property buyer experiences with banks, what South African Reserve bank really thinks of nation's bank executives.
This article, first published in Pam Golding Properties' Intellectual Property magazine under the headline "Interest rates and mortgages", sums up the South African credit situation for property investors.
Bashing the banks is a popular pastime almost everywhere. Here in South Africa, however, the clamour is growing and the High Street bankers are taking stick for making too much money, not lending enough money - and being in cahoots, to the detriment of their customers, particularly the man in the street.Even the arch-conservative Reserve Bank Governor, Tito Mboweni, has taken the banks to task, asking why their margin between the repo rate (the rate the commercial banks pay to borrow from the RB) and the prime rate (the base rate at which they lend) is so high - and why they all charge the same rate. Currently, the repo rate is 8,5% and the prime rate is 12%.Mboweni, speaking at the RB's quarterly Monetary Policy Review, stated that for 10 years he has been trying to persuade the banks to compete with each other, giving consumers the opportunity of competitive borrowing rates.
They do compete when it comes to various forms of deposits such as savings and long and medium term fixed deposits. And they have (mainly in the past) offered varying rates above and below prime on secured credit products such as mortgages and motor finance.
But they stubbornly stick together when it comes to the prime rate; the RB cuts the repo rate by 100 points - the banks cut prime by 100 points, all singing from the same song sheet. Mboweni said: "The spread is something we need to look at very carefully. There is nothing that says the spread must automatically be 3,5%. I have tried moralsuasion. It hasn't worked. I appeal to the banks to look at the spread. We need a bit of competition."
Unfortunately, the commercial banks have more on their plates at present. The recession has bitten deeply into their profit margins and the big four, Absa, Standard, FirstRand and Nedbank, are, according to analysts, taking a beating, particularly due to bad debts and the economic slowdown.
Standard chief executive Jacko Maree says the bank expects extremely difficult operating conditions to continue this year. Absa's Maria Ramos says the bank has been adversely affected by distressed consumers. They have all tightened their lending criteria - beyond the strictures of the National Credit Act which first beganputting the brakes on South Africa's consumer spending spree. Mortgage approvals have been particularly squeezed. Data released by the Reserve Bank shows that March returned the lowest mortgage advances growth rate in six years.
There are mixed tales slipping through as to the level of mortgage applications being turned down by the banks, but it is generally agreed that the days of 100% bonds are over. A reasonably large deposit (30% and more) is now the only route for borrowers, and cash is king once again. In fact, Pam GoldingProperties Western Cape region reports cash buyers making up almost 50% of sales, and mainly at the very top end of the residential market. In April, house price growth dropped toits lowest level since November 1986, according to Absa. In spite of the 3,5 percentage points (as at May 15) worth of interest rate cuts since December last, households remain underpressure. The economy is in recession and 2009 GDP growth is expected to be a negativehalf percent. The housing market is forecast to continue experiencing low levels of activity until later in the year. Absa projects that house prices will fall by 3%-4% in nominal terms and 8,5%-9,5% in real terms .Is there any light at the end of the credit tunnel? Will the tight liquidity situation ease? Well, WesBank has announced it has started relaxing its credit criteria and has increased its final approval rate to around 52%, which is good news for the hard-pressed motor industry.
To do so, it has restructured finance deals and now requires bigger deposits, shorter repayment terms, lower balloon payments - and has even introduced retrenchment cover which, says sales and marketing head Chris de Kock, is providing the bank's credit committee with some comfort.
However, long-term mortgage bonds are a different kettle of fish. But where there'sa will there's a way!
Do South Africa's banks need a shake-up? Is there still too little competition in the sector? Share your views below.

HOUSE PRICES WILL FALL FURTHER

2009-06-01T23:40:00.000-07:00

Jun 01 2009 17:48
Joan Muller
Johannesburg - Data released on Monday by two residential property gauges have dashed hopes that interest rate cuts would lift SA's ailing housing market out of the doldrums.
The latest FNB house price index showed house prices continued to plummet, with average values falling -11.3% in May 2009 year-on-year (y/y). That is the biggest price drop on record, suggesting that the SA Reserve Bank's 450 basis points rate cuts since December 2008 have had a negligible effect on housing activity.
The Lightstone house price index, also released on Monday, showed a more moderate decline of -4.5% for April 2009. However, the property valuator is also recording a deteriorating trend.
Lightstone director Andrew Watt said preliminary data suggested that house prices would continue to fall in the months ahead. According to Watt, the biggest area of concern appears to be in the affordable segment of the market where properties are priced below R250 000.
FNB's drop of -11.3% in May (-9.2% in April) was the sixth consecutive month of y/y decline in house prices, as measured by transactions financed by FNB.
FNB home loans property strategist John Loos attributed continued price falls to the sizeable oversupply of residential properties coming onto the market, as more and more financially stressed South Africans are forced to sell their homes.
"Unlike the case in 2003, when aggressive interest rate cutting took place in good global and local economic times, current rate cuts are to a great extent offset by an economic recession that is containing growth in household buying power," said Loos.
Winners and losers
Loos expected house prices to fall further over the next month or two, whereafter the rate of decline should start subsiding. However, he foresees nothing more than a "very mild improvement" in demand for the rest of 2009.
Meanwhile, housing data released last week by UK property group Knight Frank showed SA is not the only country whose house prices continue to fall. According to Knight Frank, residential property prices in two-thirds (31 out of 46) of all the countries tracked in its global index had moved into negative growth territory by the first quarter of 2009.
Latvia was the biggest loser, with prices down 36% in first quarter of 2009. This was followed by Dubai (-32%), Singapore (-23.8%), the US (-16.9%) and the UK (-16,5%).
Israel is now the best performing housing market in the world, with prices up 10.9% in the first quarter of 2009. Other top performers include the Czech Republic (9.9%), Jersey (6.9%), Switzerland (5.6%) and India (5.1%).
SA has slipped into 16th position on the Knight Frank ratings. In 2005, when house prices were still racing ahead at about 30% per year, SA ranked number one.
Nick Barnes, head of international research at Knight Frank, said the world's housing markets remain under intense pressure despite a slight improvement shown in some countries in the first quarter of 2009.
"The inescapable trend is that the worst and most widespread economic recession since the 1930s continues to batter housing markets across the globe.
"Rising unemployment, added to constrained credit conditions, means that housing demand remains suppressed. Confidence is low in most markets, which is inevitably having a negative impact on house prices."

HOME LOANS DEPEND ON PRICES

2009-06-01T23:38:00.000-07:00

May 20 2009 09:52
Elma Kloppers
Johannesburg - Capital for banks has become a scarce resource.
It has become increasingly expensive for banks to get capital to fund their asset books, especially those assets requiring long-term finance, such as mortgage loans.
This was the reaction on Monday by Gavin Opperman, Absa's group chief executive for securitised loans in the retail division, to the prevailing debate in which banks are being accused from every quarter of smothering the housing market with their lending criteria.
There are currently two issues being debated: banks' stricter lending criteria, in which prospective homebuyers are required to put down a deposit of 10% to 20%, and the interest rate at which banks are advancing money to clients.
Although the prime lending rate is currently 12%, this is not necessarily the rate that all clients pay. Historically some clients secured loans at rates of prime minus two, which no longer offered as an option.
Sean O'Sullivan, head of sales and marketing at First National Bank (FNB), says that in the current market of declining house prices, it is sensible to advance loans more conservatively.
As far as the stricter lending criteria are concerned, both reckon that this is not the time to relax them. "We are still applying a conservative lending strategy because of the falling house prices, but at the same time we are keeping a close eye on the market for any signs of improvement," notes O'Sullivan.
Opperman believes that since the residential market has not yet turned, banks are currently in no position to review their lending criteria.
"As soon as there are indications of improvement, we want to be in a position to review our lending policy and advance money more aggressively than currently."

IS IT BETTER TO RENT OR BUY?

2009-05-27T05:14:00.000-07:00

26 May 2009

Piet van der Walt - Managing director of Sanlam Home Solutions shares his views on buying versus renting property.

The recent turmoil in housing markets worldwide coupled with increasing mortgage stress locally has many potential home owners wondering whether to buy or rent?
This debate is not something new and while there are definite long-term advantages of owning your own home, not everything is a bed of roses.
A major determinant is affordability. For first time buyers, access to credit has become almost impossible without having saved up to 20% of the value of the home you want to buy.
Other factors that may to a large extent play a role in the decision to buy or rent would be the individual's credit profile and increasing uncertainty over employment.
Any potential home buyer needs access to a professional financial adviser or broker who can do comprehensive financial needs analyses in respect of their current and future financial needs.
What is crucial in rethinking the buy decision is that you cannot take a short-term view when investing in residential property. On the other hand you should not even consider the option of buying when your debt ratio is not within norms.

Buying a home
Pros
Building equity and personal wealth
Good performing long-term asset type from investment perspective
Sense of belonging to community, stability and security
Credit profile - improve ability to access funding as track record of repayment of loan will benefit individual
Free to within building regulations change décor and landscaping etc
Not dependent on landlord to maintain property - own responsibility
Best tax-free saving if additional payments are made into loan account
Respect and recognition from society - human needs hierarchy
Property can serve as security for other lending purposes e.g. starting own business
Inheritance value to family members
Paid equity and appreciation in value

Cons
Not very liquid asset - especially when economy is down and the owner wants to sell quickly
Cost of ownership - rates and taxes, insurance, maintenance, improvements, security etc
Responsible for maintenance and tenure
Possibility of loss of equity and foreclosure - risk in economic recession etc
Less mobility than renting - time to find buyer linked to state of industry/economy
2nd or investment properties can become cost burden in economic downswings and can lead to financial ruin in extreme cases
Cost of life and disability cover required to pay outstanding bond in case of death/disability
Location most important factor when investing in residential property
Thorough planning needed before investment decision taken - location, location, location.
Huge responsibility and possibly some sacrifice initially
Liquidity and cash-flow considerations to be taken into account

Renting a home
Pros
Flexibility to move in times of uncertainty - e.g. job instability or security or possible transfers/relocations due to nature of work/profession. Some rental contracts may however require a long notice period for cancellation.
Limited or no responsibility for maintenance of property
Insurance costs - only content - landlord responsible for home-owners' insurance cover.
Renting higher value property than what you will be able to afford when buying - market conditions determine
No property rates, taxes or levies payable - landlord responsible
No home-owner association costs
Other funds can be used for other investments - not tied up in equity in property and difficult to access
Potentially/initially cheaper to rent than to buy - installment vs. rent
When relocating create opportunity to study market and not take hasty investment decision
No interest-rate risk - market conditions/ increases
Good option if you don't expect to be in one place too long

Cons
Paying off landlord's debt on his behalf
Landlord reluctant to maintain property
No equity/wealth creation
Little control over rental escalations
No guarantee of tenure after contract expires.
No return on investment
Cannot offer as security for other lending purposes
Permission from landlord for any alterations/improvements etc
Rental increases annually normally linked to inflation - at one point cost to rent may break even and can even exceed cost of owning
Deposits required by landlord, local authority
Can get caught in so-called rental spiral - never become a home-owner

RESIDENTIAL PROPERTIES ERODING VALUE

2009-05-27T02:34:00.000-07:00

Realestateweb Reporter
25 May 2009

House prices declined for the first time on a year-on-year basis since late 1986 and are expected to decline further - property analyst.

Nominal house prices declined for the first time on a year-on-year basis since late 1986 because of inflation trends, according to the Absa Q1 2009 house prices.
Jacques du Toit, senior property analyst at Absa Home Loans, says the average nominal price of affordable housing increased by 4.5% year-on-year in Q1 2009 compared with price growth of 5.9% in Q4 2008. In real terms, prices declined by 3.6% y/y in the first quarter of 2009.
DuToit says a further real decline in house prices is expected in 2009, based on projected consumer price inflation trends and declining prices. Levels of activity in all segments of the market are forecast to drop by 3% - 4% in nominal terms this year.
The South African economy contracted at a rate of 1.8% in the fourth quarter of 2008. In view of the contracting economy and many households still experiencing some financial strain, the residential property market is expected to remain depressed until late this year, says Du Toit.
The average nominal price of luxury properties valued at R3.1m and R11.5m increased by 4.5% in the first quarter of 2009 while in real terms, house prices in this segment dropped by 3.6% y/y in the first quarter.
Du Toit adds that prices in the luxury segment of the market performed better in recent quarters compared to the middle segment where prices are declining over a wide front in nominal terms. He says this may be the result of the upper end of the market being less affected by trends in economic factors including inflation, interest rates and employment.
Middle-segment house prices dropped by a nominal 0.3% y/y in the first quarter of 2009 after increasing marginally by 0.2% in Q4 2008. In real terms, prices dropped by 8.0% y/y in Q1 2009 from 9.2% in Q4 2008.
Affordable housing, normally priced at R430 000 or less recorded an increase in nominal terms of 4.5% y/y while in real terms, the average price of affordable housing declined by 3.6% compared to 4.1% decline in Q4 2008.
Nominal y/y house price growth was negative in five provinces, the Eastern Cape, Gauteng, KwaZulu-Natal, Mpumalanga and the Western Cape. In East London, prices increased by 3.0% and in the coast, house prices dropped by an average of 3.3% y/y in nominal terms. - news@realestateweb.co.za

TITO: BANKS UNDERMINE RATE CUTS

2009-05-21T00:37:00.000-07:00

May 20 2009 22:25
Evan Pickworth
Midrand - South African Reserve Bank (SARB) Governor Tito Mboweni said on Wednesday evening that higher credit lending standards by commercial banks has the unfortunate effect of reducing the effectiveness of monetary policy initiatives taken by central banks to stimulate the economy.
However, he added that the behaviour of commercial banks is quite understandable, given the origins of the current economic situation.
"However, it also underlines the procyclical nature of their actions: banks are more keen to offer credit when times are good, but become somewhat reluctant to advance credit facilities during times of uncertainty and economic slowdown," he said.
Mboweni noted in a prepared speech that the BER/Ernst & Young Financial Services Index has also found evidence that domestic banks have also raised their lending standards and criteria.
"It also appears that domestic banks are charging higher spreads relative to prime than was previously the case," he added.
Elsewhere in the prepared speech he said that models are unable to predict reliably the exchange rate during periods of extremely volatile and unpredictable capital movements.
He said one of the assumptions in the April MPC meeting was that the real effective exchange rate is expected to depreciate by 4.25% in 2009 and to remain unchanged in 2010.
"The exchange rate is possibly one of the most difficult variables to estimate in the model and usually includes some sort of interest rate parity measure which allows for the domestic exchange rate to appreciate if the interest rate differential moves in its favour," he said.
He was speaking at the Sake24 economist of the year awards at the Theatre on the Track in Kyalami, just outside Johannesburg.
- I-Net Bridge

HOME LOANS DEPEND ON PRICES

2009-05-21T00:35:00.000-07:00

HAVE RATES FALLEN BELOW YOUR FIXED BOND INTEREST RATE?

2009-05-21T00:30:00.000-07:00

Denise Mhlanga
18 May 2009

Question
I have a home loan at Absa and I fixed the bond rate last year for ten years. Now the interest rate is already lower than my fixed rate. What do you suggest I do?
Answer
A fixed rate bond is a mortgage loan where the customer enters a contract with the bank to have their interest rate fixed for a predetermined period, said Luthando Vutula, managing executive of Absa home loans.
He said the customer has an option to fix the interest rate on the mortgage loan for a period of between one and ten years. A fixed rate cannot be adjusted if the term has not expired. The customer can request to terminate the fixed rate agreement and the bank has the discretion to approve or decline the request.
Vutula explained that the customer needs to understand that should the prime rate decline below the level of the fixed rate, they could be paying a higher bond repayment amount than the variable rate. Customers who find themselves in this situation may request the bank to consider allowing them to opt out of the fixed rate product. This decision is not automatically granted by the bank.
The fixed rate agreement is an excellent method of providing customers with certainty when the interest rate outlook looks uncertain and is likely to negatively impact on a customer's cash flow, he said.
Customers need to consider the term over which they wish to fix their interest rates carefully to provide them with sufficient protection through the interest rate cycle.
Furthermore, Vutula said if the customer's mortgage loan is based on a fixed interest rate, fluctuations in prime does not affect their monthly bond repayments. If the mortgage loan has a variable interest rate, the monthly repayment will move in the same direction as prime. This means that if the prime rate increases, the monthly repayment will also increase and vice versa.
He said in an upward interest rate cycle, customers are advised to consider a fixed interest rate to provide certainty on their monthly repayment particularly if they need to hedge against higher demands on their available cash flow.
In a case where the customer opts to remain with a variable interest rate, they need to monitor the monthly repayment for any changes (especially where prime has increased) to ensure they have sufficient funds in their transactional account (where a debit order payment is used) to accommodate the increased monthly instalment.

SUBURBS ARE DEAD, LONG LIVE GATED COMMUNITIES

2009-04-17T00:59:00.000-07:00

Realestateweb reporter
15 April 2009

High profile crime victim reckons secure estate properties will rise in value at expense of homes in posh suburbs. Agree?

A high profile crime victim says he is going to emigrate - from a house to a secure estate. And, he reckons, he's part of a trend that will see estate properties rising in value at the expense of stand-alone houses.
Michael de Broglio, a former chairperson of the Johannesburg Attorneys Association and Gauteng Law Council and Law Society Councillor, was held up by armed robbers in a decent Sandton suburb "without too much of a name for crime" at the Easter weekend.
Like other Gauteng residents, this is not the first time De Broglio and his family have had a close brush with violent criminals. His mother has had a knife held to her throat in a PArktown Norht house, and a brother was a victim in a hijacking in which shots were fired.
Finally De Broglio has had enough, but he is not moving to another country where violent crime is the exception rather than the rule. Instead, he says he will move to a more secure living area.
In a letter, he writes: "While a lot of people have immigrated, my immigration will be away from these suburbs, and to one of the gated communities with proper, drastic security that are all springing up all over Fourways. The traffic is horrendous, as everybody knows, but there is a reason that there has been such a flood of people there and that one secure estate after another, and I am talking about the ones that don't let you in even when somebody confirms that you can come in without first taking down your identity number and checking your ID documentation. "
De Broglio says he doesn't relish the thought of spending many hours a day commuting to and from work but would rather do that than allow his family to be vulnerable to criminals in his home.
"I can't say I am terrified. My wife says she is not affected and does not need counselling - but is snapping at me a bit more than usual and (I) did not sleep half of last night. I could endure a hijacking like that again and not leave South Africa."
He continued: "I don't feel it was so bad. What I cannot handle is the thought of the gate closing, they staying behind and drinking a bit more and what lies after that. And for that I will drive two hours a day and if need be hire a driver and sit in the back with my Dictaphone, e-mails and connected laptop. It's quite sad what we accept here and what we consider to be alright or not too bad," he says.

De Broglio says there is a flipside to remaining in a country that many others have fled to get away from high crime. Speaking to Alec Hogg on the SAfm market update earlier this week, he remarked: "I must in fairness say what I've said to senior attorneys before. Do you realise some of us would never be who we are, or have risen as quickly if it were not for the fact that the major competition already emigrated 20 years and 10 years ago - and I think that's true of all young professionals."
The leading Johannesburg lawyer says there are "wonderful opportunities in South Africa" and that other lawyers who have emigrated are still partially practising in South Africa. An interior designer friend is moving to Mauritius and will be commuting from there.
De Broglio told Hogg too that "the hijacking thing - you could do that to me five times and I wouldn't leave". "It was frightening but I don't think it's the end of the world."

SA FACES LONG HOUSING RECESSION

2009-04-17T00:57:00.000-07:00

Mar 23 2009 14:08
Joan Muller
Johannesburg - House prices are likely to fall at a rate of double digits in 2009 despite the prospect of another 300 basis points in interest rate cuts, says First National Bank.
FNB's Residential Property Barometer for first quarter 2009, which was released earlier on Monday, offers little hope of a meaningful recovery in housing activity any time soon.
FNB property strategist John Loos says the average drop in house prices is likely to exceed 10% year-on-year by mid-2009. And while further rate cuts may well start to stimulate demand for property again towards year-end, any upturn could be short-lived.
Loos expects house price growth to return to low single digits by mid-2010, but warns that that there is a real risk that the housing market could fall back into a recession by 2011.
"I don't have hopes for fantastic property returns for a number of years as there is quite a high risk that the world will stay in recession for some time to come."
Despite the gloomy outlook for house price growth, FNB's latest quarterly survey among estate agents has recorded an increase in show house visitors. However, other areas of the survey still point towards a rather "unconvincing" picture, says Loos.
Loos says after a slight improvement in the fourth quarter of 2008, both the percentage of properties sold for less than asking price and the average time it took to sell a house deteriorated.
The percentage of properties sold at less than asking price rose to a hefty 86% in first quarter 2009. At the height of the property boom in 2005, only 30% of properties were sold below asking price.
Emigrant sales on the decline
In addition, it is now taking close to 18 weeks (four-and-a-half months) to sell a house. That is up from around six weeks in 2005. Loos says these figures clearly suggest that many sellers are still not realistic in their price expectations.
Downscaling due to financial pressure is still cited by estate agents as the single most important reason for selling. Loos notes it is encouraging to see the importance of emigration as a reason for selling taking a back seat in recent months.
The percentage of sellers who plan to emigrate has dropped from 20% to 11% over the past six months.
This is probably due to a weak global economic situation, creating poor job prospects in many of the popular emigration destinations. Says Loos: "It's become a costly exercise to relocate to London, just to be retrenched."
Loos says falling inflation and interest rates aside, sentiment in the household sector as well as that of banks is likely to dampen further over the coming months, as fears around job losses mount.
"One should thus not expect residential demand to skyrocket as it did in 2003/2004 when rates fell rapidly. At the time, rate cuts were accompanied by a very positive economic growth and employment situation. One should also not expect credit criteria to ease dramatically any time soon."
Meanwhile, the number of homeowners battling to meet monthly mortgage repayments continues to rise. FNB Home Loans CEO Jan Kleynhans says 8% (or 1 360) of FNB's 170 000 home loan costumers are in arrears for three months or more. That's up from about 1% two years ago.
- Fin24.com

PRICES OF BIG HOUSES FALLING MORE

2009-04-14T01:33:00.000-07:00

Apr 09 2009 08:27
Elma Kloppers
Johannesburg - Nominal prices in the large-house (221m² to 400m²) market segment are now falling the most they have in 23 years. Nominal house prices do not include the effect of inflation.
Absa's latest house price index indicates that prices in this sector were nominally down an annualised 3.2% in March, the biggest decline since June 1986.
This brought the average price of a large house to around R1 352 400, almost R45 000 less than the R1 397 300 average in March last year.
"This indicates that the weak economic conditions are now impacting the upper end of the housing market as well, forcing some home-owners to scale down to smaller, cheaper homes," says Jacques du Toit, senior property analyst at Absa's home loan division.
At the same time new buyers are considering houses in the small segment (80m² to 140m²), with this segment consequently reflecting the smallest nominal decline in the three segments. Prices in this segment came down 0.6% on annual basis in March, bringing the average price of a small house to around R677 600, R4 400 less than in March last year.
The average nominal price of a medium-sized house (141m² to 220m²) fell an annualised 1.8% in March, bringing this segment's average to R932 700.
Du Toit does not expect the housing market to recover this year. "The weaker economic conditions are persisting for longer than expected and are still filtering through to the market."
Despite further anticipated interest-rate cuts, he considers households will continue to be under financial pressure, especially against the background of the weaker economy where more job losses could have a negative effect on household incomes, confidence and expenditure.
- Sake24.com.

You're a What? Property and your profession

2009-04-08T01:38:00.000-07:00

"You're a what?" Property & your profession
Rodney Hayter*
07 April 2009

Yes, banks are scrutinising the likelihood of you keeping your job in the tough economy, risk-rating your profession before granting home loans.

Major banks attitude toward home loan applications is toughening to the point where they now, as a matter of policy, include the evaluation of the type of profession in their assessment of the risk profile of the applicant.
Their vamped up vetting, according to Grant Gavin, also includes the risk weighting of the mix of professions based on the banks history of credit defaulters.
Key to the success of any application, while not a guarantee, is proof that an applicant's salary has been paid into his or her account for a successive three month period. Any interruption, or faltering, in that cycle, warns Gavin is likely to solicit an immediate rejection, or require further supporting documentation.
Gavin, Broker/Owner of Durban North-based RE/MAX Panache says applications from self-employed people are currently being subjected to extensive scrutiny. He advises such applicants to be prepared to support their applications with reams of information and to be patient. He strongly recommends, given the importance of this requirement for supporting documentation, that purchasers should still see the benefits in service levels of using the more prominent mortgage originators.
Bank processing of applications is currently taking between 20 to 30 days with deposit requirements, and this depends on the actual value of the property, ranging between 10 to 30 percent of the value of the home.
Against such a steely backdrop Gavin advises sellers to seriously evaluate all cash offers, especially if the offered price is "reasonable" pointing out that three out of every five applications are currently being rejected by the major lenders. With the number of home loan defaulters increasing by the day he expects such steadfastness by the banks on their lending policy to continue in the short to medium-term, thus ensuring that cash purchasers will continue to hold the aces in negotiations.
But while loan grants may be seemingly impossible for some, he points out that buyers with generally unblemished credit records, in sound employment and with some form of cash deposit the banks are prepared to come to the party. Such a profile has formed the mainstay of his agency's good first quarter run of sales in the north of Durban residential areas. Gone however, are the days of large concessionary interest rates, with consumers generally now being offered rates above prime rate.
For the third successive month the agency has topped R40m in sales with nearly half coming from outright cash purchases. A main source of business is continued migration from the Berea , driven in the main by a desire to live in Durban North's family homes on larger plots and the central locality of the area in terms of accessing Durban CBD or Umhlanga. A further factor, according to Gavin, is the perceived good value of Durban North homes which start at around R1,8m and expectations of further good growth stemming from the low density of the suburb and its central location. His agency figures show that since December homes in Durban North have been selling on average at 85 percent of their asking prices. As a general rule of thumb, current prices are about 20 percent lower than 18 months ago.
Gavin reports also good activity in the area's main market entry of Umgeni Park in the price range above R750 000 and high interest in Umhlanga's one-bedroom about 50sqm apartments, which are selling from around R750 000. These, at the peak of the property cycle were being sold at prices approaching R1m.
Last week's interest rate cut he expects to stir up some interest among the wait and see market, but points out that, while welcomed, a market recovery of any note will not be led by further cuts, but by the banks loosening their taps on financing of home loans. Interestingly, in terms of his first quarter figures, if banks were still lending with their former willingness his agency's turnover would be more than 30 percent higher than current monthly sales volumes of R40m.

SOUTH AFRICA TO GET A WHOLE NEW TOWN

2009-04-08T01:33:00.000-07:00

Statement
06 April 2009

Developer, community announce R1,3bn commuter town near Pretoria with 3 000 homes, shops, schools, clinics and parks.

A massive property development that will create a whole new town 22km to the north-west of Pretoria will shortly get under way on 450ha of land restored in 1998 to the Rama community that had been forcibly removed during the apartheid years.
The integrated development, dubbed Rama City, will take about 15 years to complete and will cost around R1,3bn in today's terms. It is being undertaken by professional developer Rama Horizon Developments in partnership with the Rama Community Property Association (RCPA).
The formation of this partnership is a groundbreaking move that could provide a development and resettlement blueprint for other communities that were victims of forced removals under the apartheid government and have now successfully reclaimed their land.
"This project," says RCPA chairman Hendrik Nhtite "will not only give the community access to about 3000 new homes, but will turn underused land into a new town complete with shops, schools, clinics, churches and parks that is within easy commuting distance of the employment opportunities in Rosslyn, Brits and Akasia. As such, it will be of enormous practical benefit to the Rama community.
"More importantly, the community is a full partner in the planning and decision-making process for the project, and an extensive training programme will ensure the transfer to the community of valuable skills, not only in the building and construction fields but in information, technology, design, communication and management."
The Rama City site is located just south of the Garankuwa hospital and Medunsa campus and is served by a railway line and a provincial road as well as regional bus and taxi nodes, so already has the basis of a good public transport system. It will be developed in phases, the first of which will be a residential area for the direct beneficiaries of the land claim.
This area will contain some 650 residential stands as well as a primary school, a middle and high school, a cultural centre and market, a community centre, a church, clinics and a series of parks with communal sports facilities. It is in an excellent position in relation to the new town centre that will be developed, which will create future wealth for its property owners.
The stands, set along paved roads, will be fully serviced and are already being allocated to the legal beneficiaries of the Rama Community. Meanwhile, provision has also been made for the development of apartments that can be rented to provide accommodation for those members of the community who do not qualify for grants or subsidies and who cannot afford to buy a home.

SA INVESTORS URGED TO CREATE OPPORTUNITIES ELSEWHERE IN AFRICA

2008-07-03T02:41:00.000-07:00

SOUTH AFRICAN property investors have to start investing in the rest of the continent because there are “major opportunities that are being overlooked”, says Wayne van der Vent, head of property investments at the Public Investment Corporation.
Van der Vent, who was speaking to the media at the 40th annual convention of commercial property association Sapoa in Cape Town, says there is a tendency for South African property players to limit themselves to offshore investments in the UK and other European property markets.
“At the moment we (SA) are an island of prosperity in a sea of decay.” He says the xenophobia that is raging in SA will not “go away until we start investing in the economies around us”.
“People come to SA because they are looking for opportunities. We must create those opportunities in their own countries.”
Van der Vent says South African property companies should start developing infrastructure and focus on developments such as shopping centres, offices and private hospitals in neighbouring countries such as Mozambique. He says while there are risks attached to developments in other parts of Africa, there is also money to be made.
Wayne Wright, business development director of the African operations of JHI, says there are a number of reasons why investors and property service providers such as JHI have established their operations in Southern African Development Community (SADC) countries, including the fact that it enables a transfer of skills and expertise to joint venture businesses there.
JHI has a presence in eight SADC countries.
He says there are limited skills systems and human resource facilities available in these markets and this creates opportunities for companies to establish themselves as partners in these countries.
“Thirdly, fees are based on US dollars and tend to be higher than what could be earned as a percentage in SA.
“Therefore, JHI believes that, notwithstanding the risks and high set-up costs required ... one would take a long-term view and the returns outweigh the risks.”
Colin Young, head of asset management at Old Mutual Investment Group Property Investments (OMIGPI), says “capital follows opportunity” and countries have to be “foreign investment-friendly”.
“When it is difficult to invest and it is too difficult to get your money out of a country, then your capital won’t flow in there. If there is a restriction in liquidity, be it because there is a lock-in or it is difficult to get your money out of a country, it adds risk to an investment.
“When you add risk to an investment, then as an investor you demand more returns.”
OMIGPI MD Ben Kodisang says his group is looking at investing in other African countries, particularly Nigeria. The group has a pilot property project in Abuja, the capital.
What attracted Old Mutual to Nigeria was its huge population and its strong gross domestic product growth because of the oil-based economy.
“We chose the capital of Nigeria because the government is located there and demand for property space will be quite strong.”
The group is developing a waterfront mixed-use property that includes about 30000m²of retail, two hotels, and an office and residential component.

MORE REPOSSESSIONS ON THE CARDS

2008-07-03T01:14:00.000-07:00

There is no good news for homeowners desperate to sell their houses as the latest house price survey shows a dip that has not been seen since 1999. Furthermore, if you have put your house up for sale, you can expect to get as much as 40 percent less than your initial asking price by the end of this year. The residential property sector is continually showing a deflated bubble from the previous property bubble boom.
Absa Bank’s House Price Index for May released yesterday recorded single digit year-on-year nominal growth of 4.3 percent last month, down 1.2 percent from 5.5percent in April — the slowest house price growth in nine years. The average price of a middle- segment house dipped to about R960700 in May, from the average of R974 000 in April. The Absa index is based on the total purchase price of houses in the 80m² to 400m² size category, valued at R2.9-million or less last year , including home improvements, for which loan applications were approved . The bank expected the SA Reserve Bank’s Monetary Policy Committee to introduce a 100 basis interest rate next week, with potentially further rate hikes if the CPIX (inflation excluding mortgage costs) remained ‘‘stubbornly high.” Absa property analyst Jacques du Toit said there were more people selling their homes than there were buyers as broad negative economic conditions started to show their effects on people’s affordability levels. ‘‘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.
Head of Lew Geffen Sotheby’s International Realty Lew Geffen, in a letter to his agents, said this week he had advised a relative to drop his price by 25 percent in order to get a quick sale, and advised agents to tell their clients to do the same. He 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 said his thoughts were that the property market would come down by a significant 40 percent from the highs of 2007, adding that there were already 60 percent fewer buyers on the market today, compared with the same time last year. He said the bank requirement of five percent and up to 25 percent equity for property purchases ranging more than R800, 000 to R4-million — indicated strongly that they had factored that the market would drop another 25 percent on top of the current estimated 15 percent decline.
‘‘Take into account that today a man who wants to purchase a R2-million property, which is the average selling price in our company, will have to earn more than R87000 gross per month in order to qualify; and if the market drops by 25 percent that same person will need to earn R65200 gross, which is also no picnic.”
The Tenant Profile Network (TPN), a registered credit bureau that offers tenant rental payment profiles for property managers and landlords, said it had seen an increase in demand for rentals compared to a year ago.
Michelle Dickens, managing director for TPN, said the company had seen the beginning of a trend of a preference for a tenant six-month versus a twelve-month-lease period, to increase rentals and meet their mortgage repayments.
She said that nationally rentals were up, averaging at R4000.
The company had also seen an increase of properties initially put up for sale being put up for rental to cushion the longer period of waiting for a 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 was reported to have a countrywide 1000 houses up for sale from execution, repossession and insolvency.
It expected thousands of families to lose their homes by the end of the third quarter of the year. — Additional reporting from Simpiwe Piliso

MEDIAN HOUSE PRICE FELL TO R550000

2008-07-03T00:11:00.000-07:00

MEDIAN house price fell to R550 000 last month - a contraction of 11,3% year-on-year when compared with the median house price of R620 000 in June last year, the banking group said today.

The five-month moving average growth rate in the median house price was 7,8%. In May the median house price was recorded at R520 000.

The Standard Bank median house price is the middle price on the group's home loans portfolio and can be considered as a reasonably accurate portrayal of national house price trends given Standard Bank's market share in the mortgage business.

The Standard Bank median house price has been volatile in the price range R520 000 to R620 000 since January 2006.

"In fact the median house price peaked at R620 000 a year ago. The surge in the median house price during the second quarter last year, which culminated in the June peak, was the result of uncertainty in the domestic residential property market that was due to the pending implementation of the National Credit Act (NCA) at the time," it said.

The uncertainty of qualifying for a mortgage of a certain amount post implementation of the NCA incentivised the prioritisation and conclusion of purchases of higher-priced properties that created a high base in the median house price from which current house price growth is being calculated.

Hence, the data have been somewhat distorted by the high base established last year, it said.

"However, this technical distortion notwithstanding, the broad trend within the South African residential property market is in line with the evolving and intensifying headwinds currently confronting the South African consumer," it said.

The Reserve Bank raised interest rates again at the June Monetary Policy Committee meeting and rates are now up a cumulative 500 basis points since June 2006. The prime interest rate is now 15,5% relative to 10,5% in June 2006.

This means that the monthly cost of servicing a mortgage is now 36% more than it was 24 months ago.

SANDTON? NO, IT'S PLUSH HARARE

2008-06-23T02:15:00.000-07:00

Simpiwe Piliso
Published:Jun 22, 2008
Zimbabwe’s economy is in a mess, but the property market is booming.
Despite the economic meltdown, Zimbabwe’s property market is by no means a bargain basement.
Wealthy locals and expatriates are splashing out on modest homes and mansions for millions of rands that could easily secure them addresses in some of South Africa’s most sought-after suburbs.
Just this week, a four- bedroom home in Borrowdale Brooke near President Robert Mugabe’s official residence was on the market for R8.5-million, while another in Greendale outside Harare was listed with a R13-million price tag.
In the embattled country the average price of a home is R1.4- million — although that does not buy anything to write home about.
And, due to the local currency woes, almost all deals are done in US dollars.
Harare estate agency Merctrust Real Estate, in a statement on its website, said the currency was in free fall.
“On Monday last week we adjusted the rate to Z4- billion/US1 and on Monday this week it was Z10- billion/US1 and on Wednesday it’s Z15-billion/US1.”
The agency stated that all the houses in its books, many in Harare’s plush northern suburbs, are now for sale in quadrillions of Zimbabwe dollars.
“Very soon it will be quintillions.”
Prices in the country’s residential property market have been “skyrocketing” over the past six months as supply surpassed demand, according to Knight Frank, a London- based property research consultancy.
An ordinary three bedroom home with no major extras, in Mount Pleasant, a modest suburb in Harare, is on the market for R3.5-million.
Knight Frank’s latest annual research report — Global Real Estate Markets: Annual Review and Forecast — shows that Zimbabwean homeowners and investors are holding on to properties to hedge against inflation.
Others have simply shelved their plans to sell in the current environment as a means of protecting the real value of their investments.
Property listings in Harare and Bulawayo offer everything from old colonial houses, luxury modern apartments to semi-detached houses in low- income townships.
Juliet Harris, managing director of Pam Golding Properties’ operations in Zimbabwe, said most South African buyers seeking to invest in Zimbabwe were shocked by the prices.
“It appears that most are of the opinion that they will be getting a bargain basement. When they are appraised of what properties in fact cost, most shy away.
“But be that as it may, there are South Africans who are investing in Zimbabwe ... and they either buy houses or land which they can, at a later stage, develop.”
She said most South African- based buyers were spending between R1.2-million and R5-million for homes and apartments in Zimbabwe.
One buyer recently paid a record R8-million for an eight- bedroom home on “one of Harare’s most affluent streets”.
The 10 000m² property features two lounges, underfloor heating, a cottage, five staff quarters, a squash and tennis court, an enormous swimming pool and an automated garden irrigation system.
Homes could easily fetch R8- million in Harare’s northern suburbs, the most exclusive of which is Borrowdale Brooke, where Mugabe lives.
The suburb is littered with mansions that are homes to the highest-ranking members of Mugabe’s Zanu-PF party. Among them are embassies and the homes of the country’s business executives, socialites and expatriates.
London newspaper The Daily Telegraph recently described how the élite in the suburb enjoyed lives of wealth and privilege, while the vast majority existed in grinding poverty and struggled to survive.
At the local supermarket, a Spar franchise, close to Mugabe’s hillside residence, almost anything is available, including focaccia bread, sun- dried tomatoes and cigars.
The further away one moves from the exclusive suburbs, the more “affordable” the homes become.
In some of these suburbs the average price is in the region of R2-million, while on the other side of the city, in the sprawling township of Chitungwiza, a two- bedroom home is on offer at R70000.
In Bulawayo, statistics released in April by Knight Frank show that the average price for a suburban home in a prime area is about R2.4- million, while the price of a townhouse in the same area is between R800000 and R2- million, and a basic flat between R320000 and R800000.
For those not prepared to pay such high prices, there is the option of the rental market.
According to Knight Frank, a four-bedroom home in a prime location in Zimbabwe can set a tenant back US500 (about R4000) a month.
This was the average rental for a four-bedroom home in Harare’s northern suburbs four years ago.
According to a report released by Standard Bank’s research economics section, many investors eager to invest in Zimbabwe have opted to wait and see until after the run-off presidential election on Friday.
“The economic crisis will continue as long as the political landscape is not stable. The international community is waiting in anticipation for a new regime to enable it to participate in rebuilding the country,” the report said.
According to Seeff Properties, which has more than 45 properties on its books in Zimbabwe, when political stability returns to the country, property prices are likely to surge .
Seeff’s licensee in Zimbabwe, John Spicer, declined to comment.
“I am afraid to say that it is not politically expedient to make any comment at present.”
Chas Everitt International managing director Berry Everitt, who recently announced plans to open offices in Zimbabwe, said international investors were showing interest in Zimbabwe.
With scores of international companies waiting on the sidelines to invest in Zimbabwe, a surge of new home seekers could pour into the country after the run-off elections.
Among these companies are mining and banking groups.

RENTAL MARKET A HIVE OF ACTIVITY

2008-06-23T02:12:00.000-07:00

Potential buyers ‘sit on sidelines’ as higher interest rates make property too pricey for many
THE South African residential rental market is experiencing intensified activity as prospective first-time buyers and struggling homeowners opt to rent instead of buy. The residential property market has taken a battering since the beginning of the year thanks to higher interest rates, which have made property too expensive for many.
The National Credit Act, which came into being in June last year, has also made it increasingly difficult to qualify for mortgage bonds.
Andrew Schaefer, MD of residential property manager Trafalgar, says the group’s letting consultants have “never been busier across all our branches”. He says: “They are now run off their feet trying to secure rental accommodation for prospective tenants.”
Schaefer says the activity has intensified over the past four months. The rental market is generally cyclical and is busiest at the beginning of the year. “We’ve seen very high levels of activity and inquiries since January this year.
“It’s been much busier than last year. There has been a significant upturn. Vacancies in many of our portfolios are at historic lows of below 1% in some cases,” says Schaefer.
He says the market is also seeing much more aggressive rental increases because demand for accommodation is so strong.
Schaefer believes SA will see an improvement in the buy-to-let market because vacancies are so low and rental increases are relatively good compared with prior years. The fundamentals would suggest that this would continue at least for the medium term, he says.
“There is uncertainty among buyers about the outlook for interest rates and affordability, given the fact that fuel prices are rocketing. They are opting to rent rather than buy.
“It allows them time to manage their short-term finances better and gives them flexibility deciding when to buy at a better time,” says Schaefer.
Potential first-time buyers who have decided to rent instead of buy are an important driver of the rental market.
There is also a growing number of mortgage defaults, and many homeowners may opt to sell rather than rent.
Saul Geffen, CE of ooba, formerly MortgageSA, says the weakening property market has increased demand for rental property as “potential buyers sit on the sidelines”.
He says rental yields are rapidly improving, which underlines the “investment case” for buy-to-let.
But property economist Erwin Rode, of Rode & Associates, says that while it is “quite an attractive argument that when you can’t afford to own a house, you choose to rent”, this is not always the case .
Rode says the same economic factors that inhibit owners also inhibit renters. One example would be inflation.
“The only difference between a buyer and a letter is in the case of the buyer, you are affected by fast-rising interest rates on the mortgage bond.
“A further factor to consider is that when times are tough, many people double up — for instance, children move back in with their parents. As a consequence historically, there hasn’t been a negative correlation between house prices and rentals.”
Rode says the latest information indicates that rentals are growing at between 7% and 9%, depending on the city.
“If you compare that with inflation that is pushing 11%, it should be clear that there is no boom out there for the rental market,” Rode says.
Lewis Civin, MD of Redcon Property Development, says that property investors remain “poised for rental growth” as Reserve Bank Governor Tito Mboweni raised interest rates by half a percentage point last week. “Investors in the low to medium price range can expect to see continued growth in rental income as home buyers even at this level are drying up.
“Investors in one of our recently completed developments in Boksburg saw a 20% increase in rental income on a one-bed unit over eight months,” Civin says.

NEW HOUSES CHEAPER, SAYS ABSA

2007-12-06T00:15:00.000-08:00

November 15, 2007
By Roy Cokayne
Pretoria - The average price of a new house has dropped below that of existing houses for the first time since the first quarter of 1989.A new house was 1.9 percent cheaper than an existing house in the third quarter of this year, according to the latest Absa quarterly residential property perspective. Absa’s average price of an existing house is R950 900, compared with R932 900 for a new house.“This development may be a reflection of tightening market conditions with regard to new housing and is related to … trends in building costs and competition in the house building sector,” it said.The report said the cost of building a new house increased by 9.8 percent year on year in the third quarter, from 11.9 percent in the second quarter.The lower growth rate in building costs in the third quarter could probably be ascribed to the recent softening in the housing market, Absa said, resultingin fiercer competition among developers and contractors.Remuneration data for the first quarter of this year, the most recent available data, showed that the ratio of house price to remuneration increased further in the quarter.
In addition, the ratio of mortgage repayments to remuneration lifted more quickly since the middle of last year.Increases in these two affordability ratios implied that house prices and mortgage repayments were rising at a faster rate than remuneration, which meant housing was becoming less affordable, Absa said.Absa forecast that higher interest rates, together with the possible effect of the National Credit Act on mortgage advances and total credit extension, would have a dampening effect on the residential property market towards the end of this year and into next year.It forecast house price growth of 14.5 percent for this year and 10 percent for next year, adding that these forecasts reflected the tighter monetary policy conditions, a slower pace of economic expansion, lower growth in real household disposable income and the effect of the National Credit Act.

HOUSE PRICE GROWTH 'TO PICK UP'

2007-11-01T23:11:00.000-07:00

Nov 01 2007 02:28 PM
Johannesburg - Standard Bank's median house price index recorded a relatively firm growth rate of 10.2% year-on-year in October, the bank said on Thursday.
"This is a noticeable improvement on the single-digit house price inflation recorded in the previous two months," the bank in a statement.
During August and September the bank's median house price recorded a year-on-year growth rate of 5.7%.
The underlying momentum in residential property prices - measured according to a five-month moving average growth rate - was recorded at 10.1% year-on-year in October.
"Notwithstanding the increased volatility in the house price data over the last few months, we have maintained a view that the underlying macroeconomic environment remains strong".
Standard Bank said people had recently become negative about the residential property market because of concerns over being able to access mortgage finance due to new regulations in the National Credit Act and higher interest rates.
Higher interests rates caused a large increase in the cost of servicing a mortgage for a home loan.
The income required to qualify for a particular house price segment had also increased, said Standard Bank.
"This reduced affordability will tend to decrease the demand for residential property by consumers and may lead to a moderation in the growth of house prices."
The bank said high levels of household debt might also impact the ability of households to buy property.
Yet, resilient macro-economic conditions remained supportive of consumer spending and the residential property market.
"The resilient setting provides a powerful countervailing force and, despite tighter monetary policy, renders a soft landing in the residential property market the most likely outcome."
Standard Bank said the growth of the economy at a rate of 4.5% in the second quarter of 2007 was a good sign for the residential property market.
SA Reserve Bank statistics also indicated that the real disposable income of households increased by 7.5% on a seasonally adjusted and annualised rate.
"This was the fastest rate of growth of real disposable income in eight years."
The bank said household consumer spending and consumer confidence also remained positive.
Within this macroeconomic context, the bank said it expected growth more or less in the 5% to 10% range until the second half of 2008.
Thereafter, moderately higher house price inflation was expected to commence.
- Sapa

HOME FORECLOSURES SIGNAL RATE BITE

2007-11-01T23:10:00.000-07:00

October 26, 2007
By Mzwandile Jacks
Johannesburg - The number of notices of sales in execution rose by two-thirds in June compared with the same month last year, indicating that interest rates were beginning to bite.Bank foreclosures as a result of mortgage holders failing to make their bond repayments had jumped to an average of just over 1 000 a month in June this year from 600 last year, experts said yesterday.John Loos, a property strategist at First National Bank Commercial, attributed the current rise in sales in execution to the interest rate hikes that were beginning to increase the risk associated with lending in residential property. Although the increase in sales in execution during this period was below the 2001 and 2004 figures, he said, it did not augur well for the near future. During 2001 and 2004, the figures were closer to 2 500 per month, he said.Historically, only about 30 percent of notices for sales in execution resulted in actual sales. Loos said this was because some mortgage holders managed to sell their property independently or made other arrangements to finance their mortgage payments.

"We could expect to see sales in executions rise to around 300 per month over the next year," Loos said. "Based on this conservative estimate, this would amount to R215 million worth of properties being repossessed each month, with the bank and owner likely to recover, on average, only 62 percent of the market value of these properties."But Andrew Watt, the business development director at Lightstone Risk Management, said the incidence of sales in execution across different market segments differed widely. Mortgage holders in the mid-market were "most feeling the effect of the interest rate rises", Watt said.

80% OF HOUSES SELL AT LESS THAN ASKING PRICE

2007-11-01T23:07:00.000-07:00

October 30, 2007
By Roy Cokayne
Pretoria - Four out of five residential properties were sold at less than the asking price in the third quarter of this year, the highest number since the inception of the First National Bank (FNB) property barometer in the fourth quarter of 2003.The average selling time has increased to 11 weeks, with premium properties remaining on the market for an average of 12 weeks and lower-priced properties for about nine weeks before being sold.The previously buoyant township market has also been hit by this trend and has experienced a marked decrease in activity.Richard Angus, the chief operating officer of FNB Home Loans, said yesterday that the number of township properties sold at less than the asking price had increased significantly to 21 percent in the third quarter of this year from 8 percent in the same quarter last year.Angus said this indicated that sellers in the township market might have been asking unrealistic prices and, in line with the trend previously noticed in the traditional suburb market, were now having to adjust their price expectations."Property professionals also claim that there is an increasing trend in the ratio of sellers to buyers [in the township market], indicating that the market is becoming more of a buyer's market," he said.The barometer, a quarterly review of residential property market activity, is based on the perceptions and expectations of estate agents. Angus said overall residential property market activity was at its lowest level, with the exception of the period immediately after implementation of the National Credit Act (NCA).

This was despite activity in the market increasing marginally in the third quarter of this year, the first increase in activity levels this year.Only 3 percent of property professionals rated activity in the property market as "very active" in the third quarter.Angus said possible reasons for the low activity included seasonality and the implementation of the NCA, while market activity had been hampered by six consecutive rate increases between the third quarter of last year and the same quarter this year.He said the proportion of first-time buyers had decreased to 14 percent from 16 percent in July, shortly after the introduction of the NCA, and 20 percent in the second quarter of this year. But this was not an unexpected result following interest rate hikes and the implementation of the NCA, he said.Angus said buy-to-let had remained stable, at the lowest level of 12 percent of the market over the past two years. In the first quarter of this year, the buy-to-let market comprised about 21 percent of sales and was at a peak of about 28 percent in the first quarter of 2004.Angus said the outlook of property professionals remained positive for the fourth quarter of this year, despite these results.This positive outlook was possibly influenced by seasonality, with the fourth quarter traditionally positive for the residential property market. This was because many people relocated at the end of the year to start a new job at the beginning of the next year, he said.

MORE STRESS FOR HOMEBUYERS

2007-10-15T00:34:00.000-07:00

Oct 12 2007 08:45 AM
Tiisetso Motsoeneng
Johannesburg - South Africa's housing market will be hard hit by Thursday's interest rate hike, which brought the hikes since mid 2006 to 350 basis points, property experts said.
"The trend caused the debt servicing cost of households to increase to about 9.7% of disposable income in the second quarter of 2007, with this ratio expected to increase further on the back of the latest rate hike," said Jacques du Toit, a senior economist at Absa.
The SA Reserve Bank raised interest rates by 50 basis points on Thursday, surprising and disappointing some economists who had expected the central bank to leave them unchanged.
Du Toit said that the latest interest rate hike would further negatively influence the affordability of housing, and with debt servicing costs set to rise to higher levels, consumers' already stretched financial position would come under even more pressure during the next few quarters.
The 350 basis point rise in rates since mid-2006 has caused the average monthly repayment on a mortgage loan to increase by 24.6%.
John Loos, a property strategist at FNB, echoed du Toit views, saying that impact of latest interest rate hike on the residential property market "is quite significant".
"For residential property, I believe that this interest rate hike will keep the market on its broad deteriorating trend for the time being," said Loos.
Thursday's interest rate hike adds another R36 per month per R100 000 of mortgage debt, implying that for a R500 000 loan at prime rate a household will have to pay an additional R181 per month.
Additional amount payable following 350 basis points worth of interest rates hikes on a R100 000 loan is R245 and R1 226 on a R500 000 loan.
- I-Net Bridge

RATES HIT CONSUMER CONFIDENCE

2007-10-10T01:22:00.000-07:00

Oct 09 2007 03:03 PM
Johannesburg - Consumer confidence declined in the third quarter of 2007 following recent interest rate hikes, but remained high by historical standards, a survey showed on Tuesday.
The confidence index compiled by First National Bank (FNB) and the Bureau for Economic Research (BER) was down to +18 from +21 in the second three months of this year, after scaling a record +23 in the first quarter.
The drop was largely due to consumers cutting back their expectations regarding the economy's performance over the next year, with a net 19% seeing performance improving compared with a net 25% previously.
FNB said the impact of two 50 basis point interest rate increases since the last survey, warnings of more hikes, and the introduction of a new credit law clamping down on lenders from June 1, had been expected to have a bigger impact on confidence than was the case.
Consumers largely still rated now as a good time to buy durable goods, it said.
"So, although consumers expect the economy to slow down in the near term future, they do not expect this to adversely affect their own finances and neither are they less willing to purchase durable goods," said FNB economist Cees Bruggemans.
South Africa's central bank has raised its repo rate by 300 basis points since June last year, taking it to 10% after hikes in June and August this year to tackle rising inflation, driven partly by robust consumer spending.
Analysts are divided on whether it will raise rates again on Thursday. A Reuters poll last week showed 12 of 19 economists expect rates to remain unchanged.
Bruggemans said consumers' ability to spend would likely deteriorate in the short term as the impact of higher interest rates is felt further, cutting the willingness to spend and resulting in a further easing in consumer confidence.
- Reuters

HOUSE PRICE GROWTH SLOWING EVEN FURTHER

2007-10-10T01:20:00.000-07:00

Business Day
Friday, October 05, 2007 2:40:00 PM
By Nick Wilson
The slowdown in SA’s house price growth continued unabated last month as a result of a tighter economic environment and the influence of the new National Credit Act. According to the latest Absa house price index, the average house price in the middle segment of the market increased a nominal 14,2% year on year to R950000 last month. In August, growth of 14,8% was recorded.The residential market in SA has been on a gradual decline since late 2004 when house price growth, fuelled by strong economic growth and a low interest rate environment, peaked at more than 35%.A fairly expensive property market caused demand to drop off, which in turn led to a gradual decline in the rate of house price growth.In the first nine months of this year, nominal house price growth averaged 15,3%, compared to that period last year. Absa senior economist Jacques du Toit said yesterday the drivers of this downward trend were “tightening economic conditions, higher debt levels” and the effects of the National Credit Act. The act, implemented from June 1 this year, aims to shield consumers from reckless lending. Under the new legislation there is a far more stringent bond qualification process. Du Toit said people were finding it harder to qualify for mortgage financing. He said that based on the first nine months of this year, the bank was forecasting nominal house price growth of 14,5% for the full year. “We still expect a further downward trend in price growth towards the end of the year,” he said. Du Toit said the bank expected interest rates to remain unchanged when the monetary policy committee met next week. “We believe the Reserve Bank will leave rates unchanged. There are signs that overall demand in the economy is slowing and that growth in credit extension is also tapering off.“This may prompt the Reserve Bank to pause in terms of any further interest rate hikes at this stage,” he said. Property economist Francois Viruly, of Viruly Consulting, said that the residential market priced up to R700 000 was driving the residential market at the moment. Viruly said the rental residential market was “probably going to be an interesting market” to look at in the future. “We are going to start to see more rental increases. People are being pushed into the rental market, and the buy-to-let market is going to start performing much better in the next 12 months,” he said. This would be the catalyst “to get residential development activity going again,” Viruly said.After the property crash in the mid-1980s, house price growth of 7%-8% annually was recorded until 1999. But since 2000, house price growth had been almost 20% annually. The peak was in late 2004 when price growth reached more than 35%. According to August’s Absa house price index, the average housing price in the middle segment climbed by a nominal 14,6% year on year to reach R942800 last month. The rate of growth slowed from the 15,1% recorded in July.

RESIDENTIAL BUYERS GET A BREAK, SAYS STANDARD

2007-10-09T00:10:00.000-07:00

October 9, 2007
By Roy Cokayne
Pretoria - Housing appears to have become a buyers' market, with residential properties taking longer to sell, according to Standard Bank.House prices rose 5.7 percent year on year last month, the bank said in its latest residential property report. Anecdotal evidence from property companies and other institutions suggested that houses remained on the market longer before being sold, and that the percentage of sellers who had to reduce prices to reach a deal had risen.It said the figure might indicate a cooling off in the housing market. Price increases might have stabilised between 5 percent and 10 percent.The property market had become less friendly for households in the past month or so. The August hike in the repo rate brought the total increase in rates to 3 percentage points since June last year and signalled an increase in mortgage rates, with mortgage repayments jumping by about 30 percent over the same period.The bank warned that this might not be the end of rate increases: further tightening of monetary policy when the Reserve Bank met this week, which was seen by some as a strong possibility, might change consumers' financial environment and thus the dynamics of the housing market. It said household debt as a percentage of disposable income edged to yet another record high of 76.6 percent in the second quarter from 75.9 percent in the first, but the rate of increase was slowing, perhaps indicating that the ratio was approaching a peak.The ratio of debt repayments to disposable income "increased from 11.5 percent in the first quarter to 11.8 percent in the second. Although this is lower than the 13.5 percent recorded in the third quarter of 1998 when the Asian crisis was at its most destructive, there is no doubt that some households are experiencing financial stress."But the bank said that, broadly speaking, it could be argued that the macroeconomic environment was benign. House price data were still reflecting underlying consumer resilience that stemmed from expansion in employment and income on the back of a relatively strong macroeconomic setting, it said. Gross domestic product grew a solid 4.5 percent in the second quarter.

PROPERTY CRISIS 'WON'T HIT SA'

2007-10-08T00:39:00.000-07:00

Oct 04 2007 10:15 PM
Johannesburg - South Africa is unlikely to experience the housing market turmoil witnessed in the US housing market in recent months, a local property expert said on Thursday.
"[Investors] seem more concerned that we might go the same way as the US. Fortunately, I don't believe that we're going the same route," said John Loos, a property strategist at FNB.
His comments come as the US housing market crisis - which emanated from reckless lending of loans to borrowers who do not qualify because of their credit history - continue to unsettle investors worldwide.
Loos said that local housing affordability and household debt did not look too bad by historical standards, which supported a case for a more stable housing market.
"With the 90s history of extreme interest rate volatility and high rate levels still in memory of lenders, along with less securitisation, I believe that SA lenders are on balance prone to being more cautious for the time being," he said.
In 1998, the South African Reserve Bank hiked interest rates by 725 basis points in less than two months and the bulk of the SA home loans are not securitised but remain on the balance sheets of banks.
These two factors, according to Loos, help counter reckless lending in the country while in the US rates have been more stable and home loan securitasation has increased.
Home loan securitisation is a process where home loans are pooled and sold as financial instruments in the capital markets.
Another factor helping to counter reckless lending in SA is the National Credit Act (NCA), which was introduced at the beginning of June this year to promote responsible lending.
- I-Net Bridge

PRICE RISE NEAR 2010 STADIUMS

2007-10-08T00:38:00.000-07:00

THE Johannesburg Development Agency (JDA), the development arm of the City of Johannesburg, is upgrading the areas around the 2010 Soccer World Cup stadiums and says these efforts are already affecting property prices in Bertrams and Doornfontein.
JDA CEO Lael Bethlehem says the agency is working on the Ellis Park and Nasrec precincts. The Nasrec precinct surrounds the FNB Soccer City stadium.
“In Ellis Park we are doing a huge amount of work upgrading the area,” Bethlehem says.
“In particular we are bringing in the new public transport system called Bus Rapid Transit into the Ellis Park area.
“This is a set of dedicated bus lanes that will allow the new buses to move very quickly.”
The Sunday Times reported earlier this year that the city’s R2bn Bus Rapid Transit system was expected to be in place by 2009 and that giant 160-seat buses would be introduced and would run in dedicated lanes on big roads.
Bethlehem says the JDA is also upgrading a portion of the nearby Bertrams area and will be upgrading a number of parks and sport facilities in that area.
The agency has also put in some public art at the intersection of Joe Slovo Drive and Saratoga Avenue.
“We have already completed revamping the Troyeville Park and we are going to be doing some residential developments in Bertrams, near to the Johannesburg Stadium, which is the athletics facility,” says Bethlehem.
She says the Johannesburg Housing Company , a nonprofit social housing institution, is going to develop a large residential complex in Bertrams at a cost of about R300m.
“I have no doubt that property prices in the Bertrams area, Lorentzville and Doornfontein are going to rise. In fact, they have already started rising.”
With the countdown having recently passed the 1000-day mark, Bethlehem says the JDA will have finished the work it has undertaken on time.
The JDA is also upgrading the Nasrec area because the international broadcasting centre for the Soccer World Cup will be there.
This is expected to bring large investments into the area, situated between Soweto and Johannesburg.
“We do have a land owners’ forum that the JDA chairs and which meets regularly, and a number of land owners there are looking at residential developments there, as well as hotels.”
The JDA is upgrading the area, including putting in new infrastructure, street lights and trees, Bethlehem says.
She says the Bus Rapid Transit system will also “open up” the Nasrec area “because one of its routes runs into Nasrec”.

INDUSTRIAL LAND 'A GOOD BUY'

2007-10-08T00:37:00.000-07:00

Nick Wilson
During upswing, land appreciates faster than buildings
NOW is a good time to invest in vacant office- and industrial-zoned land, as land shortages and low vacancies in existing buildings drive values up, say property experts.
Property economist Erwin Rode, CEO of Rode & Associates, says that during an “upswing phase” in office and industrial property — such as now — land appreciates much faster than developed properties.
In his address to the annual Rode Conference on Property in Johannesburg last week, Rode said the difficulty was the shortage of zoned office and industrial land.
“It’s very good to bank in land, if you can find it ,” he says.
The residential market, on the other hand, “is fully priced and you don’t as a rule buy an asset that is fully priced”.
Rode expects residential property prices to grow at about the consumer price index inflation rate “for the next number of years”.
David Green, MD of commercial and industrial property brokers Pace Property Group, agrees that office- and industrial-zoned land is a good investment.
He says land values are skyrocketing for all types of commercial land .
Green says, for instance, the value of industrial-zoned land has risen 300% in the past 18 months.
Industrial land, which was trading in Midrand and other popular areas at R220/m², is now at R650/m² or higher.
“This applies to zoned retail, commercial and industrial land. All three sectors have seen enormous growth in value.”
Green says investment properties have not increased in value as much as vacant zoned land.
“The reason for the increase in the value of zoned land is due to the low vacancy levels ... (in) existing buildings and also the shortage of supply of land which is ready to be developed.
“It can take up to 18 months or more to rezone land from agricultural or residential to other uses, whilst the demand for zoned land is such that developers are not able to wait that length of time and therefore require land that is already correctly zoned.”
These factors have put upward pressure on land values.
“The increasing rentals ... in all the sectors have also made it possible for developers to pay higher prices for land and still achieve acceptable returns on new developments ,” says Green.
The price of office land differs from area to area, Green says. In Johannesburg, “the highest prices are being achieved in Sandton and Fourways, Sunninghill and Bryanston”.

CREDIT ACT CURBS BUY-TO-LET MARKET

2007-10-08T00:35:00.000-07:00

Nick Wilson
THE National Credit Act , which came into effect on June 1 this year, will “severely restrain” residential buy-to-let investors and developers by ensuring these players receive credit only if they can prove they can afford it, attorney John Gilchrist says.
Gilchrist, a partner in law firm Gishen Gilchrist , says the new legislation will to a certain extent “freeze” the residential property market as fewer buyers will qualify for bonds.
Gilchrist, who was delivering a presentation at the annual Rode Conference on Property in Johannesburg, says skyrocketing residential property prices have trimmed back the number of buyers in the marketplace and the act will merely reinforce this.
“About 20%-30% of the residential property buying market has disappeared since 2004. This is due to the 200% increase in property prices over a five-year period. There is virtually nothing viable under R400000 today.”
Gilchrist says that about seven years ago, 20%-30% of the residential property market could afford property under R400000. “That market has virtually disappeared.”
The average price of a home then was R250000. The average now is R950000.
In this context, for most people, the act will “just complicate the qualifying process”.
“The (act) is just going to weed out the people who can’t afford credit and it will severely restrain individual investors and property developers,” says Gilchrist.
The legislation will reduce the number of people who will be able to invest in the buy-to-let residential market , and limit the number of properties they can acquire, he says.
“Previously, the way it worked was that banks would lend you up to 25%-30% of gross income. This meant they calculated 25%-30% of the gross income as a monthly bond instalment.
“Now, banks will be focusing on disposable income and looking at all outstanding debts.”
The new law is “good” and will have a “pruning effect”, Gilchrist says. “It means money only goes to people who can afford to repay it, especially in difficult circumstances.”
He says the qualification of buy-to-let investors for bonds before the act came into operation involved a bank simply looking at the monthly rentals achieved in the investment property in question and comparing them with the monthly bond repayments, rates, taxes and other levies. “They would have previously allowed 100% of the rental on average going towards qualification for the loan. Now this has changed and the banks won’t allow it.
“One bank has told me it will now only allow 40% of the rental on average going towards qualification for the loan.”
The act requires banks to check the overall credit exposure of borrowers before approving any new loan. It is aimed at protecting consumers from reckless lending.
Banks will be penalised if they have been found to have lent money to someone who cannot afford it.
In extreme cases of reckless lending, a bank could find that the debt owed to the bank is written off completely.
Gilchrist believes banks will “err on the side of caution” when it comes to implementation of the legislation .
FNB Homeloans CEO Jan Kleynhans says that when a bond application reaches the bank, it looks at disposable income to make sure the client can afford the loan .
“In terms of the buy-to-let market we will look at 100% of rental income provided that the income the customer declares from his existing buy-to-let property is verifiable against a lease agreement and other documents that support the costs of the lease property,” says Kleynhans.
“For example, if the existing property receives a rental income of R10000 a month and there are expenses of R2000 against that, this gives the customer a net rent of R8000. Let’s say the bond on that property is R7000 a month.
“The customer is left with R1000 before tax. Let’s say the tax is 40%, then he is left with R600. That R600 will be taken into account for the new bond that is being applied for.”

PROPERTY MARKET NOT IN FREE FALL

2007-10-02T23:30:00.000-07:00

October 1, 2007
By Roy Cokayne
Pretoria - The residential property market is still solid, not in some type of "free fall", and "ready to respond" to any mildly positive news, according to the latest Lighthouse residential property index report.This was evident in the further mild increase in month-on-month price inflation - the fifth consecutive month of increase, it added. However, the report said the rise in national month-on-month inflation to 1.39 percent in May was not believed to be the start of a sustained upward trend. Instead, it had much to do with last year's transfer duty relief, which caused a flurry of additional buying activity as the year progressed.

"The month-on-month inflation downturn is expected to resume, driving year-on-year price inflation lower until early next year, with the figures still having to see at least two further interest rate hikes [June and August], as well as [the] National Credit Act implementation, have an effect."The report said the national house price for May showed year-on-year inflation of 18.2 percent, which did not represent any trend change, with the declining inflation trend since 2004 still intact.

CREDIT ACT WILL PREVENT CRISIS

2007-09-20T00:01:00.000-07:00

Business Day
Posted to the web on: 19 September 2007
Nick Wilson Visiting US real estate speaker says that credit restrictions will lead to responsible lending INTERNATIONAL real estate seminar speaker David Knox says the new National Credit Act (NCA) will be good for the real estate sector and potentially protect it from crises similar to the collapse in the US subprime lending market
Knox, who was in SA last week, said it was important to have reasonable standards for borrowing and that "people who borrow money should have the ability to pay it back".
"The NCA may delay a person's entry into the market, but they will come in at the right time in their life. It's like a college kid wanting to buy a brand new car before he's ready. Affordability is an important way of keeping financial health in our life," he says.
"If South Africans don't believe that, they should look at the subprime lending mess in the US." In the US some of the banks relaxed their borrowing standards during a low interest-rate period to enable less qualified property buyers to borrow at lower interest rates.
This meant these buyers were now able to afford a higher mortgage than they would ordinarily have been able to. When interest rates went up these buyers were not able to afford their homes at the higher rate and this resulted in many foreclosures. The bottom fell out of this market earlier this year.
The NCA , effective from June 1 , has been slowing down bond applications. The act requires banks to check the overall credit exposure of borrowers before approving any new loan. It is aimed at protecting South African consumers from reckless lending.
Knox, who hails from the US and is a top-ranked international real estate trainer, was brought to SA this month by Seeff Properties to complete a countrywide road show of training seminars for its 1200 agents. This is his fifth trip to SA.
Knox, who has 34 years' experience in the real estate industry, says SA's residential property sector seems "very vibrant" and that he is impressed by the professional standards of the estate agents he has met.
He says SA's residential market is healthy compared with the US market, which "went into the tank a couple of years ago".
But Knox says buyers should not be "overly excited" about property cycles which rise and fall. He says that these are natural cycles.
Knox believes that SA's market is "still very much a seller's market". "Every estate agent I've spoken to, and I've spoken to about 1000 over the past two weeks, is telling me there is a shortage of inventory. If you are a seller now it may be a good time to put your home on the market. There are more buyers than properties now in SA from what I'm hearing."
He says when markets go up or down it is "dysfunctional to describe it as good or bad. Someone is going to win on the rainy days and someone is going to win on the sunny days. In a rising market the sellers are going to benefit, while in a downturning market the buyers benefit because they can afford to buy."
Knox thinks people "spend too much wasted energy" worrying about the direction of the market. "The secret to real estate is, don't wait to buy real estate, buy real estate and then wait. If you are buying a place to live, raise a family, buy a place and get into a home.
"It's a home, not an investment. It can be an investment, but it's a house first and an investment second." Knox says he has been "very impressed" with the "character of real estate professionals" in SA. "They seem to be truly interested in providing good service to clients. The South Africans have been very pro education since I've been coming here and I started coming here in 1990. I get very good attendance at property seminars here."
Knox says the skills and professional standards of South African real estate agents are high. "These are the agents I see. Bad agents don't come to seminars, the good ones do." The 2010 Soccer World Cup will boost SA's economy, which will be good for the real estate market, he says.

BEWARE: NEW HIDDEN TAX IN PROPERTY DEALS

2007-09-19T23:57:00.000-07:00

MoneyWeb 17/09/07
Buyers, estate agents and lawyers must dip into own pockets for hefty tax when sellers run from Sars. What you need to know...
Buyers, estate agents and lawyers will be made to pay tax for sellers who skip the country without paying their dues to the South African Revenue Service (Sars).The new law applies to properties sold for R2m and up, with the minimum tax payable starting at R100 000. It kicks in from this month.Sars, in this new legislation, is effectively saying it is impossible for it to keep track of property transactions where non-residents are involved and owe it money, so it is going to force buyers, agents and conveyancers do its job by acting as tax collectors. Tax lawyer Johan Troskie, a director at Deneys Reitz Attorneys, highlights the implications of a recently promulgated new section of the Income Tax Act (section 35A), which provides for a withholding tax.This is in lieu of capital gains tax payable when a property is sold, but is not calculated according to the gain made, he says. Instead, the withholding rates apply to foreign sellers as follows:
5% if the non-resident seller is an individual;
7,5% if the non-resident seller is a company; or
10% if the non-resident seller is a trust.
Troskie says estate agents now have an obligation to tell potential buyers that a seller is non-resident. If they don't, they can expect to dip into their own pockets for the money owed to Sars. The buyer must not pay over the full purchase price, but must keep back the correct amount owed to Sars and pay it over on behalf of the seller to the national fiscus.Now, that's perhaps easy enough to pick up when the seller has a thick Irish brogue or can only pronounce his "Ws" as "Vs". However there are many South Africans who have declared themselves non-resident for tax purposes and have clever schemes to get around the law, like staying out of the country for a certain number of days each year. They live and own property here, and may give their friends and clients the impression they are South Africans at heart, but technically they are non-resident and are therefore liable to pay withholding tax when they sell property. Troskie says the unwitting buyer may have one defence in the law if the circumstances are such that they could not reasonably have known a seller is non-resident. But, it's a "tenuous" test, he says.The tax law expert says agents will have to become more diligent by asking questions about residency. Asking sellers to sign a formal declaration, or type of affidavit, on their residency status may become a feature of the sales process, he predicts. There is a big risk for buyers in private sales because they may not be aware of the intricacies of the new law.The mind boggles, too, at the potential pitfalls where trusts are involved. The tests for residency undoubtedly become more tricky. As Troskie says, the new Income Tax Act addition is set to become more of an administrative headache for agents and lawyers than the Financial Intelligence Centre Act, with "real financial risks" for those involved in the process. He says the procedure for paying the money has not yet been clarified, and there are slightly different terms for resident and non-resident buyers.If you are buying, it appears that it is now more important than ever to hire a lawyer to look after your interests. Remember, the risks need to be identified before signing an offer to purchase, as that agreement is binding.

HOUSE PRICES TO SLOW FURTHER

2007-09-06T01:00:00.000-07:00

Sep 05 2007 01:55 PM
Evan Pickworth
Johannesburg - Jacques du Toit, senior economist from the biggest mortgage lender in the country, Absa, said on Wednesday that their projections were for nominal house prices to taper off in 2008 to just 10% growth as higher interest rates bite.
He added that average growth for 2007 is forecast at 14%, which is in line with his forecast in May.
"Nominal house price growth for next year is forecast at about 10%, mainly as a result of the upward trend in interest rates since mid-2006, as well as slower economic growth expected in the second half of this year and in 2008," explained Du Toit.
This projected slowdown comes after house prices grew at an astronomical 22.7% in 2005. The declining trend then took route the next year as growth averaged 15.3% in 2006. This declining cycle is therefore now likely to extend over a minimum of three years before potentially picking up again.
The current Absa projections come after they recorded August house price growth at a lower 14.6% year-on-year from 15.1% in July and 15% in June.
House price growth in the first half of the year was at 15.5%, but a decline took place to 15.4% when measured over the first eight months of the year.
Many analysts also point out that the implementation of the National Credit Act may also affect growth in mortgage advances, although it is felt that it is still a little early to tell whether this has impacted prices.
- I-Net Bridge

HOUSE PRICE GROWTH MAY START TO REVERSE

2007-09-06T00:59:00.000-07:00

September 6, 2007
By Roy Cokayne
Pretoria - House prices rose by less than inflation in July, implying a real decrease of 0.2 percent month on month, after no change in real prices was recorded in June, according to Absa's latest house price index, released yesterday.But real year-on-year house prices grew by 7.5 percent in July compared with 7.7 percent in June. Real growth in house prices averaged 8.4 percent year on year in the first seven months of the year.House prices grew 10.2 percent in real terms last year and the market has performed better than expected this year.Next month, house prices are expected to decline in real terms by 1.9 percent, the first annual reduction in real prices since 1999. However, real house prices are projected to rise by 7.2 percent for the calendar year.Absa economist Jacques du Toit said the house market performed more strongly than anticipated in the first quarter.Nominal house prices had grown in the first quarter, probably because there were no interest rate increases and the economy had performed strongly.Standard Bank said this week that the growth in the median house price fell to 5.7 percent year on year last month, from 10.4 percent in July, showing a levelling off. This also means that house prices are declining in real terms, because the growth rate is below the inflation rate.
The financial landscape of households changed with last month's interest rate hike. Mortgage repayments rose by 30 percent since June 2006.The macroeconomic environment remained resilient, which meant house price increases were likely to remain positive but in single-digit territory over the medium term.However, more tightening of monetary policy, seen as a strong possibility, would "change the financial environment and thus the outlook for the housing market", said Standard Bank. Absa said yesterday that the growth in nominal month-on-month house prices slowed to 0.7 percent last month from 0.8 percent in July. The average price of middle-segment housing rose 14.6 percent year on year to R942 800 last month. Price growth of 15 percent was recorded in July. Nominal house prices grew year on year by an average of 15.4 percent in the first eight months of 2007.Du Toit said growth in house prices was expected to taper off at the end of the year, with average growth for the full year projected at 14 percent. Nominal house price growth of 10 percent was forecast for next year.Du Toit attributed the anticipated lower growth in average house prices largely to the upward trend in interest rates since the middle of last year and the slower economic growth expected in the second half of this year and next year.

AVERAGE SA HOME COSTS R942800

2007-09-06T00:57:00.000-07:00

Sep 05 2007 09:55 AM
Johannesburg - Nominal house-price growth of 14.6% year-on-year was recorded in August in the middle segment of the market from a revised 15.1% (14.5%) in July, according to the latest Absa House Price Index. This brings the average price of a house in the survey to R942 800.
House price growth was at a higher 15% in June.
In the first half of 2007 average nominal house price growth of 15.5% was recorded compared with the same period a year ago, and the data on Wednesday showed that in the first eight months of the year average nominal house-price growth came to 15.4% year-on-year.
Real year-on-year growth in house prices of 7.5% was registered in July compared with a growth rate of 7.7% in June, based on the headline consumer price index.
On a month-on-month basis, nominal house price growth slowed to 0.7% in August (0.8% in July). In real terms, house prices declined by 0.2% month-on-month in July after no change in real prices was recorded between May and June.
The Absa House Price Index growth in December 2006 was at just 13.5% and overall in 2006 it was at 15.3% from a whopping 22.7% in 2005.
The Absa House Price Index is based on the total purchase price of houses in the 80m²-400m² size category, valued at R2.7m or less (including improvements), in respect of which loan applications were approved by Absa.
- Fin24

'LAND BUYERS MUST LIST RACE'

2007-09-04T04:51:00.000-07:00

Sep 03 2007 06:52 PM
Michael Hamlyn
Cape Town - A panel of experts have recommended that all potential property buyers disclose their race, gender and nationality, and that will include "substantial shareholders" in land-owning companies.
The panel has been investigating the foreign ownership of land. The report was presented to cabinet in July, but was not released until Monday.
The panel, under Unisa professor Shadrack Gutto, says that it is currently difficult to assess the quantity of land owned by foreigners with their best estimate being that foreigners own around 3% of land used for residential housing, agricultural holdings, farm land and sectional titles.
This will be much higher in coastal and game farming areas, they say.
Once the experts have got a better handle on information regarding corporations and trusts, the size and value will be much higher, they say.
To improve the information and statistics, the panel recommends that all property owners should be obliged to make compulsory declarations for all past, present and future registrations of property - along the lines of the disclosures demanded by the Financial Intelligence Centre Act (Fica).
The panel also recommends that special ministerial approval be required for certain categories of land to be disposed of to foreigners, especially where such a change has the potential negatively to impact the state's constitutional obligations to effect land reform" or land restitution.
Total ban
There should be a total ban on foreign ownership of land, the 10 member panel suggests, in the national interest for environmental considerations, and in areas of historical and cultural significance, or for reasons of national security.
Such land would include national key points, coastal areas, conservation areas, land close to military installations, or international boundaries and in water catchment areas.
The government should be able to expropriate such land if it is already in foreign hands and either hold it in state hands or allocate it to authorised nationals.
The panel points out that the lack of a national policy on the regulation of land owned by foreigners is not the norm among those countries with comparable economic systems or even those with more advanced economies.
They also say that ordinary citizens, both black and white, feel very strongly that the acquisition of prime land by foreigners is denying them affordable access and "rendering them strangers in their own country".
The recommendations will require legislative changes, which the panel hopes will be accommodated in one catch-all amendment bill.
Speaking in Pretoria on Monday one of the panellists, Mandla Mabuza, explained what happens next: "It is entirely up to the Department [of Agriculture and Land Affairs] in what it does in terms of possible legislation or policy framework," he said.
The panel was first constituted by the previous land affairs minister Thoko Didiza in August 2004.
- I-Net Bridge

HOUSE PRICE GROWTH PLUNGES

2007-09-04T04:50:00.000-07:00

Sep 03 2007 05:54 PM
Johannesburg - The median house price declined relatively sharply to 5.7% y/y August from 10.4% y/y in July, according to Standard Bank's Residential Property Gauge for August.
The higher end of the market experienced a tightening of financial conditions, which impacted adversely on activity in that segment.
The financial landscape of households also changed with the hike in the repo rate in August. Mortgage repayments have increased significantly since June 2006.
Johan Botha, Standard Bank senior economist says: "Economic growth has slowed down to 4.5% in the second quarter of the year, but the macroeconomic environment remains relatively resilient.
"This implies that house price increases are likely to remain in positive territory, but in single digits over the medium term.
'Rate hikes to change housing market'
"A further tightening of monetary policy at the next Monetary Policy Committee meeting in October, which is seen by many as a strong possibility, will change the financial environment and thus the outlook for the housing market adversely."
The financial landscape of households and thus the property market has changed in the last month and become gloomier. The August hike in the repo rate brought the increase in this benchmark rate to a full three percentage points higher than the rate in June last year.
The increase in the repo rate signalled an increase in mortgage rates, with mortgage repayments jumping by approximately 30% over the same period.
Higher interest rates will impact on all households and thus on the demand for housing. The debt levels of higher income groups may make them more vulnerable to interest rate increases.
This interest rate sensitivity, coupled with speculative activity taking place in higher-priced property, may partially explain the decline in the proportion of higher priced houses on Standard Bank's mortgage book in August.
'Market may be taking strain'
Botha says: "In August the proportion of the lower and middle price segment increased by another percentage point while the proportion of higher priced houses declined by two percentage points.
"The greater prominence of lower priced houses on Standard Bank's book in July and August not only resulted in a lower median (and average) price, but may also indicate that the upper end of the housing market is taking some strain.
"It certainly appears to be a buyers' market in that segment of the market. With a shift in the distribution of mortgages granted, a decline in the month-on-month median price level in August came as no surprise."
Research conducted by Credit Suisse Standard Securities confirms that the debt-servicing burden as a percentage of disposable income increases with higher levels of disposable income. The decline in the proportion of higher-priced property may also be partly explained by the artificial lift provided pre-NCA.
Broader environment 'benign'
The broader macroeconomic environment is still relatively benign. House price data are still reflecting some underlying consumer resilience that stems from the continued expansion in employment and income on the back of a relatively strong macroeconomic setting.
In the first quarter of the year, 17 000 jobs were created, which compares favourably with the 10 000 and 152 000 jobs lost in the first quarters of 2006 and 2005 respectively.
The growth in households' real disposable income of 7.5% in the first quarter (on a seasonally adjusted and annualised basis) was the highest in eight years.
"The tougher financial environment and affordability concerns will impact on property prices over the medium term. Only with the expected easing in monetary policy in 2008 could we see the start of another upward phase in property prices," says Botha.
- I-Net Bridge

CREDIT ACT, RATE HIKES CUT GROWTH IN HOUSE PRICES

2007-09-04T04:48:00.000-07:00

Posted to the web on: 04 September 2007
Property Editor
MEDIAN house price growth plunged to 5,7% year on year last month from 10,4% in July as the National Credit Act took hold, according to the Standard Bank Residential Property Gauge.
Standard Bank senior economist Johan Botha said yesterday the act, implemented on June 1, was affecting growth in house prices by slowing down bond applications.
The act requires banks to check the overall credit exposure of borrowers before approving any new loan.
Botha said many financial institutions had an increase in bond applications in May, before the act came into force .
Applications for bonds had now dropped off.
The South African residential property market has been slowing down in any event since its peak near the end of 2004.
House price growth peaked at more than 35% at the height of the residential property boom in late 2004.
Since then the trend has steadily declined, as the relatively expensive property market caused demand to drop off.
Botha said the bank expected median house price growth of between 5% and 10% for this year. He expected even more of a decline from these percentages in the first quarter of next year.
The bank said the higher end of the residential property market had experienced a tightening of financial conditions, adversely affecting activity.
Standard Bank said the “financial landscape of households” had also changed with the hike in interest rates last month.
“Mortgage repayments have increased by 30% since June 2006,” said the bank.
Botha said economic growth had slowed to 4,5% in the second quarter of this year, but that the macroeconomic environment remained “relatively resilient”.
“This implies that house price increases are likely to remain in positive territory, but in single digits over the medium term.”
Botha said a further tightening of monetary policy by the Reserve Bank next month could “change the financial environment and thus the outlook for the house market adversely”.
Property economist Francois Viruly, of Viruly Consulting, said the market was seeing property investors “shifting slightly downwards” in the type of properties they could afford.
“This can only be normal considering the hike in interest rates, the National Credit Act and the pressure on the inflation rate.”
He concluded that “although the middle (housing) market might find it somewhat more difficult at present, the lower end of the market should continue to show very significant growth”.

EMERGING HOME BUYERS HIT IN THE POCKET

2007-09-02T23:13:00.000-07:00

Business Report
03 Sept 2007
Rising property prices in emerging markets might sap consumer spending because of the extra cash needed to buy homes, according to John Muellbauer, an Oxford University economics professor.Because credit markets are still underdeveloped in eastern Europe and Asia, home buyers face tougher financing conditions and have to put up larger deposits, according to Muellbauer's paper, presented at the weekend at the Kansas City Federal Reserve Bank's economic symposium in Jackson Hole, Wyoming.
Rising property values are likely to benefit consumer spending in nations such as the UK, where the mortgage market was liberalised in the 1970s. Property prices have surged in parts of India, China and eastern Europe, fuelled by a global liquidity glut. - Bloomberg, Jackson Hole, Wyoming

MORTGAGE LOANS BALLOON DESPITE NEW CREDIT LAW

2007-08-31T00:31:00.000-07:00

Business Report August 31, 2007
Edition 1 Tonny Mafu
Johannesburg - Mortgage lending showed no let-up in the latest credit growth statistics, rising by a record R17.3 billion last month.
This comes after the introduction in June of the National Credit Act, which requires banks to add more stringent criteria when giving loans.
According to Kevin Lings, economist at Stanlib, mortgage loans grew by R9.5 billion a month in 2005, rising to R13.1 billion last year. The average monthly increase has been R12.97 billion for the first seven months this year.
Dave Mohr, chief economist at Citadel, said the strong increase in mortgage loans could be coming from companies. There had been a marked acceleration in the "other loans and advances" segment, which mostly represents credit to firms.
Lings said corporate restructuring and fixed investment activity were responsible for the increase in corporate loans. While overall private sector growth slowed modestly, from 25 percent in June to 23.1 percent last month, Lings said annual credit growth remained "exceedingly high". He said underlying credit demand had been more than 25 percent for the past few years, with the private sector expanding by R301 billion during the past year and by R558 billion over the previous two years.
Fanie Joubert, economist at Efficient Group, said slower credit growth could be a source of comfort after the "shockingly high consumer inflation figures". He added that the moderation was an indication that interest rate increases were starting to have an effect.
The Reserve Bank increased interest rates four times last year, after expressing its concern about strong consumer borrowing.
The bank resumed its monetary policy tightening in June this year, after consumer inflation breached the target band of 3 percent to 6 percent. A threat to the bank's achievement of the target has been the broadening in sources of inflation, with food and transport costs rising more strongly.
Most economists say inflation as a result of credit growth is one element that monetary policy can contain by increasing interest rates, while price pressures from food and fuel are beyond the control of the central bank.

BUILDING COST GROWTH CONTINUES TO MODERATE

2007-08-31T00:30:00.000-07:00

Business Day Posted to the web on: 30 August 2007: 16:59
Nick WilsonProperty Editor
RESIDENTIAL building cost inflation is continuing to slow, reflecting the slowing of the residential market thanks to rising interest rates and a slowdown in the economy, according to the latest First National Bank (FNB) commercial property finance residential building cost index.
FNB property strategist John Loos said yesterday the index, which was constructed by construction industry consultant Industryinsight, recorded year-on-year building cost inflation of 23,6% for the second quarter of this year. This was a further decline from the revised 29% registered in the first quarter of this year.
“The fact that it is slowing from a high of 38,5% in the fourth quarter of last year, I believe, is reflective of the slowing residential market conditions due to rising interest rates and some slowdown in the economy,” said Loos.
“The fact that it is still very high and that it was very high last year, as well, I believe, is reflective of supply side or input constraints,” he said.
Loos said these constraints included skills and material shortages, as well as the ability to acquire services related to property developments.
“These shortages have driven high building cost inflation despite the fact that demand for residential property is relatively soft compared to a few years ago,” said Loos.
He said an important factor influencing the supply side constraints was that residential property was increasingly having to compete with non-residential developments, as well as infrastructure projects, for these services, skills and materials.
Loos said he expected a further slowdown in residential building cost inflation until early next year. “But thereafter we will see a gradual recovery in the residential market and this, coupled with the accelerating infrastructure drive, leads me to expect significant building cost inflation over the rest of the decade.”
Property economist Francois Viruly, of Viruly Consulting, said the market had seen a “decline in the residential construction sector”. There was still a substantial risk that public sector infrastructure projects would “crowd out the private sector”.
“There will be projects in the private sector whose feasibility will become marginal, primarily driven by public sector projects, which absorb a lot of our materials, as well as skills in the industry. We have to be very careful that we don’t find a situation where, for example, we reach 2010 where we have the stadiums but the hotels have become unfeasible because of rising building costs. Looking ahead we need to find a careful balancing act,” said Viruly.
Another issue was that the lower end of the residential market had been showing price increases of about 40%. “W e have to be careful rising building costs don’t exacerbate that scenario making affordable housing increasingly unaffordable to first-time home owners.”

RESERVE BANK INTENT ON ACHIEVING INFLATION TARGET

2007-08-31T00:28:00.000-07:00

Business Day Posted to the web on: 30 August 2007: 17:54
Reuters
THE Reserve Bank was committed to bringing inflation back within a targeted range after four consecutive months of breaches, Reserve Bank chief economist Monde Mnyande said.
Official data yesterday showed that CPIX inflation, which the Bank monitors for its policy making, quickened to 6,5% year-on-year in last month, holding above a targeted 3-6% band for the fourth straight month.
"Although the upper limit of the range has been breached ...the Bank remains committed to achieving the target range in the near term, thereby ensuring that continued confidence is placed in our currency," Mnyande said.
"One of the main problems of inflation is an erosion of people’s trust in the face value of (banknotes). This goes to the heart of monetary policy which is the need to protect the purchasing power of our money," Mnyande said.
The Reserve Bank has raised interest rates by a total of 300 basis points since June last year, and some economists say another increase could be in the offing when its monetary policy committee next meets in October

IFA TARGETS WATERBERG FOR NEW RESORT

2007-08-27T23:25:00.000-07:00

August 28, 2007
Kuwait-based IFA Hotels and Resorts and its JSE-listed South African subsidiary are making another multimillion-rand investment in this country - this time in the Waterberg in Limpopo. IFA is already developing the award-winning Zimbali coastal resort in KwaZulu-Natal, and has 36 percent of the Boschendal wine estate in the Western Cape, where an up-market residential development is in progress. Philip de Sylva, vice president operations for Africa and the Indian Ocean islands, said the South African company was investing R15 million and the Kuwaiti parent company R90 million in a joint venture company, expected to be called IFA and Legends Development. They would carry out a development known as Legend Golf and Safari Resort in the Waterberg. - Audrey D'Angelo, Cape Town

GAUTENG TOPS HOME SALES, CAPE TOPS COST

2007-08-27T23:23:00.000-07:00

August 27, 2007
By INGI SALGADO
Cape Town - Johannesburg and Tshwane scored South Africa's highest volumes of residential property traded as a proportion of total stock, while Cape Town came out as the city with the most expensive property.The findings were released in a Lightstone housing index report on Friday.Cape Town is the most expensive of the major metropolitan regions, with an estimated R450 billion in residential real estate in May 2007, followed by Johannesburg at R379 billion.But Johannesburg shows the greatest value and volume of residential property traded between January 2005 and February 2007.The total value of transactions was R63.5 billion, compared with R61 billion in Cape Town and R35.6 billion in Tshwane.First National Bank property strategist John Loos, who compiled the report along with Lightstone business development director Andrew Watt, said the prime driver of Cape Town's value was the relative scarcity of land."Cape Town has a mountain in its midst and is further constrained by the coast. Jo'burg, on the other hand, is landlocked, which facilitates urban sprawl," the report says.Foreign land buying and holiday property purchases by inland residents boosted Cape Town's residential values.Lightstone's standard house price index confirms a continuation of the downturn in house price inflation since late 2004 on a year-on-year basis. House prices grew by 18.4 percent year on year in April, less than the 18.7 percent revised rate in March.The index displayed relatively high price inflation compared with the house price indices of Absa and Standard Bank, as it gave a greater weighting to the lower end of the market than the other two indices, said Loos. On a monthly basis, April was the third successive month of slight price inflation, from 1.35 percent in March to 1.37 percent in April.This represented the lagged response by the index to last year's minisurge in housing demand, the researchers said. The trend is expected to be short-lived, because of interest rate hikes in June and August as well as the implementation of the National Credit Act in June. Lightstone said the coastal strip, which includes properties up to 500m from the coastline, notched up an unchanged year-on-year inflation rate of 10.6 percent in April.The Western Cape displayed the lowest price inflation of all nine provinces.Johannesburg metropolitan continued to reflect less cyclical characteristics, with a mild acceleration in price inflation.

AILING PROPERTY CYCLE TO TURN IN 2008

2007-08-21T23:03:00.000-07:00

Iafrica.com
Mon, 20 Aug 2007
The dip in the South African residential property market, which started late in 2004, would begin to turn for the better towards the middle of next year, a property expert said on Monday.
"On the balance of things, it would appear that the residential property downturn still has a little way to go before things turn for the better," wrote John Loos, a property strategist at FNB, in the Residential Property Market Third Quarter Update.
He cited a shift in the direction from rising interest rates to flat movement and higher economic growth as catalysts for the residential property's turnaround.
No more rate hikes? South Africa's interest rate hike cycle is believed to be near its peak with most economists believing that the central bank would hike rates one more time this year before a long period of sideways movement sets in.
A combination of no further rate hikes and the start of a global economic recovery next year has led to the expectation of gradually accelerating year-on-year real domestic economic growth after bottoming out at 4.5 percent, Loos said.
The residential property market has been showing deteriorating activity levels over the past few years. The latest FNB Property Barometer shows estate agents reporting diminishing activity levels in the market in the second quarter and further deterioration in the July survey.
Slower growth The launch of the National Credit Act — which sets tough lending criteria — is one of the key factors contributing to the downturn of the property market, according to the barometer.
Other factors include rising interest rates and slower economic growth — from five percent last year to the projected 4.5 percent early in 2008.
"For the rest of 2007, it appears that things will get worse before they get better," Loos said. I-Net Bridge

IT'S NOW OFFICIALLY A BUYERS' PROPERTY MARKET

2007-08-20T01:06:00.000-07:00

August 20, 2007
By Roy Cokayne
Pretoria - The residential property market is likely to be nudged even further into a buyers' market by last week's half a percentage point increase in interest rates by the Reserve Bank. FNB Home Loans reported last week that three out of four residential properties were now being sold for less than the asking price and the average length of time a home remains on the market before it is sold has increased from eight to 10 weeks between the first and second quarter of this year. Both these market activity indicators are now likely to deteriorate further. The retail property market, which is sensitive to changes in consumer demand and credit extension, is also likely to slow down, but the impact on the office and industrial property markets is expected to be muted. However, the surprise half percentage point interest cut by the US Federal Reserve on Friday is likely to lead to a strengthening in the rand versus the dollar exchange rate, which will help to reduce inflation in South Africa and dampen the prospects of further interest rate increases this year.
Jacques du Toit, a senior economist at Absa group economic research, said the rate of growth in residential property prices was expected to taper off towards the end of this year and possibly into next year because of the influence of the interest rate increases together with the National Credit Act. Du Toit said that apart from the housing market, the retail property market would be most affected by the latest increase in interest rates because consumer demand and credit extension would taper off. However, the office and industrial property markets were less interest rate sensitive.
He said the cut in US interest rates would not have any direct impact on South Africa, and if oil and food prices, together with the rand exchange rate, continued to have a negative influence on domestic inflation, there could be further increases in interest rates.
John Loos, a property strategist at FNB Commercial Banking, said the US interest rate cut could be positive for the rand."It [the rate cut] will keep the soft landing going and not let the US economy go into recession," he said. Jeanne van Jaarsveldt, Re/Max marketing and financial director, said the interest rate hike would force a further slowdown in both sales volumes and prices in the residential property. Tess Rodrigues, a property finance specialist at Property Factor, said homeowners who were already under home loan repayment pressure would now be forced to sell their homes."If previously you had any doubt, this confirms that it is indeed a buyers' market. Those who wish to sell should do so sooner rather than later, as more stock will be entering the market and buyers will have plenty to choose from. It is already taking up to 10 weeks to sell a property and sellers can now expect their properties to take even longer to sell," she said.

HOUSING MARKET TO SLOW FURTHER

2007-08-19T23:57:00.000-07:00

South Africa's housing market is likely to slow further after the South African Reserve Bank (SARB) voted to increase the repo rate by 50 basis points to 10% after its latest Monetary Policy Committee meeting.
The rise is likely to lead to commercial banks raising their rates by the same margin to a level of 13.5%.
Interest rates have been hiked by a total of 300 basis points since mid- 2006.
Absa, the country's largest mortgage lender, said in its reaction that the affordability of housing, especially for first-time buyers in the low- and middle-income groups, will be negatively affected by the latest hike in interest rates.
"Consumers' spending power has already been eroded by higher fuel and food prices over the past number of months. In the first seven months of 2007, nominal year-on-year house price growth averaged 15,4%, but is expected to slow down further in the remaining few months to average around 14% for the full year," it said.
Mortgage advances growth, which declined gradually from as high as 30.9% year-on-year in October 2006 to 27.2% in June 2007, is forecast to slow down further towards the end of the year, taking into account the current interest rate cycle, the possible effect of the National Credit Act, and expected slower growth in house prices over the short term, ABSA said.
However, Allister Long, MD of property services consultancy, Powerhouse Financial Services, said the hike is unlikely to have an immediate impact on the property market.
"The impact will only be felt in the long term with property prices increasing at a much slower rate. The economy is already slowing down as there is a visible decrease in property price growth rate and the latest interest rate hike has placed added pressure to this."
Property prices are not expected to decrease, however there will be a burgeoning gap between the prices of existing properties and new developments, he added.
"Existing property prices will continue to increase at much slower rates. However the prices of new houses will increase as the cost of resources escalates. With all the commercial building that will be taking place, such as the building of the Gautrain and the stadiums for 2010, labour and material costs will become scarce and obtaining them will come at a premium."
Rental prices are also expected to increase as investors will be paying more on their bonds.
"Rental prices generally fluctuate along with the interest rate making this more of a buyer's market than a renter's one," said Long.

RATE HIKE TIMING "NOT RIGHT"

2007-08-17T06:27:00.000-07:00

Fin24.com
Aug 16 2007 04:33 PM
Johannesburg - The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) on Thursday decided to increase the repo rate by 50 basis points to 10%, in line with consensus expectations. The prime overdraft rate thereby increases to 13.5% and the current tightening cycle that began in June last year increases to 300 basis points. This also comes despite a market rumour that the MPC may have kept rates on hold due to the current global credit crisis. The content of the rumour was that liquidity is so tight, the US needs to cut rates and Europe needs to keep them on hold with the SA central bank having to follow suit - in other words, that they needed to keep rates on hold to see how things pan out. SARB Deputy Governor Dr Xolile Guma said: "At this stage there is no evidence that the recent turbulence in the international financial markets will have marked effects on the domestic growth outlook, although this will depend to some extent on the impact of these developments on the US growth performance. "To date the impact has been felt in the exchange rate and to a greater extent, on the capital market. "The possible impact on consumption via the wealth effect and on investment are likely to be limited."

LAND SHORTAGE, TRAFFIC TO DRIVE HOUSE PRICES

2007-08-17T06:26:00.000-07:00

Business Report
August 17, 2007
By Roy Cokayne
Pretoria - Road traffic congestion and the scarcity of residential land close to the major metropolitan areas would continue to drive house prices in future, John Loos, a property strategist at First National Bank commercial banking, said yesterday.Loos said motor vehicles would have an effect on property values because the roads were clogging up.He said this was as a result of the expansion of the economic infrastructure not keeping up with additional vehicles on the roads.This would lead to the urban land inflation rate increasing as people tried to move to better located areas to avoid congestion, he said."We're heading for less affordability because of land scarcity," he said.New vehicle sales had more than doubled since 2000 and 1 million new vehicle sales a year could be expected in the next decade, he said.Loos said demographic changes and deteriorating affordability would also fuel demand at the lower end of the housing market.He said these demographic changes included the fact that the average size of households was getting smaller. This means that the number of households is growing faster than the population.
The improved employment potential of previously disadvantaged individuals was one of the key drivers of this trend.The affordable end of the market was expected to receive a boost from this trend, said Loos.Loos said residential building would also have to compete for resources, including building materials, with other segments of the construction industry. His comments come against the background of "four evil forces" that are currently negatively influencing the housing market.These include the implementation of the National Credit Act, rising interest rates, a slowing global and domestic economy and a lack of further transfer duty relief."I think the market is on its way downwards until the first half of 2008. But it will be a soft landing. This year is probably going to be the worst year of the decade for the residential property market," he said.Loos said the three-year deterioration in the interest rate environment after 2003 was still in progress.

GROWTH OUTLOOK POSITIVE DESPITE INFLATION

2007-08-14T22:45:00.000-07:00

Business Day
Posted to the web on: 14 August 2007
ReutersSA’S economic outlook has improved despite rising inflation and a spate of strikes, the Bureau for Economic Research (BER) said today, and raised its growth forecasts for the year
SA has seen a series of strikes for higher pay in recent months and inflation beating settlements could add to price pressures. The CPIX inflation measure - consumer prices minus mortgage costs - has been above the central bank’s 3-6% target band for the past three months.
"Despite these negative developments the BER is - compared to our previous forecast run in April - more optimistic about the country’s growth outlook," the Bureau said in a statement.
The BER is an independent research group which regularly puts out economic surveys read by fiscal and monetary policy makers in SA.
"To a large degree the optimism is based on the relative ease with which the consumer has so far been able to cope with a more challenging macroeconomic environment", said BER economist Hugo Pienaar.
Growth is now seen at 5,0% this year, unchanged from last year and above the 4,5 and 4,8% predicted in January and April respectively.
Pienaar said expectations that employment growth would remain robust should help to shield the disposable income of households against the negative impact of higher food costs and interest rates.
South African growth has been mainly propelled by high consumer demand, but this has strained domestic supply, boosting imports. A resultant widening of the deficit on the current account has put pressure on the rand, which shed 10% against the dollar last year and has lost another 3,5% to date this year.
The Reserve Bank is also concerned that consumer demand has been largely credit-driven, with household debt shooting up to 76% of disposable income, despite 250 basis points worth of interest rate increases during the 12 months to June.
The bank’s monetary policy committee meets tomorrow and Thursday and most economists expect another 50 basis point increase to 10%.
The BER said growth should slow to 4,8% next year as consumers start to feel the pinch from higher interest rates. CPIX inflation was expected to stay above 6% year-on-year until the first quarter of next year. The 2007 average was projected at 6,2%, compared to previous forecasts of 5,6%.
"In light of the higher inflation forecast the BER expects another 50bps interest rate hike at the conclusion of this week’s MPC meeting," it said.
Beyond the first half of next year the inflation outlook looked more promising, which may result in a moderate interest rate decline during the latter stages of next year.
The BER said it expected only a gradual depreciation of the rand currency, which should be positive from an inflation point of view.

HOME OWNERS STRUGGLING TO SELL THEIR PROPERTY

2007-08-14T05:36:00.000-07:00

Business Report
August 14, 2007
By Roy Cokayne
Pretoria - Three out of four residential properties are now being sold for less than the asking price and the average time a home remains on the market before it is sold has increased from eight to 10 weeks. Jan Kleynhans, the chief executive of First National Bank (FNB) Home Loans, yesterday attributed changes in the market predominantly to the implementation of the National Credit Act in June and the cumulative effect of interest rate hikes over the past year. Market activity is now at its lowest level since the inception of the FNB Property Barometer survey in 2003.The percentage of properties being sold at less than the asking price is at its highest since the inception of the survey. Kleynhans said properties in the upper-priced segments continued to feel the pinch, with 81 percent selling for less than the asking price, compared with the national average of 76 percent.For the first time, the very active sentiment in the market was non-existent, while the not very active sentiment had increased from 9 percent to 22 percent in the first two quarters of this year. In addition, the proportion of first-time buyers entering the market had steadily declined from 32 percent in the middle of 2005 to only 16 percent in the second quarter of this year.The number of investors buying homes to let has decreased significantly from about 27 percent in the fourth quarter of 2003 to only 12 percent in the second quarter of this year. Despite these negative trends, estate agents have a positive outlook for the next quarter. But John Loos, a property strategist at FNB Commercial Banking, believed the negatives influencing the market - the implementation of the credit law, rising interest rates, the slowing global and domestic economy, and a lack of further transfer duty relief - would feed into the housing market for some time. "I think the market is on its way downwards until the first half of 2008. But it will be a soft landing. This year is probably going to be the worst year of the decade for the residential property market." The FNB barometer is a quarterly review of the residential property market based on the perceptions and forecasts of 150 estate agents in the major metropolitan areas.Kleynhans said first-time buyers were generally affected by affordability. The combination of the credit law and the recent interest rate hike had curtailed activity in this segment because of stringent affordability assessments and qualifying criteria. Overall, 43 percent of estate agents claimed applicants were struggling to qualify for home loans, he said. In the lower-priced segment, 67 percent claimed that qualification and affordability were "significant hurdles". Kleynhans said agents believe the credit act was good for the economy, but were concerned about its effect on their business. Agents operating in the lower priced segment were particularly worried.He said the speed at which home loan deals were finalised had slowed down, but estate agents were optimistic that the stumbling blocks with the credit law would be short-lived

Economists split on rate decision

2007-08-14T00:54:00.000-07:00

Business Report
August 14, 2007
By Ethel Hazelhurst
Johannesburg - Economists are divided as to whether the Reserve Bank's monetary policy committee (MPC) should raise its official repo rate when it meets tomorrow and Thursday. While a 50 basis point hike, to 10 percent, was seen as inevitable only a few days ago, events on global financial markets have added a new dynamic to the situation. Brait economist Colen Garrow said an interest rate hike "would not be appropriate" at this point. Stock markets globally fell sharply last week on fears of escalating bad debts in certain categories of credit. The all share index fell more than 4 percent on Friday, but recovered 2.5 percent yesterday. Garrow said the Reserve Bank should "take its lead from key central banks", which have pumped money into the banking system to keep rates from rising sharply.
Sapa-AP reported that the European Central Bank yesterday injected €47.66 billion (R442 billion), after pumping in €61 billion on Friday and €94.8 billion on Thursday. And AFP said the Bank of Japan injected ¥600 billion (R36.7 billion) yesterday, following ¥1 trillion on Friday. On Thursday and Friday there was an infusion by central banks of $326 billion (R2.33 trillion) as interbank credit dried up. Garrow suggested the Reserve Bank wait for markets to stabilise before it raised rates. "The MPC doesn't have to wait for its next meeting to make that decision," he said. "It has previously held an unscheduled meeting."However, Andre Roux of Investec Asset Management said a hike was needed to maintain the bank's credibility in its stand against inflation.
And Sanlam economist Jac Laubscher said although concerns relating to bad debt globally created a risk of systemic problems, there was no evidence of such problems in South Africa. And in the circumstances, a rate rise was necessary. The Reserve Bank's benchmark CPIX measure (consumer price inflation less mortgage rates) has breached the ceiling of its target of between 3 percent and 6 percent for three months in a row. But there are other issues the MPC will have to consider. South Africa relies on financial inflows to fund its current account deficit, equal to 7 percent of gross domestic product. And relatively high interest rates attract capital seeking high returns. But rising rates slow equity markets, and foreigners have been investing more in the JSE than in local bond and money markets. So the net effect of a rate rise is hard to predict. Another issue is where the economy is in the business cycle, after a 2.5 percentage point hike since last June. The effects of these adjustments are unquantifiable because the full impact of monetary policy takes up to two years to come through. If a further hike now is one too many, it could tip the economy into a recession by 2009. The fact that 2009 is an election year is a complicating factor, although not one the Reserve Bank is likely to consider. Politicians, however, may be waiting anxiously for the outcome of the MPC meeting on Thursday.

Strike More Harmful Than Credit Act

2007-08-13T00:37:00.000-07:00

Prop24.com
2007/08/07
The national four-week long public sector strike has had a more negative impact on parts of South Africa's property sectors than the new National Credit Act, which was implemented on 1 June, the day the strike began. That's according to Des Landsberg, sales director of Woodpark Real Estate, which services not only the upmarket suburb of Yellowwood Park near Durban, but also the nearby, entry-level and middle-market areas of Woodlands, Montclair and Woodhaven. The strike not only slowed Deeds office activity around the country due to a lack of staffing, said Landsberg, but also hit the pockets of prospective buyers whose participation in the work stoppage resulted in a loss of earnings. "This loss has been particularly hard-felt by those in the sub-economic and entry levels of the property market, where many people are government employees such as teachers and nurses," he said. Landsberg, who is also the local zone manager for the Network Listings (NL) multiple property-listing network, added that it would take another couple of months for them to regain their financial footing, a situation that was ricocheting on many estate agencies in terms of suppressed sales volumes and cash flow. For Mike Bennett, a director of Network Listings and the managing director of the ProProp real estate group, the rocketing price of petrol has been the latest damper on the lower and middle income markets in his areas. "On its own, it would probably have had little effect on buying activity. However, on the back of the interest rate increases we've had since June last year, the public sector strike and the implementation of the new credit extension legislation, it's had a very negative impact on market activity," he said.Both Landsberg and Bennett said, though, that in the last two weeks, there had been definite signs that the market was starting to regain some momentum. Landsberg said the more affordable suburbs such as Lower Woodlands, where entry level homes cost around R600 000, were once again eliciting strong response from advertising. Surprisingly, activity in Yellowwood Park, despite its upmarket pricing, had shown little sign of flagging in the face of the challenges that had beset the market in recent months. Property price growth here, which Landsberg put at between 10 and 12 percent per annum, was the highest of all the suburbs in his area of operation and exceeded the returns being experienced on most other investment classes. Anticipating that the interest rate would reverse its current upward trend by next year, Bennett said he expected the market to go from strength to strength provided the focus was on affordability and right pricing. He added that downward pressure at the top end of the market was persuading sellers to re-examine their asking prices and that this did not mean that prices were coming down but that asking prices were becoming more realistic. At the same time, he noted that prices at the bottom end of the market were being forced upwards, a situation that was causing middle market price growth to stagnate. - Ingrid Smit

Credit Act could break down house prices

2007-08-07T22:55:00.000-07:00

Business Report
August 7, 2007
By Tiisetso Motsoeneng
Johannesburg - A nominal house price growth of 14.5 percent year-on-year (y/y) was recorded in July in the middle segment of the market from 14.9 percent in June, according the latest Absa House Price Index. The growth brought the average house price to about R932 100. During the first seven months of the year, average nominal house price growth of 15.4 percent was recorded compared with the same period last year.
The research showed that on a month-on-month (m/m) basis, nominal house price growth slowed further to 0.5 percent in July from 0.7 percent in June - the slowest nominal month-on-month growth since September 1999 when it was 0.4 percent. In real terms, house prices declined by 0.1 percent in June. The real rate of prices remained largely unchanged since March this year.
The researchers said that they expected further moderation in the remaining months of the year due mainly to higher interest rates. "It still has to be seen to what extent the National Credit Act will influence price growth, if at all," the researchers said. The Absa House Price Index is based on the total purchase price of houses in the 80m²-400m² size category, valued at R2.7 million or less (including improvements), in respect of which loan applications were approved by Absa. - I-Net Bridge

China and US housing markets

2007-07-31T02:57:00.001-07:00

China and US housing markets leading economic impacts
Source: SOUTHEM Updates 270707
By Mike Smith Two major factors influencing Southern Hemisphere forest industries are to the forefront of the latest World Economic Outlook from the International Monetary Fund (IMF).
On the one hand, China, which has been fuelling new markets for forest products, and the United States housing market, are to the fore in the IMF’s World Economic Outlook released this week.
The overall balance of risks to the global growth outlook remained tilted modestly to the downside, as it was at the time of the April 2007 World Economic Outlook, the report said.
“A number of other risks, however, look more balanced. In particular, while the correction in the housing sector is continuing, overall downside risks related to U.S. domestic demand have diminished somewhat.”
At a web based media briefing for journalists, officials said that China was contributing about a quarter of current global growth. When Russia and India were added, these emerging economies were contributing more than 50 per cent of global growth.
As far as the US economy was concerned, the first quarter was very week and growth was expected to be over 3 per cent in the second quarter so it could average over 2 per cent for the first half and pick up in the second half.
The US housing sector was expected to continue to drag its feet, with continuing decline through 2008 but a reduction in the level of the decline.

Info for Landlords and Tenants

2007-07-31T02:55:00.000-07:00

Info For Landlords And Tenants
Prop24.com - 2007/07/25
What landlords and tenants should know about the provisions of the Rental Housing Act. By Nadisha SinghThe Rental Housing Act 50 of 1999 ("the Act") came into effect on 01 August 2000. The aims of the Act are to regulate the relationship between tenants and landlords by laying down general requirements relating to leases, making provision for the establishment of Rental Housing Tribunals in each province, and laying down general principles governing conflict resolution in the rental housing sector.This article seeks to provide a summary of the key provisions of the Act which would regulate the common causes of disputes that occur between landlords and tenants, and to thereafter provide an overview of the dispute resolution procedure created by the Act for the resolution of disputes between landlords and tenants.Key Provisions of the ActThe Act defines a "landlord" as the owner of a dwelling or his/her authorized agent. At the outset, the Act reinforces the principle of non-discrimination entrenched in section 9(3) of the Constitution of the Republic of South Africa, 1996 ("the Constitution") by requiring that a landlord may not unfairly discriminate against a prospective tenant on one or more grounds, including race, gender, pregnancy, marital status, sexual orientation, age, disability, or religion when advertising a dwelling, in negotiating a lease, or during the term of a lease.A lease does not have to be in writing but a landlord must reduce it to writing if a tenant requests he/she to do so. A lease, whether verbal or written, will be deemed to include the following terms:• The landlord must furnish the tenant with written receipts for all payments received by the landlord from the tenant.• A deposit paid by the tenant to the landlord must be invested by the landlord in an interest-bearing account with a financial institution and the landlord must pay the tenant interest at the rate applicable to a savings account with a financial institution. The tenant may request the landlord to provide him/her with written proof in respect of the interest accrued on the deposit, and the landlord must provide the proof on request.• The tenant and the landlord must jointly, before the tenant moves into the dwelling, inspect the dwelling to ascertain whether or not there exists any defects or damage to the dwelling. If there are any defects or damage, it must be reduced to writing and attached as an annexure to the lease.• At the expiration of the lease the landlord and tenant must arrange a joint inspection of the dwelling to take place within a period of three days prior to the expiration of the lease.• On the expiration of the lease, the landlord may apply the deposit and interest towards the payment of all amounts for which the tenant is liable under the lease, including the reasonable cost of repairing damage to the dwelling during the lease period. The balance of the deposit and interest, if any, must then be refunded to the tenant by the landlord not later than 14 days after the tenant has vacated the dwelling.• The receipts which indicate the costs which the landlord incurred in repairing any damage to the dwelling must be available to the tenant for inspection as proof of the costs incurred.• Should no amounts be due and owing to the landlord in terms of the lease, the deposit, together with the accrued interest, must be refunded by the landlord to the tenant, without any deduction or set-off, within seven days of expiration of the lease.• Failure by the landlord to inspect the dwelling in the presence of the tenant is deemed to be an acknowledgement by the landlord that the dwelling is in a good state of repair, and the landlord will have no further claim against the tenant, who must then be refunded the full deposit plus interest.It is important to note that the standard provisions above are enforceable in court and may not be waived by the tenant or the landlord.If on the expiration of the lease the tenant remains in the dwelling with the express or tacit consent of the landlord, the landlord and tenant are deemed, in the absence of a further written lease, to have entered into a periodic lease, on the same terms and conditions as the expired lease, except that at least one month's written notice must be given of the intention by either party to terminate the lease.An alternative dispute resolution forum: the Rental Housing TribunalThe Act makes provision for the establishment of Rental Housing Tribunals ("Tribunals") in each province. To date, Tribunals have been established in the Western Cape, KwaZulu-Natal, Gauteng, and the North West. The Tribunals, which provide a free service to tenants and landlords, seek to resolve disputes that arise between landlords and tenants due to unfair practices, and to inform landlords and tenants of their rights and obligations in terms of the Act. Each Tribunal consists of members who have expertise in housing management, housing development, and consumer matters relating to rental housing.The Tribunals operate in accordance with the principles laid down in the following legislation: the Constitution, the Act, The Unfair Practices Regulations, and the Procedural and Staff Duties Regulations published in terms of the Act, and the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act, 1998.Complaints may be lodged by mail or facsimile or delivered in person to the office of a Tribunal. On receipt of a complaint, the Tribunal will acknowledge the complaint in writing and will then begin conducting preliminary investigations to determine whether or not the complaint relates to a dispute that has arisen due to an unfair practice. If the complaint relates to a dispute that has arisen due to an unfair practice, the Tribunal will determine whether or not the dispute may be resolved by mediation. If the dispute may be resolved by mediation, the Tribunal will appoint a mediator who will merely act as a facilitator in trying to resolve the dispute. The final decision will be the decision of the parties and not of the mediator. If the dispute cannot be resolved by mediation, the Tribunal will arrange for a formal hearing of the complaint.Any dispute that has arisen due to an unfair practice must be determined by a Tribunal unless proceedings have already been instituted in another court. However, a person retains the right to approach a court to institute proceedings for the normal recovery of arrear rental, or for eviction in the absence of a dispute regarding an unfair practice. A ruling by the Tribunal is deemed to be an order of the magistrate's court in terms of the Magistrate's Court Act, 1944 and the proceedings of a Tribunal may be brought under review before the High Court within its area of jurisdiction.It is submitted that the creation of the Tribunals is a commendable initiative by Government. Once an awareness of the provisions of the Act and the activities of the Tribunals have been created among the general public, both landlords and tenants will become more informed and will then feel more empowered and protected. The number of disputes between landlords and tenants may decrease and those disputes that occur will be resolved by the Tribunal, with the result that the burden of our courts will be eased tremendously. – Nadisha Singh*Nadisha Singh is an Associate at the Cape Town office of corporate law firm Bowman Gilfillan.

Growth in land prices outstrips houses

2007-07-31T02:53:00.000-07:00

Growth in land price outstrips houses amid lack of properly serviced sites
Business Report
July 30, 2007
By Roy Cokayne
Pretoria - Land price increases are outstripping the average growth in house prices due to the scarcity of properly serviced land for residential development.The latest Absa quarterly report on the residential property market, released last week, said the scarcity was particularly acute in the rapidly growing metropolitan areas and the coastal regions of South Africa.Jacques du Toit, a senior economist at Absa group economic research, said: "This situation is not expected to improve materially and will increasingly be reflected in vacant land prices in years to come."The report showed that land values for new housing increased by 26.6 percent year on year in the second quarter to about R380 000 on average. This compared with year-on-year growth of 28.4 percent in the first quarter.Real growth in land prices of 18.4 percent year on year was recorded in the second quarter, compared with 21.2 percent in the previous quarter.Du Toit said demand and supply conditions for land for new housing caused land values to rise from R163 a square metre in 2000 to R546 a square metre last year.
Excluding the impact of inflation, land prices rose 150.5 percent, or 16.2 percent a year, in this period. But Du Toit said the ratio of average land values to average prices of houses rose from 25.9 percent in 2000 to 32.9 percent last year after reaching a low of about 21 percent in the mid-1990s."Along the coast, land with a view has continued to increase in value in recent years despite a slowdown in the residential property market in general since 2004," he added. "House prices in these areas may reflect market conditions, but growth in land values may remain strong and rise further as a result of diminishing supply."Du Toit said the market for residential land was influenced by demographic factors and the sharp increase in the construction of new housing. The country's population rose 7.8 percent to 48.3 million people between 2000 and last year.

2007-07-25T00:23:00.000-07:00

Property still open to foreign buyers
Business Report 2007
Land restrictions remain on table after release of cabinet report
By Roy Cokayne
Pretoria - The threat of restrictions on the foreign ownership of land receded yesterday, but the issue remains on the government's agenda. A cabinet meeting in Pretoria received and noted the report by the panel of experts on the development of policy on regulation of foreign land ownership. The report follows the hefty increase in property prices in recent years, which was blamed on land purchases by foreigners. The panel considered the following key recommendations:

Long-term leasing of land as opposed to outright sale;
A possible moratorium on sale of land to foreigners;
The identification of instances where a prohibition on foreign ownership of land could be justified, such as national key points, water catchment areas, land along border lines and international borders;
Special ministerial approval in cases where certain categories of land were considered for disposal, such as land earmarked for land reform, restitution or integrated human settlement.

The cabinet statement says it has approved the publication of the report for public comment subject to the inclusion of a comparative analysis of how other countries managed this complex policy matter."The final policy will be approved by cabinet after the public has commented on the report," says the statement.

Erwin Rode, chief executive of property services company Rode & Associates, believes the threat of foreign land ownership restrictions is receding. He has the impression that the government is backtracking on the imposition of restrictions."The fact that they haven't come up with any hard evidence of foreigners somehow influencing our [property] prices will make it difficult for government to do anything but make a gesture," he said.

John Loos, a property strategist at First National Bank Commercial Banking, said there was "nothing too concrete" on what the policy would be. He did not ultimately believe the recommendations would be draconian.
"They are taking a long time, and the longer it takes the more I'm encouraged, because the more sensible the policy will possibly be. There are concerns about foreign land ownership but the government is also aware of the potential benefits of foreign investment," Loos said."There have been suggestions that foreign land ownership has been driving up property prices," he continued."The reality is that the economy has been performing strongly and the middle class growing, which has been the main driver of property inflation."Loos said in support of this statement that property inflation was widespread, even in townships where there was very little foreign interest. In February the state-appointed panel called for an immediate moratorium on land transactions by non-South Africans, despite preliminary findings indicating extremely low levels of foreign ownership. Attraction of local equities is fading Johannesburg - Equities were losing their appeal to foreign investors, Old Mutual Investment Group South Africa (Omigsa) said yesterday. Peter Brooke, head of macro strategy at Omigsa, said that based on historic price: earnings ratios of US shares and local shares, South Africa might get fewer foreign inflows in the next three years. Price: earnings ratios reflect corporate prospects, with a high ratio showing a very optimistic outlook on earnings. Foreigners invested R130 billion in South African financial assets last year, with about R72 billion going into JSE-listed shares. This year investors from abroad have made net purchases of about R50 billion, compared with R55 billion for the same period last year. But Brooke said the real return from all asset classes would be "considerably lower than those seen in the past four years". Bonds, which have responded to the deterioration in inflation, are expected to yield only 8 percent. Property is forecast to earn about 10 percent, while equities are expected to be the best performer, with returns of up to 13 percent a year over the next three to five years.

2007-07-23T01:39:00.001-07:00

Interest rates will keep moving up
Business Report July 20, 2007
Johannesburg - Expect to see South Africa's main repo rate hit 10 percent by this time next month - its highest rate in four years - as continued high consumer inflation and food prices on harvest concerns provide more than enough ammunition for the increase, said Moody's Economy.com."We expect that consumer-price data out next Wednesday will again test the South African Reserve Bank's inflation target ceiling. Food prices are a further likely pressure, thanks to worries about a smaller-than-anticipated harvest for the second year in a row," stated the analysts.South Africa's maize yields for the 2007/08 season fell by 82 000 tons last week to 274 000 tons compared with yields the week before. So far, farmers have delivered 4.257 million tons to the silos, about 2.8 million tons away from the projected 7.050 million tons.
There are some expectations, however, that the harvest could be cut as low as 6.80 million tons, with talk that the harvest is not going well.The repo rose as high as 13.5 percent in September 2002, before receding to 7 percent in April 2005, with the current tightening cycle of 250 basis points beginning in June 2006.South Africa's key consumer inflation data for June is due at 11.30am on Wednesday and PPI on Thursday at the same time. The next meeting of South Africa's Monetary Policy Committee to decide on interest rates takes place on August 16. - I-Net Bridge

2007-07-20T06:17:00.000-07:00

The rise in South African residential rents is picking up steadily, driven particularly by Johannesburg and East London that are powering ahead, according to the latest Trafalgar property index."And this is just the start of substantial rises over the next decade and more," says Andrew Schaefer, MD of national residential letting agents Trafalgar. "Rents rose year on year by 6,43% from June 2005 to June 2006, 6,88% from December 2005 to December 2006 and have risen 8.26% between June 2006 and June 2007. That doesn't seem dramatic but the index has grown from 100 in 2003 to 129.3 in 2007, so the average tenant is paying nearly 30% more than he did three and a half years ago. East London tenants are paying 51% more and Johannesburg and KwaZulu Natal 33% more" Schaefer says that constant rent rises are inevitable. "Firstly, household formation or demand for rental accommodation appears to be far outstripping the creation of new stock or supply," he adds. "It's a pity the exact data are not readily available.""Second, it's not just population growth that is driving demand, although we get the feeling that the number of foreign Africans coming into SA is greater than statistics indicate. It's mainly being driven by the rapid reduction in household sizes. According to the University of South Africa, household sizes have dropped from 4,48 in 1996 to 3,69 in 2005 and the number of households grew from 9 million to nearly 13 million in the same time. Based on this data we estimate that about 450 000 households are forming each year of which at least 100 000 will be tenants. Other factors affect rental demand as well. For instance, the number of single households that make a large proportion of tenants is now about 25% of all households, up from 12,5 in 1995. "Third is the growing demand from young people wanting more mobility than in the past and finding a choice of good homes for indefinite periods from the growing ranks of buy to let investors. "Fourth is rising house prices tied to increasing interest rates that is pushing more first time home buyers off the property ladder. "And fifth is the slowing development of new apartments and other rental stock by developers faced with rising interest rates, building and land costs and slowing price increases." Pretoria remains the laggard of South African cities with its index at 115 and its rents actually dropping by 0,62% from June to June. Cape Town's rents have improved by 6,8% but at 126 it continues to lag the national index of 129. Johannesburg (up 11.88%) and KwaZulu Natal (7,82%) - mainly greater Durban -- are around 133. East London's increase is ahead of the pack at 13.7%.

2007-07-20T00:24:00.000-07:00

The outlook for global property remains sound on the back of economic growth says Mark Appleton, Chief Investment Officer at Barnard Jacobs Mellet Private Client Services who recently returned from an overseas visit to global property investment managers. Appleton says the various geographical areas still offer opportunity although perhaps not at the same levels as seen previously. "There has been significant yield compression across the globe and this has been the major source of performance to date. However the view is that no further compression is anticipated and the focus will be on rental and distribution growth going forward." Appleton says that this will largely be driven by increasing replacement cost which will impact on the level of supply. He says general consensus is underweight the US, Australia and Hong Kong while overweight in Japan, Singapore, Germany, France, and the UK.He says there are concerns around US property due to a slow down in economic growth. "While interest rates will trend down it is primarily economic growth that will drive listed property returns and this is questionable in the US right now," says Appleton who adds that while consumer spending is not as vibrant as the past five years but is still reasonably strong as unemployment remains at the 4% level.Appleton says there are however pockets of growth and value in the US such as hospitality and apartments. "Apartments and hospitality are the growth areas. Hospitality is becoming a target for private equity."He adds that Asia however offers strong growth prospects and although yields are no longer a bargain, growing demand should serve to underpin strong rental growth. "In Singapore for example the Government is looking to double tourism."The view, says Appleton, is that China is offering value especially coming from such a low base. It will benefit from increased internationalism as market opens up and the Olympics focuses international attention.India is also viewed favourably as the other growth engine after China although it has its challenges. India is about five to six years behind China's growth path so there is still plenty of upside. It is also favoured as a business destination due to the strong English influences and hence attractive for business."Between Delhi and Mumbai the vacancy is practically zero, with waiting lists for leases. The current yield is around 7% and this is likely to reduce by about 100 basis points as the cost of property increases."Appleton says that while many of the buildings are of high quality, the conditions are such that even young buildings can look 'worn' quickly."Infrastructure is poor and varies between regions. Many offices require reserve power generators. The roadways are often in disrepair and some developers add their own roads to new constructions rather than wait for the local government". Appleton says shopping malls are being developed with varying success. "India, and perhaps Asia more broadly, represent good investment opportunities as many members of society have broken into the middle class and are now cash rich. The Indian work force in particular is easily employable, speaks English well and is highly motivated."Japan is also viewed favourably by investors. Appleton says due to low inflation and low interest rates there is a huge appetite for yield among domestic investors. The level of office take up is high and there are supply constraints resulting in little new office development in the last five years. Japan also faces natural geographical constraints and is prone to natural disasters. "Thus far demand has been relatively low, so there is no incentive to supply. This is likely to change. The typical yield on the property companies is in excess of 3% and represents reasonable pick up over the government bond at 1.7%."Appleton says property pundits are bullish on Germany which is still in the early part of the business cycle. He says that strong growth for property is continuing in the former East Germany and Berlin in particular is offering investment opportunities.In general, higher returns are expected from Europe, on the back of better rental growth, than from UK. Retail is favoured followed by industrial and then offices.In the UK Appleton says the view is that the investment markets are benefiting from a shift in focus of financial firms towards the UK and therefore office space is stretched as a result. "London is the hub of this demand, but the influence does spread out into the regions, especially through retail." Appleton says the demand from corporations is strong to the extent that it is somewhat immune from interest rates and growth rates in rent are currently in the region of 3% and could stretch to double digits in the near future. "However yields are below bond rates and growth will have to be strong to justify valuations." - I-Net Bridge

2007-07-19T06:21:00.000-07:00

Township housing boom eludes black estate agents
Business Report
July 19, 2007
By Sibongile Khumalo
Johannesburg - Lack of marketing skills and tight budgets have been identified as key factors preventing estate agents in townships from reaping the rewards of the booming property market, the Estate Agency Affairs Board (EAAB) has indicated.The board hopes the recently launched National Qualifications Framework training modules will address problems of professionalism and improve business skills.Andy Tondi, chairman of South African Black Property Practitioners, called for initiatives to strengthen the township estate industry to meet the current activity."It is of great concern that the much talked-about housing boom in the township was not enjoyed by the budding black estate agents," said Tondi."The wealth of the industry is taken away by large companies that have taken full advantage of the market. Right now the benefits of the boom do not match the increasing hype around the market."Bataung Matsau, managing director of BS Properties in Johannesburg, said the booming township property market was due to the shift in mind-set around ownership of property."For a long time the majority of township houses were passed down to family members," he said. "Selling was not regarded as an option."
He lamented the inability of township agents to make the most of the ongoing vibrancy of the market.Chief executive of EAAB Nomonde Mapetla said the demand in the township housing market had started to show vibrancy in 2004."Most agents operate on very tight budgets or nothing at all. This puts them in [a] situation where they are unable to market themselves and fail to attract sales."Training would not only equip agents on industry norms and practices, but would provide skills to help attract overseas clients.Mapetla said there was a need to prepare agents to deal in commercial property that was currently showing appreciation in the townships.There has been a rapid increase in the number of estate agents operating in these areas since 1994. In 2006, more than 70 000 estate agents were registered with the board.

2007-07-18T23:50:00.000-07:00

Business Day Posted to the web on:
18 July 2007
Confidence high as construction rockets ahead
Mariam Isa
Economics Editor
BUILDING confidence in SA rose back to near a record peak in the second quarter of this year, reflecting a boom spurred by public spending and pent-up demand for affordable housing, an independent survey showed yesterday.
The FNB building confidence index rose to 88 points from 87 in the first quarter of this year, edging back towards a historic high of 89 posted in the fourth quarter of last year.
FNB chief economist Cees Bruggemans said improved confidence in the building industry reflected higher overall economic growth, which quickened to an average annual rate of 5% over the past three years from 3% earlier in the decade.
“We have barely started. It looks like we are in an extended growth cycle which is likely to last another 7-8 years,” he said.
Release of the survey coincided with official data yesterday showing that capital spending by the government rose by 25,4% to R71,8bn in the financial year which ended in March, with expenditure on land and buildings soaring by 149% and construction up by 23,1%.
A slowdown in public sector capital expenditure is expected this year, before the pace picks up again in 2008, the figures from Statistics SA showed.
Construction is playing an increasing role in the economy, with the sector expanding a blistering 21,3% in the first quarter of this year — a 17-year record.
At the same time, the government’s R416bn infrastructure spending drive is having positive spin-offs, although it focuses on ports, roads, railways and soccer stadiums.
The FNB building survey showed that confidence in the nonresidential sector, which covers commercial buildings, was steady at 94 points but fell in the residential sector to 82 points from 86 in the first quarter.
This suggested business conditions there had been hit by the cumulative two percentage point increase in lending rates last year, Bruggemans said.
The Reserve Bank raised its key repo rate by half a percentage point to 9,5% again in June, and many analysts expect another hike at its meeting next month. But the residential slowdown is unlikely to last, the survey carried out by the Bureau for Economic Research showed.
“Regarding the business outlook for the third quarter, residential contractors said they expected business conditions to remain more or less stable, but an improvement in the tempo of building activity is expected,” FNB said.
Bruggemans said there was “enormous pent-up demand” for affordable housing units worth R170000-R250000 from the expanding black middle class.
FNB commercial property strategist John Loos said builders in the nonresidential sector were “very optimistic” and “upbeat” about short-term prospects but they also indicated that shortages of skilled labour and inadequate supplies of materials were “seriously constraining” operations

2007-07-10T04:42:00.000-07:00

Slowdown in building cost inflation may be short-lived
Business Report July 6, 2007
By Roy Cokayne
Pretoria - Residential building cost inflation appears to be slowing after a significant surge last year, but the decline is expected to be short-lived, according to FNB Commercial Property Finance's residential building cost index.John Loos, a property strategist at FNB Commercial Property Finance, said it was possible contractor pricing power was beginning to suffer from rising interest rates.However, Loos said the formal residential market had experienced much competition for inputs from other sectors, which could be a driver of building cost inflation until 2010."The first-quarter slowdown in year-on-year building cost inflation may be short-lived," he said.The index reflects the average building cost a square metre charged by contractors in the formal residential property sector, but excludes low-cost housing.It measured the average building cost at R4 883.91m2 in the first quarter of this year, down from R5 104.12m2 measured in the fourth quarter.Although there was a slight decline in the first quarter of this year, current levels "are a far cry from averages of around R2 000m2 in 1998 just prior to the property boom", he said.Year-on-year building cost inflation was measured at 26 percent for the first quarter, significantly lower than the 39.2 percent peak in the fourth quarter of last year.
Loos said this decline "ends a strong cost surge that began at the beginning of last year".He said the previous year-on-year building cost inflation peak was at 24.4 percent in the first quarter of 2004, which arguably reflected the high degree of pricing power of contractors due to extremely strong growth in demand at the height of the property boom.However, Loos said materials cost inflation at that stage was relatively low and skills shortages less of a constraint while affordability was arguably less of an issue than it was today."Contractors are arguably faced with greater input shortages today compared with a few years ago."Supply and demand theory would suggest that, given that residential building activity tapered slightly in 2005 and 2006, one should have seen a moderation in building input cost inflation."However, residential property development competes with other sectors for many inputs... For many infrastructure projects, 2010 is a 'deadline' fast approaching. In addition, the banking sector's affordable housing drive is beginning to step up a gear or two," he said.Meanwhile, a R700 million housing project at Windmill Park in Boksburg was unveiled by First National Bank yesterday, boosting its expenditure on housing projects to R2.7 billion.

2007-07-10T04:41:00.000-07:00

'Property to the people' could be the new ANC rallying cry
Business Report June 29, 2007
By Quentin Wray
Two key strands of thought are running through the policy proposals on land reform at the ANC policy conference, including the need to free up land for the poor in traditional rural areas and to discourage the foreign ownership of land - or at least land that is not used regularly.For example, the delegation from KwaZulu-Natal - where there is a swathe of rural land under the control of traditional chiefs - has noted that current forms of "ownership" cut off the people from "the economic value of land".It refers specifically to Ngonyama Trust land, which falls under King Goodwill Zwelithini, and other land under "traditional authority structures".The North West delegation argues that agrarian reform "must become one of the fundamental and key programmes aimed at the economic development and upliftment of people" in rural areas. This is another province with great tracts of land under chiefs' control.The province noted that Reconstruction and Development Programme houses - including township houses - had no title deeds, making it hard for owners to use them as collateral "for economic engagement".This province suggests that disused or underused state land should be transferred to municipalities for disposal and used for "local economic development", providing assets to the historically disadvantaged.While these issues have been considered at previous ANC conferences - with little progress in implementation - the pressure is on the ruling party to fast-track the redistribution of at least 30 percent of land to the disadvantaged by 2014.SA Communist Party deputy secretary-general Jeremy Cronin said these issues would be thrashed out today in commission sessions, and it was too early to tell what progress would be made.However, delegates said compromises would likely be forged.Limited foreign ownership leaseholds could be considered, while ways of carving up rural land could involve collective schemes, including an arrangement with the chiefs. A priority will be opening the way for the rank and file to borrow capital against property assets for the start-up of small businesses.

2007-07-10T04:37:00.000-07:00

SA Corporate rental income rockets
Business Report July 9, 2007
Johannesburg - SA Corporate Real Estate Fund Managers' first-half rental income increased as faster economic growth fuelled demand for industrial buildings, it said on Friday.The company achieved increases of between 12.5 percent and 30 percent for major industrial properties in Gauteng, and it planned to raise rents by between 16 percent and 47 percent for similar properties in KwaZulu-Natal, it said. - Bloomberg