About Me

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I am a qualified Attorney. I specialise in Property Law, Commercial Law, Corporate Law and Trusts.
Please visit our website at www.prop-law.co.za for more details.
I am an elected Committee Member of the Property Committee of the Association of Pretoria Attorneys and through my involvement, I like to ensure that I am constantly at the "sharp-end" of Conveyancing Practice.

I am the elected Chairman on the Gauteng Council of SAPOA. The South African Property Owners Association (SAPOA) is the biggest and most influential institution in the property industry. SAPOA members control about 90% of commercial property in SA, with a combined portfolio in excess of R150 Billion (about $22 Billion). I am also on the National Council and the National Legal Committee of SAPOA.
Member of the Institute of Directors South Africa and Member of the Sirdar Governance Panel.

21 June 2011

Standard Bank expects to payout over R50bn in new loans

Standard Bank expects to payout over R50bn in new loans

Higher than inflation increases in disposable incomes and demand for mortgages is expected to help Standard Bank (JSE:SBK) lend over R50bn in new loans this year as businesses and individual’s appetite to borrow recovers, the bank said on Monday.

Standard Bank’s head of personal and business banking, Peter Schlebusch, said the bank expects to pay out over R50bn in new loans this year mainly in the personal markets space.

Buying or selling property?

Buying or selling property?

Most property transactions in South Africa are affected by the legislation in terms of which taxes and duties are levied. This article provides a summary on some of these taxes.

Transfer Duty

Transfer duty is, generally speaking, payable when immovable property is acquired. It is payable by the purchaser and is calculated as a percentage of the purchase price. If SARS is of the opinion that the purchase price is less than the fair value of the property, then SARS will calculate the transfer duty based on the fair value.

The current transfer duty rates were announced in the Budget on 23 February 2011. They are applicable to both individuals and legal persons (companies, close corporations and trusts) in respect of properties acquired under sale agreements concluded on or after 23 February 2011. R37,000 plus 8% of the value above R1,500,000

Transfer duty is payable within six months from the date of acquisition, which is usually the date the sale agreement is signed, failing which SARS will charge penalty interest.

A purchaser does not pay transfer duty in transactions where VAT is payable. In such instances, the purchaser will pay the purchase price and VAT to the seller who is then responsible for paying the VAT to SARS.

Value Added Tax (VAT)

VAT is payable on the supply by a VAT vendor of goods supplied in the course and furtherance of any enterprise carried on by such vendor. In relation to a property transaction, this means that if the seller is a VAT vendor and the sale of the property is in the course and furtherance of the seller's enterprise then VAT will be payable on the purchase price.

Ordinarily such VAT will be calculated at the rate of 14%. However, if the property is sold as a going concern, VAT will be calculated at the rate of 0%.

In order for the sale of a property to be "zero-rated" the following main requirements must be met:

The seller and purchaser must be VAT vendors.
The seller and purchaser must agree in writing that the property is sold as a going concern and that the purchase price is inclusive of VAT at the rate of 0%.
The property must constitute an income earning activity.
The sale of the property must include all the assets required for carrying on the income earning activity.

Donations Tax

Donations tax is payable on the value of property disposed of by a resident by means of a donation. Donations tax is levied at 20% on the value of the property donated and is payable by the donor. There are certain exemptions from donations tax. It is important to bear in mind that if SARS is of the opinion that a property has been disposed of for a consideration which is not adequate, then the property will be treated as having been disposed of by donation and donations tax will be payable.

Withholding Tax

Non-residents are liable to pay capital gains tax when they dispose of immovable property situated in South Africa. SARS found this taxation of non-residents difficult to enforce and therefore introduced a "withholding tax" provision in the Income Tax Act.

In terms of the provision, when a purchaser buys immovable property from a non-resident and the purchase price is over R2 million, the purchaser must withhold a certain percentage from the amount due to the seller and pay this to SARS. In most instances, this payment will be done on the purchaser's behalf by the conveyancers attending to the transfer. The amount withheld from the seller is seen as an advance on his tax liability for that tax year.

The current withholding tax rates are as follows: if the seller is a natural person, the purchaser must withhold 5% of the purchase price, if the seller is a company, 7,5% and if the seller is a trust, 10%.

Income Tax Act - transfer of residence grace period

The grace period which was introduced in terms of the Income Tax Act in 2009, which allows for a primary residence owned by a company, close corporation or trust, to be transferred to the relevant individuals of such entity without incurring CGT or transfer duty, has been amended. The initial grace period now only applies in respect of a property which has been acquired by an individual from the relevant entity by no later than 30 September 2010.

In order to take advantage of the new grace period, the following requirements must be met:

The residence must be disposed of to a person who is a "connected person", as defined in the Act, in relation to the entity.
The person must have ordinarily resided in the residence from at least 11 February 2009 to the date of disposal and the residence must have been used mainly for domestic purposes.
The disposal must take place on or before 31 December 2012.
Within six months from the date of disposal the entity must take steps to liquidate, wind up or deregister.

* Victoria Hodgon is a director in the conveyancing department at Garlicke & Bousfield Inc.

Homeownership: Rent or buy

Homeownership: Rent or buy

I have time and again seen homeownership put a family on a new footing socially, psychologically and economically. Homeownership provides a stabilising influence and serves as an anchor for which all members of the family will be prepared to make sacrifices and endure hardship.

However in today's market we are frequently asked if this is not a good time to rent.

20 June 2011

Property market remains conducive to new home buyers

Realestateweb - Property market remains conducive to new home buyers

Residential house prices in South Africa fell slightly in May from a year earlier, according to latest statistics recorded by ooba - South Africa's leading bond originator - however, the environment remains conducive to new homebuyers with lenders continuing to relax their lending criteria.

Realestateweb - Property Loan Stocks deliver performance - Investment insights - South Africa's fastest-growing property website

Property Loan Stocks deliver performance - Investment insights - South Africa's fastest-growing property website

Research published by the PLSA demonstrates that some PLSs are already showing around double-digit returns for the year-to-date to May 2011: Fortress B is at some 15.9% and Octodec 8.4% in the three month period to 31 May 2011, highest returns were reported by Fortress B, Octodec, and Growthpoint Properties with total returns of 18.1%, 13.0% and 10.8%, respectively.

Wendy Machanik reapplies for a Fidelity Fund Certificate

Wendy Machanik reapplies for a FFC

Although the Wendy Mechanik saga is rapidly becoming old news to everyone except Wendy Mechanik, I have posted this article because of a comment that was posted by someone using the pseudonymn Zeitgeis, who posted:
"what an idiot - she's going to jail!? is she going to sell timeshare in the eating hall?"

Gareth Shepperson

17 June 2011

What motivates an Estate Agent’s selection of a Conveyancer???

I would humbly submit that our Firm provides a service that is better than most and is, in fact, comparable to the very best service levels in our profession!

In a perfect world, this should mean that Estate Agents are beating down our doors in order to refer work to us. This is (unfortunately) not happening and I continue to search for the essential elements that inform an Agent's choice of Conveyancer.

I am specifically not going to deal with the kickbacks paid to Agents by Conveyancers. We all know that it happens but (as a highly ethical law firm … don't laugh, there is such a thing) we are not prepared to indulge in illegal behavior. I am therefore not including it in my search for the essential elements that inform an Agent's choice of Conveyancer. Other than to state that we serve and treat our Agents very well, I am not prepared indulge this topic any further.

I therefore continue to actively strive to ascertain what motivates the selection of a Conveyancer. In an effort to get to the bottom of an Agent's motivation, I sent out a survey last year to 183 Agents who were registered with Private Property. Here are some of the more relevant extracts from my survey:

Q1. How long have you been doing business as an Estate Agent?I am a novice, "0.0%"
1 - 3 years, "5.6%"
3 - 6 years, "38.9%"
6 - 10 years, "33.3%"
Too long to remember!!, "22.2%"

Q2. How long have you been listing on Private Property?
Less than 1 month, "0.0%"
1 - 2 months, "0.0%"
3 - 6 months, "22.2%"
6 - 12 months, "38.9%"
More than a year, "38.9%"

Q9. Do you frequently advise Sellers to make use of a Conveyancer that you deal with, know and trust?
Never, "5.6%"
Seldom, "5.6%"
Often, "27.8%"
Always, "61.1%"
Is there a Conveyancer that can be trusted?, "0.0%"

Q10. In a few words, describe what would influence you to recommend a Conveyancer to Sellers.18 respondents answered the question

From the survey, it is clear that although the Sellers may sometimes nominate the Conveyancers, the Estate Agents recommend the Conveyancer in the overwhelming majority of transfers. This is very clearly illustrated in this chart.

18 Respondents answered question 10, which really gets to the heart of the motivation behind an Agent's selection of a Conveyancer. Here are some of the responses:
  1. he must have a professional, trust relationship with me as an agent before I will recommend him to sellers.
  2. Only service.
  3. Good, promp service. Thank - you
  4. Personal contact - not through the secretary or admin person - it's very frustrating. They assist me in finding information I need to complete a successful transaction.
  6. Head Office
  7. Relationship with an Attorney that provides above average service proves to be vital in every transaction. Knowing the job and thoroughly implementing years of experience into daily practice to eliminate errors and shorten the length of time on each transaction bringing a quick and pleasant transfer to conclusion.
  8. Tell me more
  10. Good feedback and quick response.
  11. Personal relationship and track record
  12. service
  13. Trust and relationship
  14. one who communicates with me and the client at every stage of the transaction
  15. Good service
  16. Service and feedback.

It is clear that we have returned to SERVICE as the major motivator. We have done everything in our power in order to ensure that we provide the very best service possible. In this regard please indulge me if I highlight a few:
  • We send out weekly detailed comprehensive reports to Sellers, Buyers and Agents wherein we set out the entire history of the transaction and the remaining items on the path to registration.
  • I (the Conveyancer) personally go to the clients. This includes Sellers, Buyers and Agents and any other relevant people/entities, in order to ensure that the transfer is registered as expeditiously as possible. It is my job to register the transfer and so I don't sit in my office and expect people to take time away from work in order to come and see me. This also sometimes includes after hours and weekend visits to clients. (Whatever it takes to get things done as fast as possible.)
  • We have built up and make use of our Contacts at Municipalities in order to ensure the minimum possible delay.
  • Training is important. Our staff regularly attend various training courses so that we are constantly at the forefront of conveyancing developments and fully au fait with the processes and technology involved. In order to better understand the developer's perspective, I attended the very prestigious Property Development Program (PDP), presented by SAPOA and the UCT Graduate School of Business.
  • I regularly meet with colleagues and a variety of industry players through my membership of (and participation in) various organisations. I am currently serving as the vice-chairman (Gauteng) of the South African Property Owners Association (SAPOA) and I am a member of the Property Committee of the Association of Pretoria Attorneys. I am therefore at the coalface of developments in property law.
  • I have contributed a number of articles to the Media. The most recent being my thoughts on Foreign Investment in South African Real Estate which appeared in the March edition of the Property Magazine.
  • I also try and keep in touch through Social Media such as Facebook, LinkedIn and others. My Blog (Gareth Shepperson's First Law) at http://garethsfirstlaw.blogspot.com/ is certainly my biggest contribution to Cyber Real Estate and I hope to add some value through that vehicle.

We continue to strive for excellence and professionalism in what we do and continue to live up to our motto:
"For all of your Real Estate Questions, we are the Answer."
If you are an Estate Agent and have a different view on what motivates your selection of a Conveyancer, I would really love to hear from you.

Gareth Shepperson
Brazington Shepperson & McConnell Attorneys

Significant improvement in residential building activity

Significant improvement in residential building activity

In the first four months of 2011, building activity with regard to new housing in the South African residential property market improved significantly in especially the planning phase compared with the same period in 2010.

REALTOR® Magazine-Daily News-Signs of a Real Estate Recovery?

REALTOR® Magazine-Daily News-Signs of a Real Estate Recovery?

The global financial crisis started with the sub-prime mortgage issues in the USA and the ensuing downturn in that real estate market. That is why I am always on the lookout for positive news from the US real estate market becuase I don't think that a local recovery is possible without a coinciding global recovery.

14 June 2011

Where will the smart money in property be going in the next twelve months?

Where will the smart money in property be going in the next twelve months? - Investment insights

This is an article by Jason Lee. I have read his books and also receive his weekly newsletter. His advice is usually quite sound and practicle.

It is interesting that he points out that the barriers to entry into commercial/industrial property investment are higher and that it therefore represents a better opportunity for investors. However, he fails to mention how these barriers may be overcome.

Gareth Shepperson

10 June 2011

Growthpoint, PIC concludes V&A Waterfront deal - Commercial - South Africa

Growthpoint, PIC concludes V&A Waterfront deal - Commercial - South Africa

The Government Employees Pension Fund (GEPF), represented by the Public Investment Corporation Limited (PIC), together with Growthpoint Properties Limited today announced that their purchase, in equal proportions, of South Africa's landmark V&A Waterfront is now complete and all conditions have been fulfilled.

Sectional Title Amendment Act has useful changes

Sectional Title Amendment Act has useful changes

The Sectional Title Amendment Act (2010) which is now in force incorporates a number of useful changes.

The latest amendment allows the trustees of the scheme to extend a section simply by notifying the bondholder/owner - and, if no response is received from him within 30 days, to deem that he has no objection

09 June 2011

2012 - 2013 likely to see property recovery

2012 - 2013 likely to see property recovery - Property talk

On-going reporting on the USA's massive debt, serious economic problems in at least five European countries, war, revolution and other problems in the Arab world, Afghanistan and Pakistan are said by some to have dampened confidence in property worldwide - and here in SA.

(An article by Lanice Steward, the MD of Anne Porter Knight Frank.)

06 June 2011

Health returning to industrial property

Health returning to industrial property

Industrial property is showing signs of a recovery with vacancy rates seemingly levelling off and rentals once again showing growth.

First time buyers set to dominate sales

First time buyers set to dominate sales

South Africa has arguably one of the fastest growing middle class population segments in the world, which brings new property buyers into the market every month.

Time to make like China, learn from US successes

Time to make like China, learn from US successes

It’s a short jump from forgetting why the Berlin Wall fell to joining the mob attacking the cornerstones of free market economics. Given its obvious superiority over the alternatives, these attacks are illogical. So I started wondering whether this isn’t some dastardly plot hatched in Washington, designed to throw the rest of us off track. Because, surely, our leaders couldn’t be that dumb?

03 June 2011

Property investment: disproving the conventional wisdom of "high risk, high return"

Property investment: disproving the conventional wisdom of "high risk, high return"

Conventional knowledge dictates that high risk investments will produce high returns, and similarly, low risk investments will yield low returns. Dr Koos du Toit, CEO of P3 Investment Group explains why this adage does not hold true when it comes to buy-to-let property, a low risk investment producing exceptional returns.

Far reaching judgement may cause upsets for property sales

Far reaching judgement may cause upsets for property sales

The Supreme Court of Appeals recently delivered two far-reaching judgments, with detrimental consequences for the taxpayer. The latest case, delivered in May has far reaching consequences for companies wanting to sell unused land.

The first, on 1 December 2010, was the NWK case and the most recent on May 10 2011, was the Founders Hill case. Neither judgment was in the taxpayer's favour, and there is a growing fear that a new trend has started at the Supreme Court of Appeal against the taxpayer. In the NWK case, more than a century worth of good precedent was strangely interpreted to arrive at a judgement against the taxpayer.

02 June 2011

Property deals cannot be exited after offer is accepted

Property deals cannot be exited after offer is accepted

This is an interesting article from Realestateweb and in my opinion highlights why buyers and sellers should consult with their PROPERTY ATTORNEY throughout the process and particularly BEFORE SIGNING ANYTHING!

This will be the biggest financial transaction of their lives and yet people seem to be willing to enter it based upon blind faith. Great for litigation attorneys - not great for anyone else.

There are many honourable and professional people in the real estate game but there are also many "snakes" on the prowl for victims. Find honourable, honest and ethical people. Ask around.

My advice - make sure that you consult with a specialist Property Lawyer throughout the process.

Gareth Shepperson

Taking care of your biggest investment - Wealth Building | Moneyweb

Taking care of your biggest investment - Wealth Building Moneyweb

MOST people consider their residential property to be their biggest asset. This perception was created by the 8-year property boom which came to an end when the Global Recession hit in 2008.

However, the downturn in the residential property market has shattered this myth as property went into a severe downturn. Property can be an expensive mistake, as so many buyers of leisure properties and empty stands can testify. Furthermore, your property is a lifestyle asset. We all need to live somewhere, but will this provide an income for your retirement?

Gareth Shepperson

27 May 2011

Realestateweb - SA RMBS performance remains stable In March 2011 - Moody`s - Investment insights - South Africa's fastest-growing property website

Realestateweb - SA RMBS performance remains stable In March 2011 - Moody`s - Investment insights - South Africa's fastest-growing property website

London, 24 May 2011 -- The performance of the South African residential mortgage-backed securities (RMBS) market remained stable during the six-month period leading to March 2011, according to the latest indices published by Moody's Investors Service.

Gareth Shepperson

25 May 2011

Demand outstrips supply for lower-to-mid priced rentals - Residential

Realestateweb - Demand outstrips supply for lower-to-mid priced rentals - Residential - South Africa's fastest-growing property website

The first quarter of 2011 saw a 25% increase in volume of transactions concluded for rentals in the Cape Town Metropolitan Area, with demand for lower-to-mid priced (R5,000 - R10,000) rentals outstripping supply.

Gareth Shepperson

Regulator moves to shut down estate agency - Property | Moneyweb

Regulator moves to shut down estate agency - Property | Moneyweb

Constantia Sectional Title Management (CSTM) is hours away from having its fidelity fund certificate (FFC) withdrawn by the Estate Agency Affairs Board (EAAB). On Tuesday the EAAB will in an urgent application to the South Gauteng High Court seek to withdraw CSTM’s FFC and have a curator officially appointed to administer its trust account.

Gareth Shepperson

Goodbye dollar - Across the Atlantic | Moneyweb.com

Goodbye dollar - Across the Atlantic | Moneyweb.com

By 2025, the dollar will no longer be the world's dominant reserve currency; instead, global finance will be based on a multipolar system in which the dollar shares the role of top currency dog with the euro and the renminbi.

This is one of the predictions of the World Bank's latest report, Global Development Horizons 2011-Multipolarity: The New Global Economy, which argues that the growing economic importance of emerging markets is reshaping the global system in fundamental and important ways.

Gareth Shepperson

24 May 2011

Property News Gauteng: Selling your home should be "strictly business"

Property News Gauteng: Selling your home should be "strictly business"

More home loans approved

Banks declined fewer home loans in April 2011 compared to the same month in 2010, a bond originator said on Monday. 

"The ability to obtain financing is one of the biggest drivers in the property market, so the consistent improvements are positive for the market," ooba CEO Saul Geffen said in a statement. 

The bank initial decline ratio was 8.7 percent lower year-on-year, at 45.4 percent. 

The bank effective approval ratio for home loans increased significantly from 57.3 percent in April last year to 64.4 percent, ooba found. 

Geffen said the strong April approval rates followed record numbers in March, when the approval figure was the highest value of approved home loans since October 2008. 

The average deposit size as a percentage of the purchase price decreased year-on-year by 39.6 percent to 13.1 percent, or R108,164. 

At the same time, the average approved bond size increased by 3.7 percent to R715,319 in April 2011 from R689,742 in April 2010. 

"The average deposit for April was only 13 percent of purchase price, which is significantly improved from the levels seen in 2009, and this opens up a considerably broader homebuyer base who can now afford the lower deposit requirements," said Geffen. 

The oobarometer price index showed a year-on-year decline in the average purchase price of 6.5 percent to R823,483 in April 2011 from R881,044 a year earlier. 

The average purchase price by a first time buyer fell by a more moderate 0.2 percent year-on-year to R625,252. 

Geffen said the decline in house prices in April pointed to a further period of declining prices, after strong growth in the first half of 2010. 

"We anticipate the negative growth trend will reverse shortly after mid-year and show moderate positive price growth for the second half of the year," he said. - Sapa

Sharemax offers investors a “haircut”

Sharemax investors are being offered the choice between receiving a monthly income for their investment in the company or being repaid part of the money that they have invested in a full and final settlement agreement.

About 40 000 investors have put more than R4,5-billion into the property syndication company. The Sharemax board has proposed that a scheme of arrangement and an offer of compromise is negotiated with investors.

In September last year Sharemax defaulted on monthly interest payment to investors and this led to the company being investigated and statutory managers being appointed to run the scheme which appeared to be operating in contravention of the Banks Act.

Spokesman for the company, Dawie Roodt confirmed that some of the companies in the Sharemax portfolio were "definitely bankrupt" and said that the amount owed to investors by some of the companies exceeded the value of assets owned by the company.

He did not say which of the companies was bankrupt.

He says that the R3,5-billion The Villa shopping centre, south east of Pretoria is one of the developments that is bankrupt and Roodt says that one of the advantages of liquidation of the bankrupt businesses is that certain investigations could be conducted and those at fault identified.

However, he adds that liquidation would not be in the interests of the investors.

He says the new board of Sharemax has been granted permission by the High Court to seek the approval of investors in Zambezi Retail Park and The Villa to outline details of an income plan scheme as part of a scheme of arrangement and offer of compromise. The dates for these meetings have not yet been finalised.

Roodt says that the reason for this is that the board is still considering alternatives that might provide a better solution for the investors but would not say what these alternatives are.

He says that the board wants to give existing investors the option of staying in the syndication and riding out the tough times or getting out of it now and "taking a haircut" – a reference to getting back less money than originally invested.

He says that investors in The Villa will not be repaid the full amount of their investment.

Are banks 'killing' property market?

Has it ever struck you just how many people are property experts when you mention that you are thinking of buying or selling a property?

Paddy Hartdegen writes a regular column for Property24.com

These well-meaning advisers – with opinions that are certainly influenced more by hearsay than knowledge – will say that now is not the time to be involved in the property sector and, as a rule of thumb, they think they're right.

People with a little more knowledge, like estate agents, will say it's an excellent time to buy but, if you want to sell, make sure that you've priced your house correctly, particularly if it falls into the upper price brackets.

Do estate agents give you a true value? Never. They give you a 'gut-instinct' based value that is determined by what you want and what they think they can get. If the house is slow to move, then the price is too high. It's a pathetic basis for determining a true value.

Bankers (responsible for lending the money) often won't say a word – except among friends. And the sad fact of the matter is that bankers are the ones who dictate the state of the property market. If they lend money, sales boom. If they don't sales dwindle.

In years gone by, when the cyclical swings were not as great as they appear to be today, banks would look for value in a property and would grant a bond based on the value that they attributed to it.

You would expect that pattern to be cast in stone and that, today, if you were to go to four different banks, you would get a very similar valuation from all four of them.

And that's where you'd be so wrong. Different banks have different criteria and they use different yardsticks to adjudicate value. Ask for a value from a banker and you'll get four very different ones.

This, naturally enough, makes it incredibly difficult for property owners and for estate agents who, for instance, put in an application for a bond (based on a fair purchase price) to all four of the banks and find that some banks come back and say there is "insufficient value" in the property to the grant the bond amount applied for.

The more expensive the home, the greater variation there is. And much of that valuation process appears to be purely subjective rather than scientific.

Question a bank about the details of why the value is so low and they will come up with all sorts of subjective reasons: "It's not the right property to be buying in this market" or "The property is over-priced for the area" or "The owners have over-capitalised and want too much money" or the "The asking price is simply too high for the home" or, mostly importantly "We won't grant a loan of that size against that property"..

Forget the fact that the buyer has a right to decide what amount he or she is prepared to pay for the property in question. Forget the fact that the bank won't pay a penny of the excessively exorbitant interest rates that are calculated over the next 20 or 25 years. That's the buyer's responsibility.

Just remember banks borrow money from the Reserve Bank at 5,5% and charge the money they've borrowed at prime of 9% so banks make 3,5% gratis before lending a bean. It's iniquitous.

If that's not bad enough then we have the other factor: banks can now stipulate what a house is worth by making a snap, subjective and often unfair value judgment.

I watched one of these valuers at work on the property that I currently rent. He had a measuring tape (on wheels to calculate the perimeter of the house) that he wheeled past the plants (not next to the house) to give him a rough idea of the outer boundary.

Then he walked through the house, taking no more than five minutes to survey the lot. Then he swaggered through to my office demanding that I drop what I'm doing and immediately let him out.

If he was here for five minutes then that was a lot.

I went outside with him and waited next to his run-down white jalopy while he searched for an address in a map book.

After I had spent more time looking at him than he had spent looking at my house, I tapped on his window and said, rather sharply, "Listen, bud, I'm busy so why don't you leave find directions somewhere else rather than just wasting my time."

He drove away mumbling – and I didn't give a fig.

His few minutes here resulted in a decision worth more than a million rand. It's totally absurd and certainly a deeply unprofessional way to determine the value of a property.

His visit was typical of all those others I have experienced when valuators come to value a house. In the course of my lifetime I have bought and sold more than 20 properties and I have never had a different experience from a bank's valuation man.

So I was hardly surprised to read the comments from Ronald Ennik, an executive director of Leapfrog Property Group who says that banks are damaging the property market by continuing to value properties "too conservatively".

He's quite right. I would take it further than Ennik did: I would say that banks are killing the property market and they seem to be doing so with a smile on their corporate faces and it makes me sick.

Apart from making it really hard to qualify for a bond, the banks are now deciding the value of property and what it's worth. How unfair is that?

Homebuyers' dreams are smashed by a cretin who spends less than ten minutes looking at a property. The same cretin who cannot even read directions in a map book.

And the bank he represents accepts his word as gospel – the final say on what a property is worth. It's bizarre.

Surely there must be a less subjective way of determining property values?

Professional land valuers (like my cousin) will tell you that there is a lot more that goes into compiling an accurate and realistic property value than just wandering around with a tape measure and a pair of reasonable eyes.

And it is these professionals that should be doing the valuations for banks and it is their figures that should be the basis for any bond regardless of which bank it is that's granting the money.

Property values must surely be based on measurable criteria and not on value judgments. Value judgments are not a valuation, they're a guess. And I wish that  Standard, Absa, Nedbank and FNB would remember that.

And then stick to lending money based on the risk profile of the individual and not on whether they approve of the purchase he or she is making.

I also wish that Capitec and African Bank (and others) would step into the market and shake it up completely by adopting a more fair and reasonable approach.

Because as things go mortgage-lending banks are just a very motley bunch. 

Property in demand, despite prices

The demand for property in SA belies reports of a "soft" market from First National Bank (FNB) and Absa (ASA), according to Jawitz Properties.

Absa reported that house prices encountered relatively sharper declines on a year-on-year basis in April, while FNB said the April increase in house prices may not be sustainable in the short term.

Jawitz Properties CEO
Herschel Jawitz said: "Demand is measured by show-day attendance, enquiries, buyer appointments and website activity, all of which are still showing better numbers than property price performance would suggest. It's not as if the phone is not ringing."

He added that the underlying activity in the market continued to be resilient, but converting this underlying activity and interest into offers and successful deals was the real challenge.

"When buyers do decide to put in offers, they usually reflect their perception of a buyer's market, and often much work still needs to be done to close the gap between buyer and seller," he said.

Jawitz listed bank lending as another challenge. Statistics such as debt-to-income ratios posed a problem in terms of the recovery of the market. The current measure was at 78%, down from about 84%, and economists were using this as a key measure for bank lending.

"Consumers are indebted, but with consumer spending in the doldrums and interest rates at historic lows, the likelihood of this measure coming down much further is slim."

He said it was likely that the debt-to-income ratio might rise when interest rates started to go up later this year, or in 2012. If banks tightened their lending further, a real recovery in property prices might occur only in 2013. - Moyagabo Maake, I-Net Bridge

23 May 2011

CSTM suspected of “criminal wrongdoing” - EAAB - Special investigations | Moneyweb

CSTM suspected of “criminal wrongdoing” - EAAB - Special investigations | Moneyweb

The offices of Constantia Sectional Title Management (CSTM) in Roodepoort, Johannesburg were again raided on Friday by the Estate Agency Affairs Board’s (EAAB) inspectors assisted by the police. Gareth Shepperson