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.

12 September 2011

Tainted credit records depress property market

Tainted credit records depress property market

Tainted credit records depress property market

More than 8.6 million credit-active consumers with damaged credit records were contributing to the poor performance of the residential property market this year, Jacques du Toit, the senior property analyst at Absa, said yesterday.

Largely because 46 percent of a total of 18.6 million credit-active consumers were in this predicament, in the first quarter, a recovery in house prices which started last year, when house prices rose 7 percent, is rapidly fading. This year prices are rising only about 1 percent year on year, according to Absa, based on mortgage loan applications approved by the bank. And in real terms - with inflation stripped out - prices are falling.

So far this year, prices of small houses had fallen 6.6 percent in real terms, medium-sized houses 3.6 percent and large houses 2.5 percent, Du Toit said.

A similar trend in residential property was noted by Standard Bank on Wednesday.

Research analyst Sibusiso Gumbi said median house prices rose 1.6 percent year on year last month, down from year-on-year growth of 2.4 percent in July. In real terms, prices "are in negative territory", Gumbi said.

Nominal house price growth reached a peak of 32.2 percent in 2004, according to Du Toit. Growth subsided to 4 percent in 2008, as the economy moved towards a recession. Prices fell 0.2 percent the following year.

The property market globally has been weak since the financial crisis of 2007/08 and the recession of 2008/09. Bloomberg reported yesterday that British house prices were 2.6 percent lower in the three months to August compared with a year earlier. UK house prices rose 147 percent, on average, between 2000 and the market's peak in October 2007.

"That was 11 times faster than consumer-price inflation of 13.2 percent. Values then slumped 21 percent through February 2009, though they've since increased 12 percent," Bloomberg said.

FNB home loans strategist John Loos said, in the US, the Case Shiller house price index revealed a year-on-year decline of 4.6 percent in June.

On the domestic front, Absa's house price index showed that, in the case of large houses, the market has taken a turn for the worse.

In nominal terms, the index for houses between 221m2 and 400m2, has fallen steadily each month from 407.6 points in March to 395.6 last month.

The indices for medium and small houses have moved up in the period. Medium-sized house are between 141m2 and 220m2, while small houses are between 80m2 and 140m2.

Du Toit said nominal house price growth would be "well within single digits for the full year, while in real terms prices are expected to decline in the face of rising consumer inflation". Inflation is expected to breach the ceiling of the Reserve Bank's 3 percent to 6 percent target range. Gumbi forecast nominal price growth in "low single digits".

Home loans up as banks relax lending rules

Home loans up as banks relax lending rules

Home loans up as banks relax lending rules

At the height of the property boom in 2006, South Africa's four major banks were approving an average of more than 30 000 new home loans every quarter.

During 2009 this number had dropped to well below 8 000 as banks tightened lending criteria considerably in response to the global financial crisis, as well as factors such as interest rate increases, high household debt ratios and the effect of the National Credit Act.

However, with sharp cuts in the repo rate over the past couple of years, the prime lending rate has dropped to below its 2006 level and, according to Lightstone property analysts, all indications are that banks have been slowly relaxing their lending criteria again. The result is that the number of new home loans approved is on an upward trend again, having increased by 10 percent since 2009.

Lightstone recently completed a study of the number of home loans approved per quarter and loan-tovalue ratios of the four major banks - Absa, Standard Bank, FNB and Nedbank - from 2006 to the first quarter of 2011, to assess whether the strict lending criteria applied over the past few years since the economic crisis have eased.

"There is a slow and cautious recovery and there has been a slight drop in the first quarter of 2011, with fears of a double dip recession being mooted. But an upward trend in new lending for the residential market indicates that banks are developing more of a desire for risk," says Lightstone property analyst Hayley Ivins.

"Boosting indications that lending criteria have relaxed is the fact the loan-to-value (LTV) ratios are on a similar upward trend. After dropping from an average for all banks and all market segments of almost 90 percent in 2006 to just 79 percent in 2009, they have climbed back up to an average of 82 percent since the first quarter of 2010."

She says there is a significant difference in LTVs, however, once these are assessed in terms of market segment. Poorer households are accessing home loans of over 90 percent LTV whereas the LTVs for the comfortably off and super-wealthy are around 80 percent and 75 percent respectively.

"A number of factors account for this trend. The first is affordability - it is often simply the case that comfortable and wealthier buyers have cash to put down deposits and have often sold previous homes at a profit, whereas those buying in poorer areas may not have savings or the profits from the sale of a home to invest.

"However, it should also be considered that much of the bad debt on the banks' books after the downturn in property values and rising interest rates caused many homeowners to default, came from the wealthier sector and higher-priced homes. Also, there has been pressure on the banks to contribute towards South Africa's low-cost housing backlog by making home loans more accessible to lower income earners.

"There has been comment from the property sector that the strict lending criteria are a major factor constraining house price growth, and that in light of low interest rates this approach may be too conservative - creating something of a buyer's market," says Ivins.

However, she says, there is clearly light at the end of the tunnel.

"Interest rates are low, home loan accounts are performing better and lending criteria should become more lenient, which should stimulate prices and demand as household debt comes under control and banks resolve the distressed property sales and properties in possession still on their books."

Plan for property taxes along corridors like Gautrain

Plan for property taxes along corridors like Gautrain : Property News from IOLProperty

Plan for property taxes along corridors like Gautrain

Owners of land along public infrastructure corridors like the Gautrain could be slapped with additional taxes as municipalities seek to augment thier revenues to close the widening gap between their expenditure needs and available funds.

Mayur Maganlal, the excecutive director for economic development and planning at the SA Local Government Association (Salga), said last week a possible source of additional revenue could be a tax on land along public infrastructure corridors like the Gautrain. Land values on these corridors typically arise as a result of the investment in infrastructure.

The Gautrain has also spurred a number of commercial and residential property developments around its station nodes. Areas around Gautrain stations, including Rosebank, Sandton, Hatfield, Marlboro and Rhodesfield, have commercial and residential property developments under way or being planned.

Gover nments around the world have been using various mechanisms for capturing a share of the rise in land values as a result of the public infrastructure investments.

"Many planners and economists, including Nobel laureate William Vickrey, suggest that cities could benefit by funding transit system development costs and a major portion of operating costs from land value capture, that is, by taxing a portion of the additional value of adjacent properties that result from transit accessibility," says a study by the Victoria Transport Policy Institute, a Canadian transport research outfit.

Vickrey was a Canadian economist who was the joint winner of the Nobel prize for economics in 1996.

Property economist Francois Viruly said some cities had played the property market very well by taking advantage of increases in the price of properties in and around mass transit transport systems and using the proceeds to pay for the cost of building those systems. The big debate locally was whether municipalities had developed masterplans for the Gautrain stations, he said.

It emerged during the Salga conference that municipalities were working on a tax on businesses that could raise as much as R19 billion annually.

Development charges, another source of additional revenues, are levies that are imposed on developers of new or existing properties.

"Municipalities currently significantly under-recover revenues from development charges," says Salga.

"This is increasingly problematic as the revenue foregone limits the ability of municipalities to invest in the expansion of infrastructure that supports economic growth and poverty reduction," says Salga.

08 September 2011

Nedbank backs inner city development

Nedbank backs inner city development

Nedbank Corporate Property Finance has again thrown its weight behind urban renewal and the revitalisation of the inner city by backing another development in the CBD of Johannesburg, the powerhouse of Africa.

In a R41 million finance deal, Nedbank has backed the redevelopment of the existing nine-storey building at 16 Frederick Street in Marshalltown into a modern residential apartment building. Once completed, the property will boast a total GLA of 4 503m2, consisting of 138 residential units, including 68 studio units, 48 one-bedroom units, 17 two-bedroom units and five duplexes, as well as 300m2 of retail space on the ground floor and 36 parking bays in the basement.

A sales agreement has already been concluded with Diluculo Investments (Pty) Ltd for the purchase of the building based on the rental return calculation, on completion of the refurbishment. The deal forms part of Diluculo’s long-term strategy to acquire residential units specifically in the affordable housing rental market.

The development of 16 Frederick Street is being undertaken by Lemay Properties (Pty) Ltd, which fulfils the role of developer, and Lemay Construction (Pty) Ltd as the main turnkey contractor.

This is the second finance partnership Nedbank Corporate Property Finance has entered into with the Lemay Group, reaffirming Nedbank Corporate Property Finance’s approach of working closely with clients to provide financial solutions that anticipate and fulfil the requirement for growth and expansion. Last year, Nedbank Corporate Property Finance provided finance for the R100 million redevelopment of an office building situated at 29 Kerk Street in the Johannesburg CBD, also for sale to Diluculo on completion of the refurbishment, which was completed in an impressive five month contract period without sacrificing quality.

“Nedbank Corporate Property Finance is pleased to participate in the exciting urban renewal taking place in inner city Johannesburg, the powerhouse of Africa,” says Ken Reynolds, Nedbank Corporate Property Finance divisional executive for Gauteng. “The nine-storey building is well-located in the heart of the CBD, on the corner of Frederick and Sauer Streets, directly opposite the Standard Bank superblock. It offers easy and convenient accessibility to various transportation nodes, including the Metro Taxi rank and Ghandi Square Bus Terminal.

The project falls within the Urban Development Zone of the Johannesburg CBD, the focus point of the inner city development programme aimed at converting old, derelict office buildings into good quality residential developments. The surrounding buildings are in impeccable condition, and this building is, in fact, the only one available in this node for a full refurbishment for an ‘A’ grade tenant. Demand for residential accommodation in the area is strong in light of the ongoing shift of young professionals from outlying regions into the CBD to benefit from living close to work, educational institutions, transport and amenities. All these factors ensure that this is yet another successful inner city project backed by Nedbank Corporate Property Finance,” concludes Reynolds.

Lemay Construction was established in 2009 to initiate the shareholders’ own opportunities in property development as well as to source construction work through the tender market. Lemay Properties was established shortly after to complement the construction division with the sourcing of development opportunities and the management of acquisitions and properties.

Although recently established, the directors and management team at Lemay have a combined experience exceeding 60 years in the construction and property development industry, specifically in urban renewal projects.

In addition to Lemay acting as project managers, quantity surveyors, main contractors and developers, the professional team for this development includes Interspace Architects; Lidwala Consulting Engineers; Stander Associates acting as the structural engineers and Bergman Fisher Associates (BFA) as the electrical engineers.

06 September 2011

Investec Property Fund to expand property portfolio

Investec Property Fund to expand property portfolio

Proposes R185m acquisition of two prime commercial properties in Gauteng.
Investec Property Fund Limited (“The Fund”), Investec’s recently launched listed property vehicle announces its intention to acquire two new properties as it grows its portfolio of quality South African real estate. This proposed transaction marks the Fund’s first acquisition since listing in April this year. The total value of the transaction will be R185 million, which will be paid in cash and funded initially by way of a bridging loan facility provided by Investec Bank.

Commenting on the news, Sam Leon, Chief Executive Officer of The Fund said: “As the first acquisition for the Fund, these are two attractive properties, in prime locations with strong tenants, which we believe offer good value at an attractive yield, which will enhance the earnings and growth prospects of the Fund.”

The properties are both located in Gauteng, in strong commercial areas. The first, The Innovation Building, is located in Randburg, and following a recent refurbishment provides 15,000 square metres of quality office accommodation, including parking and storage. It is situated on Bram Fischer Drive, one of the main arteries of the Randburg CBD, in easy reach of the highways and is a landmark building in the area. A ten year lease has been concluded with a tenant.

The second property is the 5,733 square metre Scientific Building, part of the new Cosmo Business Park, just north of the Kya Sands industrial node, with direct access to Malibongwe Drive and in close proximity to Lanseria Airport. The building is home to the Scientific Group who have signed a seven year, triple net lease.

An independent valuation performed on the properties provided a valuation of R194.5 million which is above the purchase consideration. In terms of the unaudited forecast financial performance of the properties over the next 18 months the directors are confident that the proposed transaction will increase the distributions to be paid to the linked unit holders of the Fund.

Sam Leon added: “The Fund was established with the purpose of investing in direct real estate where there is potential for income generation and capital growth. These properties fulfill our acquisition criteria with quality tenants in place and will enhance the distribution prospects of the Fund going forward.”

The acquisition is subject to the approval of the unit holders of the Fund and this will be sought at a general meeting.

05 September 2011

End of the road for disastrous luxury North West development (Platinum Planet)

End of the road for disastrous luxury North West "Metsi Pepa" development

Only a portion of investors in the controversial and now defunct luxury Metsi Pepa development in the North West province can expect to get a percentage of their money back, depending on who they paid their hard earned cash to.

As recently as July 13 2011, developers Nicola and Jaco Prinsloo promised investors that the project was on track and that the development would be completed towards the end of the year.

But, last week Nicola Prinsloo and her attorney Johan Botha confirmed to Moneyweb that the land had been sold to government for less than 30% of its commercial value. A settlement was reached with the Department of Rural Development after protracted negotiations. Botha says investors who paid deposits or full amounts when the development was first sold in 2007 will be able to apply for compensation, with conditions, and this is where the waters become muddied. More than 200 people invested their money in this development.

Prinsloo says only investors who paid monies directly to Metsi Pepa’s nominated lawyers and auditors will qualify to apply for compensation. Those who paid the marketing company Platinum Planet at the time will unfortunately not. Botha says it has emerged that several individuals had paid their deposits or full amounts to Platinum Planet headed by Cherie Eilertsen whom some have described as the “evangelist” of property.

In the past year, Moneyweb has been inundated with complaints over Eilertsten’s hard-hitting direct marketing strategies which have left people out of pocket and in some instances bankrupt.

Several attempts have been made to reach Eilertsen to ascertain what has happened to the deposits and other revenue paid to her, but she has not responded.

The Metsi Pepa development, situated between Potchefstroom and Carletonville, has been dogged by controversy since its inception and if that wasn’t enough it was recently burnt down in a spate of fires in the North West province. In fact, it’s been alleged that the fire originated on Metsi Pepa, destroying 6 000 hectares of farmland and killing scores of small wild animals on the property. It’s been alleged that Eskom workers were accidently responsible for the blaze.

Surrounding farmers also suffered damages running into millions. It’s understood the farm had already been sold at the time of the catastrophe which happened towards the end of August 2011.

Young property buyers make a comeback

Young property buyers are reportedly making a comeback and supporting the residential property market in South Africa thanks to improved market conditions.

According to the FNB Property Barometer First Time and Age Group Property Buying Q2 2011, an estimated 25 percent of buyers were first-time buyers. This is up from 22 percent in Q1 2011 and higher than the low of 12 percent reached in Q3 2008 as the recession hit.

FNB Home Loans property strategist, John Loos, says this reflects improvement in the property market since the 2008 recession and the peak in interest rates.

“The percentage of young buyers would also suggest an environment still far more benign than early last decade where the 20 and the under age group reached a 20.6 percent peak in 2001,” says Loos.
He explains that since 2009, there has been evidence of something of a young buyer comeback both in the FNB Estate Agent Survey and the Deeds Office data for property purchases by individuals.
Long before tightened credit requirements in 2008, younger buyers started to decline in significance due to sharply rising house prices, which gave rise to an affordability issue.

Estate agents, according to the FNB Property surveys started to report a decline in the percentage of first-time buyers in 2006 while the Deeds Office data reported that the 30 and under age group peaked as a percentage of total buyers as early as 2001.

The Deeds Office data indicates that since early 2010 the younger age groups have been playing a more prominent role in supporting home buying demand. From a low of 15.1 percent as at the Q3 2009, the fourth quarter moving average percentage of “age 30 and below” buyers rose to 16.9 percent as at the Q2 2010. The 31 to 40 year age group’s percentage rose from 29.6 percent to 31.1 percent of total buying.
“Trends in buyer age groups can be an important indicator of the economic and interest rate environment.”
Younger buyers in their 20s and even some in their 30s have more flexibility. Often having not yet established a family, they have basic residential needs. They can opt to stay with their parents for longer or rent.
“Young aspirant buyers have accumulated fewer saving and are more sensitive to deposit requirements by banks and house price fluctuations,” says Loos.

He says there is a high degree of cyclicality in first-time or in younger age group home buying in general. These groups stay out of the market in greater numbers than their older counterparts and enter at a more rapid rate off a low base once conditions turn for the better.

The 61 year old and older age group is the least cyclical, being far less dependent on credit and having more wealth in store to weather the storms. This group saw its percentage of total buying rise sharply through the 2008 recession as younger age groups felt the pinch and pulled back, peaking at 13.56 percent for the four quarters to Q3 2009.

Loos says the 61 and older age group never reached the same high percentage of total buying that it did in 1998 (16.3 percent for the four quarters of that year).
That was the year that interest rates spiked to 25.5 percent prime. It was admittedly short-lived, and interest rates fell dramatically soon thereafter.

He adds that the composition of age group buying is an important indicator of the general environment, which includes economic growth, interest rates, inflation, bank lending criteria and home affordability.

Right now, we’re somewhere “midway between great and bad”, with young buyers having increased in prominence since 2008, but not having reached the same high percentages of the boom years. The less cyclical over 60s have declined in prominence, as they do in better times, but at 11.75 percent of total buying they are not yet near the low of 9 percent of total buying reached in 2006.

FNB house price index up 6%

FNB house price index up 6%

FNB house price index up 6%

August FNB House price numbers are providing a mixed picture for the residential property sector according to John Loos, property market strategist at FNB Home Loans.

In year-on-year (y/y) terms, the FNB House Price Index growth rate continued to accelerate, he said; the index rose by 6.1% y/y in August. This represented an increase on the revised growth rate of 4.8% for July and a reflection, with a lag, of the mild resurgence in demand in the summer of 2010/11.

Loos said that in real terms, adjusted for CPI inflation, the y/y percentage change for July was still mildly negative to the tune of -0.5%, given that CPI inflation in July was 5.3% and the revised nominal house price growth rate for that month was 4.8%. Given the further acceleration in nominal house price growth in August, it was quite possible that last month would show the first positive real y/y house price growth since October last year.

He said that on the other hand, while the seasonally-adjusted month-on-month growth rate continued to point to still-positive growth, it also indicated a slowing in growth momentum. This arguably reflected some weakening demand, more recently during the winter months, not only as a result of seasonal factors but also due to no further interest rate cuts in 2011 as well as slowing economic growth (and likely household income growth too). Simultaneously, FNB's valuers continue to suggest a deteriorating balance between supply and demand.

Despite the recent rise in y/y house-price growth, FNB's expectations remained modest against a backdrop of slowing economic growth with a not-insignificant risk of global and local recession according to Loos. In addition, monetary policy was not as relaxed as it seemed when examined in real terms. Real interest rates, by both of FNB's measures, have been declining in recent months.

Loos explained that without much economic or interest rate stimulus, FNB's valuers implicitly suggested that there should be further market correction to come. Whether that correction was in nominal or real terms, though, for the time being the FNB valuers' impressions of the market imbalance, coupled to the FNB Estate Agent Surveys of recent quarters, which estimated the average time of homes on the market to be near to a lengthy four months, suggested that this recent surge in y/y house price growth was not yet the start of a sustained longer term accelerating trend.

02 September 2011

Banks prefer to bond wealthy properties

Banks prefer to bond wealthy properties

The proportion of bonded property showed an increase within the wealthy and affordable price segments from 2006 to 2010.
A recent study conducted by property analysts Lightstone indicates that South African banks prefer to bond high-priced property worth R1.5m or more, as buyers of these properties are considered less risky and more -likely to pay their bond repayments.

The proportion of bonded property showed a general increase within the wealthy and affordable price segments from 2006 to 2010, and this decreased proportionally for the comfortable price segment - even though the majority of properties sold in South Africa fall within this bracket.

Property market needs stimulation

Property experts reckon a cut in the interest rate by the Reserve Bank would be a positive move for the South African property market.

However, it is unlikely to change the pedestrian rate at which property prices are increasing, says Herschel Jawitz, chief executive officer of Jawitz Properties.

“It will certainly give consumers more confidence in the economy and ease their financial situations. “There is no doubt that there is a strong relationship between consumer confidence and the demand for property,” says Jawitz.

He says at the moment, buyers are under pressure and are cautious about putting pen to paper when it comes to making offers. As a result, he feels an interest rate cut would add some impetus to the market and at least hold property prices in positive nominal gain territory.

Homeowners still under pressure to keep their homes would welcome a cut in rates and give them a chance to catch up or remain current on their repayments.

The fewer distressed sellers and repossessed homes on the market, the better for property prices, buyers, sellers, estate agents and the banks. Should rates remain the same, the residential market will continue to recover slowly, he says.

“Real price gains are still some way away but prices are increasing and the market is currently offering good value at historically low rates,” says Jawitz.

Meanwhile, Pam Golding Properties (PGP) believes that although the activity levels have increased since the beginning of 2011, the residential property market is still currently experiencing considerable pent-up demand from home buyers.

This, reckons PGP, is largely due to the fact that the ability of buyers to purchase either for cash or with a low deposit is limited.

Dr Andrew Golding, chief executive officer of PGP says there is significant number of would-be buyers who cannot access finance.

“Although interest rates are low currently, the reality is that the market has flattened again and in order to stimulate greater impetus in the primary housing market, a relaxation of the stringent bank lending criteria would be welcome,” says Golding.

He explains that the desire or demand to buy is there, whether it is for the first-time, upgrade, downsize or simply relocate. In the leisure or second home market, there are price reductions and opportunities for buyers taking a longer term view of the market and their investment.

In some instances, he says, sales are being concluded to buyers seeking leisure property and have means to acquire prime coastal investment properties at premium prices without pressure to source rental income from the property when not utilised.

“Despite the fact that the South African housing market remains muted, it continues to demonstrate resilience in the face of global economic concerns,” adds Golding.

Absa lends up to 100 percent home loan

Absa says it is still giving 100 percent loan-to-value to would-be home buyers even in this market but only if they qualify.

According to Sifiso Shongwe, managing executive of Absa Home Loans, loans are being granted across the board to applicants who qualify - meaning they have a good credit rating.

“Since the National Credit Act came into effect, the dynamics have changed and as banks, we have to exercise responsible lending,” says Shongwe.

He says as a bank, they have a target they would like to reach in terms of ensuring South Africans access finance to buy homes. Without giving any figures, he says they have not surpassed that target as yet.

“The focus of demand for and supply of housing is set to be on smaller-sized and higher-density housing because affordability is set to remain a key factor into the future,” he says.

Shongwe says in the current economy, owning a house has become beyond the reach of many South Africans and innovative products both in physical housing and in financing are required to reduce the housing backlog.

He explains that they are seeing growth in the affordable market where people are buying much smaller houses. Banks, he says, are still in the business of lending and are still lending up to 100 percent loans to property buyers if they meet the required criteria.

Young Carr, chief executive officer of the Aida Property Group, says the first thing banks will do on receiving a home loan application is to check the borrower’s credit history.

Good management of monthly bills, including any clothing or furniture accounts and credit card payments is critical even for young people who have no immediate plans to buy a home, says Carr.

“Getting an early start on building a good credit record in this way also means that if there are any minor misjudgments early in a working career, they will most probably be outweighed by a longer period of good credit management when the time does come to buy a home.”

Carr says potential borrowers need to pay attention to the implications of the National Credit Act, which provides that lenders must ensure, before they grant any new credit, that borrowers will not be committing too much of their income to debt repayment.

They do this by compiling a complete debt profile including all other repayments the consumer has to make as well as regular monthly expenditure on items such as transport, food and school fees before they can approve a home loan, he says.

01 September 2011

Estate agents' board readies to go belly up : Property News from IOLProperty

Estate agents' board readies to go belly up : Property News from IOLProperty

The Estate Agency Affairs Board appears to be imploding, with two senior members suspended, nasty, mass e-mails being sent and accusations of fraud and corruption flying around.

Liberty plans 60 floor Sandton office tower

Liberty plans 60 floor Sandton office tower

Liberty Properties, owned by insurer Liberty Group, is planning a 60-storey plus office Tower in Sandton City following its over a billion rand upgrade of the precinct, but says it does not expect work to start before 2013 as tenants need to get a breather from construction.

Sandton City generates income of R600m on an annual basis from the complex and office space. Liberty Properties owns 75% of Sandton City and is the largest single asset within the property portfolio, which consists of 33 properties

“What we are doing at the moment is phase one. What we will probably have is a three phase master plan. There are plans which have to be approved by the board ... The plan is to do another phase which will include office space. The real work I would not see it starting before 2013. We need to give the centre some time to breathe,” Ogbu said.

Currently Sandton City is undergoing a facelift, scheduled to be ready by November 10 this year. With the new extension, the over three decades old Sandton City will add just over 30 000 square meters with new space for 72 tenants. The mall is expected to boast two new restaurants that will give patrons a close view of the traffic flowing on Rivonia Road.

The new space is also expected to host Spanish fashion retailer Zara and among other a big flagship store of @Home. Woolworths will also have a separate store for its Trenery and Country Road brands. Sandton City centre manager Sharon Swain said there is going to be a bit of a shift in tenancy and the plan is to host high end stores in one area.

Over the last three years Liberty Properties’ spent over R3bn upgrading Sandton City, Eastgate Mall and Mitchell Plain. Ogbu says despite the extensions the company still has a lot of demand that it can’t meet. Its vacancies across the portfolio are around 5%.Ogbu says the unit has been doing well delivering inflation beating returns.

Asked about risk of over investing Ogbu said its properties were managed conservatively and construction happened only when there was a certain level of pre-letting. Liberty Properties is also working on a $165m development in Lusaka and R300m office facility in Swaziland. It also has projects in the pipeline in Nigeria.

“We have built a strong portfolio and we have very good assets . We can look forward to solid growth going forward ... The intention is not just to grow assets but to build a strong stable business,” Ogbu added.

He said there was no appetite to list its property portfolio at the moment.

31 August 2011

Offices stand empty

Offices stand empty

In my previous posting, I highlighted Liberty's new Sandton property. If you go back through my postings you will see news about several of South Africa's biggest companies (e.g. Old Mutual, Standard Bank and others) building massive new office blocks in Sandton.

This is in addition to the major corporations that have already moved there, including the Johannesburg Stock Exchange.

This report deals with vacancies in the Johannesburg CBD. The trend is clear but is it reversable?

Gareth Shepperson

Special Report Podcast: Mel Urdang - director: retail, Liberty Properties - Boardroom Talk with Alec Hogg | Moneyweb

Special Report Podcast: Mel Urdang - director: retail, Liberty Properties - Boardroom Talk with Alec Hogg Moneyweb

Liberty’s R1.7bn Sandton City investment and property shares to invest in.

29 August 2011

ConCourt dismisses bid on compensation

ConCourt dismisses bid on compensation

The Constitutional Court did not agree with a KwaZulu-Natal family trust that the amount and time of compensation must be settled before their land was expropriated, in a judgment handed down in Johannesburg on Thursday.

The matter related to properties along the Umgeni River which flows through parts of Durban.

When notice of expropriation in order to canalise the river was received in 2004, Mohammed Yusuf Haffajee and others did not formally object.

They were willing to vacate the property but wanted to enter into a private treaty.

The expropriation date was set by the municipality for July 31 2005 without an agreement on compensation having been reached.

The eThekwini municipality had tendered a compensation amount but it was rejected.

The city believed that compensation and expropriation were separate, and that a disagreement on compensation did not invalidate expropriation.

The applicants insisted that expropriation could not take place until the amount of compensation had been determined.

An eviction order against them was granted by the High Court in Durban and the land owners appealed this on the grounds that expropriation before settling the compensation issue was unconstitutional.

They believed that under the property clause in Section 25 of the Constitution, determining the amount and time of the compensation was a prerequisite.

Leave to appeal was refused in the High Court and the Supreme Court of Appeal.

They then applied for leave to appeal at the Constitutional Court, but the court found that although there would be times where it would be unjust to evict people before determining compensation, like cases where people could lose their livelihood or homes, there were also cases where this would not be possible.

Urgent evacuation ahead of natural disasters would be an example.

An inflexible requirement for compensation before expropriation would therefore be against Section 25(3) of the Constitution that the amount and time of compensation must be a balance between the public interest and the interests of those affected by expropriation.

Therefore, Section 25(2) of the Constitution did not require that the amount and time of compensation and payment must always be determined before expropriation.

The court said this determination would generally be just and equitable, but where it had to be done after expropriation, it should be done as soon as was reasonably possible.

Eviction following expropriation cannot take place without agreement between the parties, the judges continued, and if there is no agreement, then this must be done under court supervision.

In disputed cases of eviction, the courts must ensure a just and equitable outcome in line with Section 26, which protects the right of access to housing.

The court allowed the application for leave to appeal, but the appeal itself was dismissed with each party ordered to pay their own costs.

Questions to ask when buying into a sectional title scheme - Property | Moneyweb

Questions to ask when buying into a sectional title scheme - Property Moneyweb

25 August 2011

R580m inner-city property development for Cape Town

R580m inner-city property development for Cape Town

A massive R580 million development, including flats, parking and retail space within walking distance of Parliament, is set to change the face of the Cape Town city centre.

Investment and property development company Eurocape's plans for the first phase include 9 900m² of retail space and parking.

The development, in Roeland Street and sections of Hope Street, includes the building housing Equal Education's Bookery and may have a supermarket as an anchor tenant.

This is the latest in a series of major city centre developments and comes as the national Department of Public Works is demolishing eight buildings in the vicinity of Parliament to create short-term parking for parliamentary staff.

The first phase would cost more than R216m, including the land, and the cost of all phases would be R580m, said Simphiwe Mathebula, Eurocape's sales and marketing manager.

Plans for phase one were at an advanced stage and planning approvals were in place, he said.

"Tenants for more than 40 percent of the retail space have been secured. As soon as the balance has been secured, ground breaking will commence."

Phase two would include 100 flats for "young city workers" while the third phase could include more flats or offices.

The development was expected to be completed in 2013.

Public Works spokesman Thami Mchunu said the eight buildings around Parliament, which are being demolished at a cost of R11m, would be replaced by surface parking for parliamentary staff in the short term.

In the long term it would be an extension to the parliamentary precinct which could include offices.

In 2009 it was reported that housing for MPs also formed part of Eurocape's plans.

Mathebula said this might be included in phase three.

Plans for MP accommodation in the precinct depended on funding and approvals, said Mchunu.

Demolition was expected to be completed in November.

The Cape Argus recently reported that a 32-storey skyscraper, which would be the city's tallest, was also expected to be completed by the end of 2013, and would accommodate about 3 000 people.

The R1.6 billion Portside building will be between Buitengracht, Hans Strijdom Avenue and Bree and Mechau streets.

It is the biggest commercial building project in the city since Safmarine House was built in 1993.

Michael Bagraim, president of the Cape Chamber of Commerce and Industry, said the Eurocape and Portside developments showed "people have faith in the economy. Our city is making a comeback".

In April the Weekend Argus reported there were plans for the regeneration of six city precincts.

Public Works and Transport MEC Robin Carlisle said at the time these were the Artscape, Somerset, Prestwich Street, Government and Garage precincts and the area around Oude Molen, which would be named the Two Rivers Urban Park.

The Artscape Precinct would involve the expansion of the Cape Town International Convention Centre and the area around the theatre, and raising the Artscape Garden to freeway level, allowing for parking underneath.

The R4.5bn project would turn the area into a 24-hour entertainment zone, with coffee shops and about 30 000m 2 of retail space.

Plans for the Somerset Precinct, around Somerset Hospital, have not yet been finalised.

The plan for the Prestwich Street Precinct was to link the city with the V&A Waterfront via a pedestrian route similar to the fan mile between the CBD and Green Point for the Soccer World Cup.

The Government Precinct would centre on provincial government-owned buildings such as those in Dorp Street and the provincial administration building in Wale Street. Changes would include one main entrance to government buildings beneath the arches in Keerom Street, while a high-rise is to be built on the corner of Loop and Leeuwen streets to house government departments.

The Government Precinct comprises land in the Buitenkant, Mill, Hope and Roeland street areas. The government garage will move to the old abattoir site at Maitland, along with the ambulance depot, freeing up valuable land. Entrylevel housing is part of the plan.

The urban park around Oude Molen and the Valkenberg psychiatric hospital will be the base for a hi-tech medical park.

Allan Gray to relocate HQ to V&A Waterfront

Allan Gray to relocate HQ to V&A Waterfront

JSE-listed Growthpoint says it has committed R684m for a new development on the landmark V&A Waterfront with investment management firm, Allan Gray, as an anchor tenant.

In June 2011 the company took transfer of 50% of the Waterfront in Cape Town in a R4.9bn deal which has been described as one of the country’s largest property transactions yet. The Allan Gray headquarters will fall within the Clock Tower/Silo Square precinct and is expected to be ready for occupation in April 2013. A development blueprint is in the process of being put together with work scheduled to begin In September 2011. A retail component is on spec to cater for the Allan Gray staff.

CEO Nortbert Sasse says the property company’s long-term expectations for the V&A are for superior returns generated by completing all development opportunities. He also mentioned that the debt-funded Waterfront transaction took Growthpoint’s borrowings from R9.3bn to R14.3bn, increasing the company’s loan-to-value ratio from 29.9% to 37.8%. Growthpoint has a portfolio of 424 directly owned properties in South Africa valued at R32.5bn, it also owns 37 properties in Australia valued at R6.4bn and bought the V&A at a cost of R4.9bn.

In its annual results presentation, the property giant said it had posted an 8.1% rise in distributions to 131c per linked investment unit in the year ended June, compared with the previous financial year. Growthpoint Properties says given the global and economic uncertainties, higher interest margins on debt refinance and other pressures, it expects to show positive growth in distribution of between 3% and 7% in the next financial year.

CEO Norbert Sasse has attributed its performance to aggressive property management, vigilant control of arrears, fortified portfolio occupancy levels and the distribution enhancing performance of Growthpoint Properties Australia (GOZ) in which Growthpoint has a 61% holding.

With regards to its investment in Australia, Sasse says the venture continues to perform positively with the strong Australian dollar providing an additional boost to the company’s distributions. Its total return over the past year has amounted to 28.6% made up of an income return of 11.4% and a capital return of 17.2%. GOZ has acquired 15 properties during the year, bringing its total number of properties to 37 across Australia and increasing the value of the GOZ portfolio to just more than Aus$1bn. The portfolio there has gone from purely industrial properties to include a 28% spread of offices at year end.

Sasse says at a level of 7.4%, tenant arrears as a percentage of total monthly collectables have been successfully cut by Growthpoint to levels prior to the 2008/2009 global financial crisis. He added the company’s portfolio occupancy had strengthened during the year, with the overall vacancy level coming down from 6.4% to 5%. “The successful cutbacks in vacancies has been balanced against lacklustre demand, particularly for office space, in the context of a gruelling economic climate with low GDP growth and increasing unemployment figures,” Sasse said. He added that clients were generally seeking shorter leases, reflecting uncertainty on the outlook of the South African and global economies.

Bonitas curators to auction scheme`s `investment` properties

Bonitas curators to auction scheme`s `investment` properties

24 August 2011

'Time to stop bad-mouthing the property market'

'Time to stop bad-mouthing the property market'

'Time to stop bad-mouthing the property market'

"Ongoing - and mostly unfounded - pessimism in the residential property market is threatening to become self-fulfilling prophecy."

So says Berry Everitt, MD of the Chas Everitt International property group, who notes: "The truth is that there are a great many positive indicators for property at the moment, and our industry as well as the banks and the economists should be doing more to reinforce and underline these in order to strengthen the recovery."

Writing in the Property Signposts newsletter, he says: "The truth is that home prices are rising again and while the average increase may not yet match inflation, more activity in the market and more sales will take care of that.

"What is more, it is important to communicate the fact that those who buy now before prices really start escalating are making a good move, for two reasons, the first being that they are getting more house for their money and the second that they are putting themselves in a position to make greater returns on their investments than if they wait until later in the property cycle to buy.

"Just ask anyone who bought in 2004 at the beginning of the last property boom, instead of waiting until 2007, when prices - and thus the costs of entering the market - were already sky-high."

Meanwhile, Everitt says, he is encouraged by the fact that sales volumes in most of his group's offices are substantially up on this time last year - and that the average time it is taking them to sell a well-priced home is down to around 10 to 12 weeks, a far cry from the average 20 to 24 weeks two years ago.

"To a large extent, this is because prospective buyers are generally in much better financial shape than they were two years ago, and thus better qualified to obtain home loans. Many debt defaults have been addressed and sorted out, household income levels are up and the average debt-to-income ratio has dropped below 77%, it's lowest level since the end of 2006."

And perhaps in recognition of this, he says, the banks have definitely been granting more loan approvals for the past few months.

"Consequently, I really think it is time now to let the August winds blow away any negativity, stop sitting on the fence and get involved in the market with a positive attitude. We have it in our power to create our own 'happy ending' instead of allowing the doomsayers to talk us into disaster."

23 August 2011

Property News Gauteng: Increasing number of young expats returning to SA

Property News Gauteng: Increasing number of young expats returning to SA: Extreme weather conditions and geological events in many parts of the world this year, as well as prolonged political protests, huge financi...

22 August 2011

Residential fixed investment hit by the lagged impact of the recession

Residential fixed investment hit by the lagged impact of the recession

The FNB Estate Agent Survey provides evidence to this effect.

Residential fixed investment has been hard hit in recent years by the lagged impact of the 2008 recession and residential property market slowdown, which in turn was caused by a global recession along with significant interest rate hiking from 2006 to 2008.

The decline in overall residential fixed investment started back in 2007, and has continued unabated up until early in 2011, according to the Reserve Bank’s (SARB) data. It is not only new building activity that has suffered but the additions and alterations market too, and sometimes even home maintenance has fallen short.

The FNB Estate Agent Survey provides evidence to this effect. The sample of agents has been of the opinion that, since the start of the survey back in 2004, there has been a broad decline in the percentage of home owners undertaking “value-adding upgrades” or “maintaining and making some improvements” on their homes. From 79.5% of total estimated homeowners in early-2004, agents see homeowners falling into these 2 categories of home investment as having declined to 41.5% of total homeowners in their areas.

This implies a major shift by a significant portion of homeowners towards “lesser forms” of home investment, namely “fully maintaining with no improvements”, “only attending to basic maintenance” and ”letting homes get run down”.

This is reflective of tough economic times as well as an ongoing obsession with consumption, by households, in order to maintain their material lifestyle in the short term. This propensity to consume can be seen in the SARB numbers, where saving is so low that households remain in a situation of “net dis-saving”, i.e. where the little gross saving that exists is insufficient to cover the depreciation on fixed assets owned by households. In the 1st quarter of 2011, the SARB reports that real household consumption expenditure grew year-on-year by 5%, higher than real disposable income growth in the same quarter, while residential fixed investment was the victim of the need to trim expenditure, declining year-on-year by -4.9% in real terms.,

Not only did home investment/upgrades suffer, but building of new homes has also been reduced greatly. From the peak of building completions at the end of 2005, square metres completed had dropped by -57.4% by the 2nd quarter of 2011.

However, there is some sign of stabilization at these lower levels of building activity. In the 2nd quarter of 2011, square metres of residential buildings completed were only marginally down year-on-year by -3.2%, after far greater drops in earlier quarters. Interest rates remain low, existing residential demand has picked up since the lows of 2008/9, and one would expect building activity to respond positively to these events with a lag. However, we expect stabilization and very low growth in completions at best in 2012, as the household sector remains financially stressed, supply overhangs in many existing markets remain, and existing home bargains are still to be found. On top of this, estimated replacement costs of homes are on average 21.7 higher than existing home prices. Therefore, after a projected -0.8% slight decline for 2011 as a whole, we forecast a mild +2.4% growth rate in square metres of residential buildings completed for 2012 as a whole.

In addition, economic growth slowdown is at hand, and the risk of a 2nd global recession is significant. Under those conditions, we would expect any residential building sector growth to run out of steam towards the latter stage of 2012.

The relative bright spot is expected to be the Affordable Housing Market, which we think should be the key driver of any building activity growth that may take place, having been the least oversupplied market following the property boom.


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Valuation of Property

Valuing of property

It is essential to understand how banks go about property valuations.
The property media have done an excellent job in educating and informing the general public on property matters and their increased knowledge has become apparent in the questions they put to agents and the requests they regularly make for carefully researched information to back up the agent’s statements.

Nevertheless many surprising “patches of ignorance” still exist – one of which concerns the valuing of property.

South African valuers operate to international standards, but this does not mean that all valuations will be the same or be what the agent, seller or buyer feel they should be.

The most important fact to grasp is that the bank valuer is there to assess how the property rates in relation to the price being paid for it, i.e. how much security its value offers the bank.

A valuer is not there to check on the physical state of the property or what parts of it need repair.

Bank and other valuers use a number of tools to do a market related price valuation, one of which will be a Comparative Market Analysis. This tries to fix a realistic value for the home by comparing it to similar properties in the area that have sold recently.

CMAs are, of course, an inexact science because no two homes are the same, even when they have the same designs and are in the same estate. In particular, the condition of one home may be very different from that of another – its defects, or lack of them – should lead to a different valuation but often do not.

Where a property has obvious defects, but the valuer feels that the valuation can be reached if these are fixed, valuers may take cognisance of such defects by calculating what it would cost to repair them and inserting a retention clause stipulating that specialised repairs have to be carried out before the Bond can be registered.

Municipal valuations can be useful guidelines, provided it is accepted that these days they are often far higher (as much as 20%) than the market value – the aim of the municipalities being to increase their rates and taxes.

Another guideline in establishing a fair valuation may be the insurance value – but as this will take into account the cost of replacing the home, it, too, will probably be high because, in today’s market, building a new home is 20 to 30% more expensive than buying one “second hand”.

Valuations become exceptionally important when a buyer is applying for a bond. Quite often the bond applicant will, possibly on his estate agent’s advice, make an offer only to find that the banks’ valuers see the property as being considerably less. The bank will then be prepared to issue a bond only in relation to their valuation.

In these cases if market value is not found, a good bond originator may be able to persuade the bank that their valuation is not market related or he may be able to get the buyer and seller to rectify defects which will make the higher valuation valid.

It has to be understood that a home may have certain features (e.g. proximity to a school or an especially attractive garden) which give it huge value for some buyers but might reduce its appeal to other buyers.

In a willing buyer, willing seller market, where a bank does not find value, we always suggest that the valuer meets with the estate agent selling the property and have a relook at the comparative market analysis and decide what it is about this property that detracts from the value as calculated by the valuer.

This will enable the agent to find out what the bank thinks should be changed or improved before they will consider granting the loan and often matters can then be put right.

*Rob Lawrence is the National Manager of Rawson Finance, the Bond Originators for the Rawson Group.

19 August 2011

Home owners holding on to property for longer

Home owners holding on to property for longer

A recent property survey has indicated that home owners in Gauteng and the Western Cape are holding on to their assets for longer, hoping to realise higher prices in the residential market.

Property giant, Lightstone’s Andrew Watt says home owners in these provinces have waited roughly six years before disposing of their property, but this waiting period seems to have increased to eight years, with the exception of KwaZulu-Natal. What has also emerged is a spike in house prices in the Eastern Cape over the past few months, but Watt says it is too early to speculate on the reason for this.

Watt says house price inflation remains relatively muted although it is still positive with the affordable market remaining the pick of the value segments. Recent statistics gauging property price growth over the mid to long term, have shown the top performing luxury suburbs were, not surprisingly, in the Western Cape.

The top performer in this sector was La Pastorale suburb in Stellenbosch, followed by Zwavelpoort and Westcliff in Gauteng. Other top Western Cape performers included Kalk Bay, Mostertsdrift, Sunset Beach, Scarborough and Murdock Valley. This luxury sector includes residential properties from R1.5m and more.

In the high value band, meaning houses ranging from between R750 000 to the R1.5m mark, the picture is remarkably different and features suburbs from the Western and Northern Cape, Limpopo, Mpumalanga, the Free State and KwaZulu-Natal.

A presentation at a Rode 2011 conference in Johannesburg showed that the top performing Eastern Cape suburbs over the past 15 years were found mostly in Nelson Mandela Bay, followed by Kouga, Buffalo City and Baviaans. The equivalent in the Western Cape was the city of Cape Town, George, Swellendam, Oudtshoorn, the Breede River Winelands, Witzenberg and the Cederberg.

What also emerged during the Lighthouse presentation was that over 80% of foreign owned properties in South Africa were valued under R3m which indicates that ownership is not limited only to the very top end of the market which accounts for roughly 5% of foreign ownership. As far as ownership in the provinces is concerned, the Western Cape historically and currently leads the pack, followed by Gauteng, KwaZulu-Natal and the Eastern Cape with the other provinces trailing behind. The province that has least piqued the interest of foreign ownership is the Northern Cape with its harsh climate.

Investec to salvage sour loans

Investec to salvage sour loans

Investec has won a provisional liquidation order for about five Pinnacle Point Group (JSE:PNG) subsidiaries for which liquidators are expected to be appointed by the Master of the High Court by next week, lawyers for the specialist bank told Moneyweb.

Investec’s lawyer Leonard Katz from Edward Nathan Sonnenbergs (ENS) said the liquidation was granted by the Western Cape High Court. ENS said the properties under provisional liquidation are: Festival Bay Trading 55 Pty Ltd, Pinnacle Point Resorts Pty Ltd, Pinnacle Point Investment PTY Ltd, Clarence Golf and Trout Estate, Eagle Creek and Property Promotions and Management (PPM).

Investec is collectively owed close to R115m by Pinnacle Point subsidiaries. A source close to Pinnacle Point Group confirmed the provisional liquidation was granted on Thursday, but does not include PPM.

“The liquidators will immediately commence the investigations and they will try and start to find buyers for the assets,” Katz said.

Pinnacle Point Group is currently under a business rescue. But the underlying assets that have been placed under provisional liquidation are not part of it.

The business rescue practitioner, Mike Lane, said he would not comment on the provisional liquidation.

18 August 2011

First-time property buyers spending more : Property News from IOLProperty

First-time property buyers spending more : Property News from IOLProperty

First-time house buyers are spending more on a property than they did a year ago, according to bond originator ooba on Wednesday.

The July first-time buyer's purchase price figures show year-on-year growth of three percent to R609,417 ooba said in a statement.

"Higher levels of activity amongst first time buyers are generally a positive indicator for the housing market, as demand increases and there are positive knock-on effects," said Rhys Dyer, ooba chief operating officer.

He said the average first time buyer's purchase price had grown consistently in the past quarter, due to low interest rates and an easing of lending conditions, especially for deposit requirements.

However, the overall price index recorded negative year-on-year price growth of 3.4 percent to R821,579 in July 2011 from R850,763

in July 2010.

Forty-nine percent of home loan applications finalised by ooba from January to July 2011 were for first time home buyers, which was up two percent from the same period last year.

There had been an almost one percent increase in the average approved bond size to R702,072 in July from R696,903 a year ago.

The average deposit had decreased by 20 percent to R119,507 and was now equivalent to 15 percent of the purchase price.

This was a sign of banks' improved lending appetite, said Dyer.

The average bank decline ratio at 47 percent and the effective approval rate of 64 percent were at similar levels to the June 2011 numbers, indicating little month-on-month change in bank approval rates.

Dyer said that in July, the ratio of applications declined by one lender, but granted by another stayed at 23 percent.

Investec Property Fund to bulk up on Retail

Investec Property Fund to bulk up on Retail

Investec Property Fund is looking at bulking up on retail property as it remains underweight in that sector. It also has ambitions to include the Firs and Hyatt Regency, in Rosebank, in its portfolio and believes these properties will benefit from the good transport infrastructure of the Gautrain, thus boosting the listed fund.

Sam Leon, the CEO of the R1.7bn Investec Property Fund, said the objective is to get to a fighting weight which is somewhere between R7bn and R10bn over time. However he could not put a timeframe saying it was not easy as the company would not bulk up for the sake of bulking. However, Leon concedes that the fund is underweight in retail.

“It is illogical that we’re clearly underweight retail with under 10% of GLA (gross leasable area). We are looking to create the right retail product and then we will put it in the fund. But again it’s not for the sake of getting retail it’s for the sake of getting good property. So we are looking to bulk up on the retail side,” Leon said.

“One of the potential products that could go into the fund at the appropriate time once it’s bedded down is the Firs [complex] in Rosebank ... It’s not yet offered to the fund that is something in the pipeline ... It clearly has the quality that we would like to see in the fund ... Good transport infrastructure works and has a [good] impact for real estate.”

Investec Property owns the Firs shopping centre, offices and The Hyatt hotel, but it is not yet included in the listed fund. Leon said in terms of the gross leasable area, the fund was 65% industrial, 25% offices and about 10% retail. By revenue the fund is 40% industrial and 50% office.

“Our office portfolio as we currently stand is very defensive. We have got Woolworths with a long term lease in excess of ten years, which is their head-office and Investec’s regional office in [Umhlanga in Durban] in excess of ten years ... So in this case the offices are very defensive because of the type of tenancy and the length of the lease.”

Leon added that the fund has been fairly stable since it listed in April. It has previously said that it aims to provide a dividend yield of 9.5%. Investec’s Property Fund debuted at R10.60 in April. On Wednesday it closed flat at R10.30.

17 August 2011

Home loan interest rates 'already higher'

Home loan interest rates 'already higher' : Property News from IOLProperty

"In recent months we have seen a significant decrease in the rate concessions that banks are willing to give clients, from as much as 1,5% off prime to virtually nothing."

"In other words, home loan interest rates are already effectively higher for many borrowers, even though the Reserve Bank has not yet officially raised interest rates."

Zoning Certificates: Developers beware

Zoning Certificates: Developers beware

Court warns developers not to rely on local authorities to know the correct zoning of their property.
The KwaZulu Natal High Court in Eagle Creek Investment 138 (Pty) Ltd v Hibiscus Coast Municipality and Another [2010] ZAKZDHC 24 (16 July 2010) gave developers an unusual warning. The court in its decision warned developers not to rely on local authorities to know the correct zoning of their property.

In terms of the facts in the matter, the developer obtained a written zoning certificate from the municipality which stated that its property was zoned "General Commercial 2". On the strength of the information contained in the zoning certificate, the developer prepared and lodged building plans with the municipality for the construction of a motor vehicle dealership on the property. The municipality approved the plans and the developer commenced construction of the dealership.

The owners of the neighbouring properties lodged objections against the construction of the dealership. The municipality then decided that the property was in fact zoned "Limited Commercial" which meant that the plans could not have been approved. The municipality reasoned that it had relied incorrectly on zoning maps drawn for it by a third party. The municipality accordingly demanded that the developer cease construction of the dealership immediately. Two months later the municipality did an about turn and withdrew the "stop work" order allowing the developer to continue with its construction.

The owners of the neighbouring properties subsequently made an application to court and were granted an interdict halting construction. The court agreed with the neighbours in its finding and held that the property was indeed zoned "Limited Commercial" and therefore set aside the approval of the building plans.

As a result, the contractor sued the municipality for R1,018,079.64 (one million eighteen thousand and seventy nine rand and sixty four cents), which it claimed it had suffered as damages.

In its defence, the municipality claimed it was immune from claims of damages arising from the negligent exercise of its statutory duties.

Unfortunately for the developer, the court upheld the municipality's defence on the basis that the municipality enjoyed immunity in terms of the local (KZN) Ordinance.

Accordingly, developers must do their own homework in respect of establishing the zoning of their properties to ensure that such properties are appropriately zoned. Further, if developers do run into any problems it is advisable to obtain legal advice promptly.

First signs of a swing by investors back to sectional title property

First signs of a swing by investors back to sectional title property

With the stock markets dropping 15% in two weeks – then bouncing back, only to drop and rise again, manufacturing and mining output down, and with major SA corporations cutting staff, there has just recently been a discernible swing back to sectional title property.

16 August 2011

Emigration property selling at three-year low

Emigration property selling at three-year low

It must be remembered that expats buying property in South Africa don’t always do so with a view to returning permanently. “Nevertheless, we assume that this is a partial indicator of skills returning or intending to return.”

Is property geared for a slump?

Is property geared for a slump?

According to FNB’s report, “economic data releases and events lead to the belief that we could see increased pressure on the market in the near term.”

15 August 2011

Global office rentals on the mend.

Global office rentals on the mend

While global office rents increased 4.3% year-on-year in the first quarter of 2011, according to CB Richard Ellis’s Q1 2011 Global Office MarketView, rentals in South Africa have remained stable, Broll Property Group reports.

South Africa is currently a tenants’ market. Landlords are willing to look at favourable deals to retain tenants, but South Africa’s rentals are on par with international trends. We face the same challenges. Unemployment is rising and companies are downsizing and consolidating to ensure their future. Obviously, that affects their property requirements.

The South African property market lags behind the EMEA market by 12 to 18 months.

Old Mutual’s R20bn town centre development

Old Mutual’s R20bn town centre development

Old Mutual says it is working on a R20bn town centre in Midrand Johannesburg and among other separate initiatives it is looking at investing close to R2bn in expanding the Menlyn shopping centre in Pretoria next year.