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.

10 October 2011

50% of South Africans have bad credit records but they can get bonds

50% of South Africans have bad credit records but they can get bonds

Just under 50% of South Africans have poor credit records - but, if they take the right steps, they can still get bond finance.

According to the latest records, almost half of all economically active South Africans have some form of "credit challenge" that makes it difficult for them to qualify for home loans or other finance from the banks, says Rob Lawrence, national manager of Rawson Finance.

"We are regularly asked by bond applicants to try and sort these matters out. Fortunately, Rawson Finance and the other originators now have arrangements with organisations dedicated to rehabilitating people whose credit records would normally prevent them from borrowing again.

"Depending on the severity of the original misdemeanour, the process can take anything from three to 12 months. But the ultimate success rate is high, so it's definitely worth tackling the challenge."

He says certain issues can be quickly put right. For example, if a credit bureau's investigation reveals that clients generally pay their bills but do so irregularly or late, this implies that the problem is not so much lack of funds but poor organisation. The rehabilitation organisation can assist them to budget and plan better and so improve their credit profiles. They could then become creditworthy within six months.

If, however, clients have had court judgments against them on account of unpaid debts, this will be recorded permanently. It can then take up to a year to get recession orders from the courts and have any judgments cleared, provided the original debts have been repaid.

Certain debt defaulters have garnishee orders against them. These are imposed by the courts and make it compulsory for their employers to deduct fixed sums each month to pay over to creditors. Lawrence says any bond applicants in this situation will not be considered for loans until their debts are paid up.

" If the credit bureau's records show that at some stage applicants' debts had to be written off by creditors, it will take at least a year to get them rehabilitated - and, again, this will involve repaying the debt in full."

Lawrence says although many South Africans' debt repayment performances are not something they can be proud of, he and his team understand how it is possible for people to land up in these predicaments and are always willing to help debtors rehabilitate themselves with the help of their associate rehabilitation services organisations.

"The message we have to give is that people shouldn't despair, nor should they abandon plans to become homeowners. There is almost invariably a way out of these difficulties, especially if the original fault was due to hardship rather than a deliberate attempt to avoid payment , " says Lawrence.

Weekend Argus (Sunday Edition)

07 October 2011

Home loans for highly indebted

Home loans for highly indebted

Standard Bank is piloting a rent-to-buy housing model in the affordable home segment, an initiative that is likely to help those with impaired records to qualify for home loans in the future.

“The model that we are interested in is deferred ownership for a while. It could be 12-18 months of rent but it will be as if they are paying the bond. We are just piloting it right now. We have agreed with one developer to put 100 people on the pilot,” Standard Bank’s Director of Affordable Housing Nicholas Nkosi said.

Nkosi said the affordable housing segment covered those who earn between R3 500 and R16 000 and properties of up to R500 000. With the rent-to buy model, a client would have to prove for a good number of months that they could afford to pay rent, rates and all other responsibilities that come with a home loan before the bank approved lending. So the customer would behave as if they are paying a bond although renting.

If the customer can demonstrate affordability a portion of his rental expenses will be used to contribute towards a bond. To make this possible Standard Bank wants to enter into agreements with developers who will first rent out the property and possibly sell it if the customer can demonstrate affordability of a home loan.

Nkosi said this would go a long way in helping people to own a home. He pointed out that banks were often criticised for not giving the customer an alternative after being declined a home loan. The pilot is expected to run for about six months.

“My mandate is to have an increase in home ownerships in the affordable housing segment,” Nkosi said, adding that the bank is open for business although the challenge is availability of housing in this market segment.

With an appetite to lend more, Nkosi said the bank planned to double the size of its affordable housing home loan book within four years. Currently the size of the book is R10bn and the plan is to boost it to R20bn by 2015.

This year alone Nkosi is confident that the bank will lend over R3bn compared to about R2bn last year. According to Nkosi, Standard Bank has the biggest market share in this space of about 31% and plans to maintain its dominance.

“Ultimately the true test is how many people we are putting into homes,” he added.

“The probability of default is higher. But as much as it is higher it does not mean it is certain. A lot of people do make a plan to pay their home loans,” Nkosi said.

Asked how bad the impairments were in this segment, he would not budge, only stating that it compared favourably to the higher segment.

He did concede that affordability was an issue in this market as the average house had now increased to about R320 000 compared to R250 000 two years ago.

He said pricing is very important in this segment and the bank also needed to make sure that the customer can afford to pay his debt when interest rates rise. To further boost lending Nkosi said the bank sometimes offered home loans of up to 30 years.

Johannesburg CBD revival back

Johannesburg CBD revival back

The Johannesburg city centre could see seven new rejuvenation projects should Urban Genesis’s negotiations be successful.

Such projects felt the backlash of the 2008 meltdown as both government and the private sectors tightened their belts but efforts are now back to refurbish the Johannesburg city centre in the form of City Improvement Districts (CIDs). The approach is a holistic one whereby the private and public sectors come together in joint ventures to rejuvenate demarcated areas in the central business district.

CEO of Urban Genesis, Shrivaar Singh, says recent developments have seen retailers like Ackermans and other chain stores returning to the city. What is key is management and the strict enforcement of formal services like cleaning and maintenance, security, marketing and promotions. This is in addition to services provided by the local authority.

A tour of the Main Street Mall and the Newtown Improvement District has revealed a stark contrast between nodes being formally managed and those where only basic services are provided. What is also taking shape is the mixed use development, incorporating hawkers and retail by day while residents occupy space in former office high rises converted into residential units. Singh says around 8 000 families have made the inner city their home over the past five or so years. The revamping of the mall area cost around R100m, and included the costly process of redoing the roads in the vicinity.

This relocation brought with it the need for recreational facilities, prompting the renovation and greening of the former derelict and crime ridden Bokkie Park. After a year-long effort involving the Johannesburg city council and the private sector, notably mining entities, the square has been renamed Oppenheimer Park and comprises luscious gardens, a mini auditorium for performers, cement benches in strategic places, often in the shade and more importantly, an extremely popular basketball court. It is a perfect lunchtime retreat for city workers, but also for children, or anyone else really to enjoy the tranquillity of a safe and clean environment. Unobtrusive security guards watch over the park 24 hours a day even when it is locked between 6pm and 6am daily.

Adjacent to the park, informal traders have been allocated space where they can ply their wares under newly-erected shelters, and it all seems to work. So-called “block leaders” have been allocated portions which they manage, ensuring a clean and safe flea market experience. The difference between the formally managed areas, run by the CIDs and the local authority as opposed to the unregulated trade in parts of Jeppe, Bree and other streets is astounding. The latter are filthy, unhygienic and generally unsafe.

The CIDS have been around for about 12 years and if developments in parts of the CBD are anything to go by, they could be a viable option for landlords to protect and enhance their investments. The Urban Genesis website says “… managed environments … are a proven tool in the fight against urban deterioration and decay,” which help to offer landowners a better return on their investment.

R85m disposal of the Grace building

R85m disposal of the Grace building

Hyprop has concluded a deal to dispose of The Grace building in Rosebank to Southern Sun for R85 million. The transaction encompasses the sale of the entire building including the hotel premises and offices.

CEO Pieter Prinsloo says the sale is in line with strategy to divest from non-core assets. "We are pleased to have concluded a speedy transaction, in this instance with Southern Sun which is keen to establish their first hotel in the Rosebank node." Southern Sun is planning to re-open the hotel under their own brand in the first half of 2012.

Hyprop's future focus in Rosebank remains the planned extensions to The Mall of Rosebank and increasing its retail footprint in this high-growth node.

The Grace transaction remains conditional on Competition Commission approval.

04 October 2011

'Property sellers reluctant to drop prices

'Property sellers reluctant to drop prices'

The levels at which South African residential property prices are currently standing are debated weekly in the country's media, often with very pessimistic forecasts, but, says Bill Rawson, chairman of Rawson Properties, even now relatively few sellers accept that buyers are in a commanding position and big price adjustments are essential.

"From the figures coming across my desk," he says, "it is clear that the majority of sellers still baulk at cutting prices by over 10%. A good agent may be able to persuade them to accept that a bigger cut is essential, but generally they prefer not to sell rather than to take a big cut."

The sellers' thinking, says Rawson, appears to be that the bottom of the downturn has now been reached and from now on prices can only move up.

"Most of the banks' analysts would not agree with this view – they see price stagnation staying with us for six months or a year but that is very seldom the view of the sellers with whom our franchises have to deal. Countrywide confidence in property remains strong."

Rawson said that he himself is now cautiously optimistic about the chances of a mini-recovery becoming evident towards the end of this year.

"It is significant that our development company is finding that certain banks are now ready to talk about loans. One bank has already advanced R1 billion for new projects in Gauteng. This has not been publicised as they do not want a flood of applications but it has happened."

The tight credit controls ooba recently revealed that 46% of bond applications are still being turned down have, said Rawson, made buyers far more enterprising in finding money for property: families, private companies and syndicates have stepped into the breach left by the banks' withdrawal.

"This innovative trend is good for the SA housing market: it is noticeable that luxury non-essentials are being sold off to provide property investment funds a sure sign that those who watch the market appreciate that today's market offers them bargains."

Those contemplating which asset class to invest in money, stocks or property - added Rawson, have to bear in mind that housing is an essential product.

"Although people pull out of other assets in bad times there will always be underlying activity in property. People get married, families grow, new schools are attended, transfers take place, people die or separate these and other daily occurrences keep all but the very worst housing markets alive."

Rawson Properties Press Release

Joburg has most expensive staff, but admin and delivery problems are ongoing

Joburg has most expensive staff, but admin and delivery problems are ongoing

The City of Joburg hires twice as many top managers as any other metro and accounts for two-fifths of all metro spending on top managers in the entire country.

The City of Cape Town manages a budget slightly bigger than Joburg's, but needs less than half the managers.

Joburg's bill for the top brass is bigger than the same bills combined for the next three biggest metro spenders - eThekwini, Cape Town and Nelson Mandela Bay.

The details are in the Treasury's recent Local Government Expenditure and Budgets Review. The spending is for the municipal financial year which ended in June last year.

Joburg pays four of its top 40 staff each more than R2 million a year, and another 30 have annual salaries of R1m, excluding bonuses.

Joburg's highest paid official is the head of City Power, followed by the chief financial officer, the head of Joburg Water and the city manager.

Those top 40 staff were together paid nearly R59m in 2009/10. That included more than R5m paid in bonuses in total to the top 40. The bonuses were paid out in 2009/10 to 37 of the 40 but were delayed payments for work done during 2008/9 so they may have been paid to different people due to staff turnover.

Some of Joburg's top staff are in acting positions and changes are expected as contracts which were linked to the former mayor's term of office expire. One post listed in the report no longer exists.

The Treasury lists as filled posts two unnamed directors in the city manager's office and two heads of the mayor's office (each paid more than R1m), but these do not appear on the city's organogram and The Star could not establish who filled three of these posts.

Excluding bonuses, eThekwini pays one official, the municipal manager, more than R2m. The remaining 13 all get more than R1m.

Ekurhuleni pays 13 of its 18 top officials more than R1m each, Tshwane pays 13 of its 14 top officials more than R1m each, Cape Town pays 13 of its 14 top officials more than R1m each, and Nelson Mandela Bay pays its 13 top officials more than R1m each.

Including bonuses, Ekurhuleni spent the least of any metro on its top staff, about half of Tshwane, Cape Town or Nelson Mandela Bay's expenditure. Joburg spent six times more than Ekurhuleni.

Although Nelson Mandela Bay has the smallest municipal budget by far, its total spending on its top officials is on a par with Tshwane and Cape Town.

And while Joburg has the biggest and most expensive top staff structure, the metro has had ongoing administration and delivery problems. It is also the metro with the biggest debt.

September statistics on money owed to municipalities shows Joburg top of the list, with the metro owed R12.1 billion. It was followed by Ekurhuleni (owed R9bn), Cape Town (R5.8bn), eThekwini (R4.6bn), Tshwane (R3.8bn) and Nelson Mandela Bay (R1.4bn).

The city had a qualified audit for 2009/10, blamed largely on the migration of data to the problematic centralised billing system.

The Auditor-General report said the city did not ensure that revenue was billed correctly.

Joburg Water and City Power also got qualified audits.

A recent report to council by the municipal accounts committee on 2009/10 finances notes that the city “spends millions of rand every financial year on interest and penalties to South African Revenue Services (Sars)”. The committee report said the annual report for 2009/10 wasn't ready for council in the prescribed timeframe and the qualified audit raised questions on the competence of finance officials.

The qualified audit noted R743m in billing errors over property rates and values; city officials claimed the error involved R1.2m.

The city lost R15m to fraud in 2009/10 and faced claims totalling R171m.

The billing crisis is still not over. Related to this, the call centre had such problems that last year the city spent millions setting up a new call centre; complaints from residents have reduced but are ongoing.

Residents also complain endlessly about potholes.

Labour relations are an ongoing headache with disruptions - partly arising from wage disputes but also often blamed on failure to address management problems, corruption allegations, privatisation and in-fighting - in Pikitup, Metrobus, Rea Vaya and the emergency services.

Unions threatened disruptions at the Joburg metro police this year, partly because R30m in licensing money that went missing three years ago could still not be found.

Housing targets have not been met - the city planned 100 000 units over five years but expects to provide only 80 percent due to lack of money (the housing budget was slashed to R48m in 2009/10, which was considerably less than it spent on its top management).

The backlog is about 400 000 units.

The Star

03 October 2011

FNB Sep house price index unchanged

FNB Sep house price index unchanged

First National Bank's house price index has recorded 5.6% year-on-year growth (y/y) in September, unchanged from the revised 5.6% in August.

This "stalling", said FNB property strategist John Loos, can partly be ascribed to rising base effects, with the bout of month-on-month house price decline around mid-2010 being at its worst around August last year, and thereafter starting to dissipate.

However, it is believed that economic factors are also beginning to play a role in constraining house price growth, with the interest rate cutting stimulus of late-2010 wearing thin, and economic growth having slowed in the second quarter 2011 placing pressure on real household disposable income growth.

In real terms, adjusting house price growth for consumer price inflation, August saw a very slight +0.3% positive y/y growth rate after nine consecutive months of y/y decline, with y/y house price inflation outstripping consumer price inflation.

On a month-on-month basis, house prices showed further loss in momentum in September, with growth turning negative to the tune of -0.24%, down from a revised +0.19% in August. This is the continuation of a weakening month-on-month growth trend spanning back to the +1.34% peak of February 2011.

Looking forward to the remainder of 2011, Loos noted that were no obvious major economic stimuli for a still poorly balanced - weak demand versus supply - South African residential property market, with interest rates still on hold for now, and global and domestic economic growth currently slowing.

Metsi Pepa Developers dodge probe into fraud allegations - Property | Moneyweb

Metsi Pepa Developers dodge probe into fraud allegations

An increasing number of investors in the failed Metsi Pepa development near Potchefstroom in the North West province are contemplating criminal and civil charges against developers Nicola and Jaco Prinsloo. This after the couple sold the sprawling farmland earmarked for the development to government, allegedly for R39m, according to documents obtained from a deed search in the Pretoria office.

In return, they are offering investors 40c in the rand with a promise of further funds should their planned legal action against what they call “the professional team” be successful. The team comprises, among others, the engineers, architects and town planners that were employed to work on the project and who have been blamed for its failure.

According to records in the Deeds Office, the farm consisted of nine demarcated areas, seven of which were sold to the Department of Rural Development for the total sum of R39m. These properties were bought on June 27 2011 and were registered on August 29 2011. Another demarcated area was sold to an entity listed as MI Chiboo Farming (Pty) Ltd. According to the title deeds, this area was sold for R4m on September 13 2010 and was registered on March 10 2011.

There is a segment of the farm for which no deed of sale can immediately be traced.

Moneyweb has sent a detailed list of questions to the Prinsloos and their attorney Johan Botha of Botha Geldenhuys Incorporated asking them to confirm the sales reflected by the Deeds Office. They declined the opportunity to comment, saying only: “Should we not comment on the contents of your e-mail of aforesaid date, must it not be construed [sic] as an acknowledgement of the particulars thereof but rather seen as a denial of the entirety of contents of your aforesaid mail. Our clients reserve the right to react upon your allegations as stated in your aforesaid mail if the necessity arises.” Botha says the case is sub judice pending legal action.

Earlier this month Nicola Prinsloo informed investors she was planning to sue “the professional team” whom she blames for scuppering the project. Previously Moneyweb reported that some of the companies involved in the project included Als Roads, which had threatened to sue the development for outstanding monies. The matter was heard in the North Gauteng High Court and a settlement was reached, the details of which remained confidential. Als says its account has been settled recently upon the sale of the land.

The engineering firm Fick Hollenbach and Partners from Potchefstroom, which was also blamed for erecting tented structures that violated restrictions imposed by the Department of Water Affairs, was exonerated by the Engineering Council.

Several independent sources have told Moneyweb that the trouble began when Water Affairs and the Blue Scorpions found that the restrictions imposed in terms of the environmental impact study on the farm had been violated. It has also been alleged that Jaco Prinsloo removed reeds from the wetland area of the farm which was in violation of the law.

Initial calculations gleaned from an interim audit in 2008, revealed the money received from investors amounted to around R18m, excluding interest. At least three investors Moneyweb spoke to indicated their determination to recoup the full amounts invested with interest, saying the 40c in the rand offer is an insult. One says he/she will in the interim settle for the offer and try to recover the rest by laying criminal charges against the Prinsloos.

Moneyweb has been unable to obtain a final reconciliation of how the R18m was spent, despite asking both Cherie Eilertsen of Platinum Planet, which marketed and sold properties on behalf of the developers/ principals and Nicola Prinsloo for this information.

During a site visit to the location in February 2011, an investor said they were told by Eilertsen and Nicola that they would be issued with share certificates as a gesture of goodwill, but this never materialised. The offer was backed up by a letter from Botha.

In a letter dated September 23 2011, Botha made the offer of 40c in the rand. He also informed investors that the developers planned to proceed with legal action against the professional team, requesting permission from stakeholders to do so. The letter states that the Prinsloos hope to further reimburse investors with the proceeds of funds recovered should they succeed in successfully suing the team.

The letter further states: “You are hereby requested to accept the above mentioned offer of payment of 40c out of every rand in writing by no later than September 30 2011, and furthermore to undertake in writing your full support to institute legal action against the professional team.” The letter also undertook to start paying investors during the first week of October.

Several investors have indicated they will consider laying charges if this agreement is not honoured. Another has indicated he is not interested in pursuing the professional team as his contract was with Nicola Prinsloo who had in fact recruited the team.

On Wednesday afternoon an SMS to investors from Platinum Planet, advised them not to sign any offers on Metsi Pepa. “We have retained the services of BMV Attorneys and Adv Verster with a view to obtaining more info/better offer. A meeting with Metsi attorney Johan Botha has been set for Tues 4 October. Mr Johan Botha has given an irrevocable undertaking not to disqualify any investors whose acceptance/consent letters do not reach them by (the) 30 September (deadline). Platinum.” Eilertsen’s legal counsel, Antoon Botha, has confirmed the authenticity of the SMS. He said in an e-mail to Moneyweb: “As mentioned to you, Platinum is not claiming to act on behalf of ALL investors. There are however various investors whom have given Platinum Planet a mandate in this regard.”

In recent months Moneyweb has received numerous e-mails asking the same as investors have been unable to reach either Eilertson or her company, both of which have come under fire for their handling of the matter. At least two investors have spurned Platinum Planet’s offer to negotiate on their behalf, saying they want nothing to do with Eilertsen. Antoon Botha says the SMS was in response to a number of queries from other investors.

Eilertsen has maintained throughout that Platinum had at all times acted within its mandate in marketing the development and that the principals/developers should be held responsible for non-delivery. Antoon Botha has also indicated that Platinum is still owed a significant amount of money accruing from the development and that this will be addressed in the appropriate forum.

29 September 2011

Where to for the commercial property industry?

Where to for the commercial property industry?

....Asks Rodney Luntz.

With the Rand having depreciated, growth in the SA economy predicted to be sharply down and the global economy in turmoil - “Where to now for the commercial property industry?”.

From an industrial perspective everyone in the market was clamouring for a weaker rand and given recent circumstances, commercial property experts are now pondering whether this will be the life line for the industrial property market?

Although a weaker rand will make South Africa’s manufacturers much more competitive, the truth is that the global crisis has dented demand and no matter how weak the rand is or becomes, if demand is down then the industrial sector as a whole will decline. Until the global economy and our own economy begin to recover, the industrial sector is going to remain depressed.

Furthermore according to economists our own growth forecasts have been reduced to 3.2% from 3.7% previously and to 3.6% from 3.9% next year. This growth rate will have very little effect on our employment numbers which again must have a knock on effect on the property market.

From an office perspective, the market is pretty stagnant with only certain nodes showing slight improvement. The slight improvement that is taking place is due to the fact that there is very little new stock coming onto the market and savvy tenants taking advantage of a weak market. The slowdown in the economy and no meaningful uptake in employment does not bode well for this sector.

The weak rand also has an impact on the retail sector as this adds to their costs due to imports being more expensive. Retailers were seeing the benefits of the low rates which put more money in consumers’ pockets, which in turn resulted in a greater turnover. A weaker rand however adds to inflation which then causes rates to increase. With interest rates looking to increase rather than decrease, the effect on retailers is obvious and the sector finds itself in a rather vicious cycle.

So overall a weaker rand, a slowdown in the economy and the global crisis are all putting pressure on an already weak market.

Notwithstanding this weak market we are still seeing a fundamental disconnect between what a seller wants for his property and what investors are prepared to pay. Under such circumstances, sellers need to understand that they are selling into a very difficult market and thus have to be realistic in terms of their pricing.

Properties which are not realistically priced are just not selling. In a strong market premiums may be paid for certain properties but not so in a weak market. In such a market pricing is everything.

If sellers aren’t realistic in their pricing then their only choice is to button down the hatches and be prepared for very turbulent times.

*Rodney Luntz is the Managing Director of the High St Property Co.

Pinnacle Point risks delisting from JSE

Pinnacle Point risks delisting from JSE

Ailing property firm Pinnacle Point Group may be delisted from the Johannesburg Stock Exchange should a final liquidation in November be approved.

Already the trading of Pinnacle Point shares, which are 1c apiece, have been suspended on the Johannesburg Stock Exchange (JSE) following a court ruling ordering the company to be put under provisional liquidation.

“The requirements make provision that if a company is placed into liquidation the company may be suspended under those circumstances and typically we would. In this particular case the company also requested the JSE to suspend the listing and we obviously acceded to that request,” Andre Visser, the general manager for Issuer Services at the JSE said.

Asked what the motivation was for Pinnacle Point to remain listed on the JSE if it had liquidity issues, Visser said:

“There is no real motivation at this stage that is why it has been suspended. But what I am saying is we will only consider the termination once we see what is the outcome of the court case. If the company somehow comes out of liquidation and it is liquid again the JSE would consider [re-instating the listing] but if that is not likely then obviously we would not re-instate the listing.”

The provisional liquidation was granted in favour of a firm called Cape Point Vineyard, which owns 80m shares or just under 1% of the Pinnacle Point Group. Cape Point Vineyard won a business rescue in July, appointing Mike Lane as a practitioner. But now it wants Pinnacle Point to be finally wound up.

The owner of Cape Point Vineyard, Sybrand van der Spuy, says the business rescue was turned into a liquidation because of frustrations from some board members at Pinnacle Point. Van der Spuy believes there is a zero chance that Pinnacle Point will avoid a final liquidation.

“I will take a bet not because I am pleased about it. It’s a disaster for myself I am losing a bit of money but if you look at the poor pensioner they are losing R260m and the chances of shareholders getting any money back I think it’s zero ... I have lost R5m. It’s one thing for me to lose R5m and other people to lose R260m,” van der Spuy said.

He also said that he was considering laying criminal charges against some board members at Pinnacle Point for alleged bribery.

28 September 2011

FNB/BER building index steady

FNB/BER building index steady

FNB/BER building index steady

Building confidence has remained almost unchanged in the third quarter of 2011, from the preceding quarter, according to First National Bank and the Bureau for Economic Research.

The latest FNB/BER building confidence index edged down to 23 points from 24 points in the preceding quarter, it was revealed on Wednesday.

The index can vary between zero - indicating an extreme lack of confidence - and 100, indicating extreme confidence. It reveals the percentage of respondents that are satisfied with prevailing business conditions in six sectors, namely architects, quantity surveyors, building contractors, building sub-contractors, manufacturers of building materials and retailers of building materials and hardware.

The survey showed that the composite building confidence index remained steady during the quarter under review, as changes in the constituent parts cancelled each other out.

The confidence of quantity surveyors, sub-contractors and building material merchants increased, while that of architects, main contractors and building material manufacturers declined relative to the second quarter of 2011.

"Too much should not be read into the Q3 2011 increase of sub-contractors and merchants, as well as the decline of manufacturers, as a longer term perspective reveals that in these cases confidence mostly reversed to their Q1 2011 levels," said Cees Bruggemans, chief economist at FNB.

Residential building confidence declined to 21 points in the third quarter, from 24 points in the previous quarter, as growth in building activity faltered once more.

However, non-residential building confidence increased to 21 points in the period in focus from 16 points in the previous quarter, boosted primarily by private sector and some government work.

Bruggemans said increased investor uncertainty following renewed sharp falls in global share markets and economic growth downgrades at best pointed to continued weakness in the building industry in the next quarter or so.

I-Net Bridge

Self-employed still struggle to obtain bank home loans

Self-employed still struggle to obtain bank home loans

In spite of interest rates being at a 33-year low, banks remain very cautious in granting home loans, with all information submitted to them being thoroughly analysed to ensure applicants can afford to buy, says Kim Pistor, legal adviser and conveyancing manager for Rabie Property Group.

Pistor says although it is relatively straight forward to confirm the monthly earnings of salaried applicants, the same can't be said for those who are self-employed.

"In these cases supporting documentation is a key element in successful mortgage applications, and the banks require financial histories for the preceding two to three years.

"It usually t akes much longer to have bonds approved for these applications as they are often initially declined due to the various banks' tight criteria for self-employed individuals. Quite often clients find their own banks are not the ones that eventually issue approvals, so the services of a mortgage originator can be beneficial," says Pistor.

To assist residential buyers, Rabie has teamed up with John Savage and Liz Botha of Better Bond, who helped many of Rabie's buyers have mortgage finance approved at the best possible interest rates.

"A key bit of advice they give property investors is to check their own credit bureau reports annually as this is a critical part of the assessment process for mortgage lending," she says.

"Interest rates offered by banks can vary by as much as 1 percent, and applicants don't necessarily get the best rate from their own banks. Investors are sometimes disappointed that they can't get the same rate they were offered three years ago. But with the prime interest rate at 15 percent in December 2008 against the current 9 percent, the banks can no longer offer the previous average 2 percent discount on prescribed interest rates.

"The risk related to the loan now has more of a bearing on the rate discounts offered. In addition, applicants with positive credit ratings and deposits of 10 percent or more will be offered more favourable interest rates than applicants for 100 percent bonds."

Weekend Argus (Saturday Edition)

Self-employed still struggle to obtain bank home loans

Self-employed still struggle to obtain bank home loans

In spite of interest rates being at a 33-year low, banks remain very cautious in granting home loans, with all information submitted to them being thoroughly analysed to ensure applicants can afford to buy, says Kim Pistor, legal adviser and conveyancing manager for Rabie Property Group.

Pistor says although it is relatively straight forward to confirm the monthly earnings of salaried applicants, the same can't be said for those who are self-employed.

"In these cases supporting documentation is a key element in successful mortgage applications, and the banks require financial histories for the preceding two to three years.

"It usually t akes much longer to have bonds approved for these applications as they are often initially declined due to the various banks' tight criteria for self-employed individuals. Quite often clients find their own banks are not the ones that eventually issue approvals, so the services of a mortgage originator can be beneficial," says Pistor.

To assist residential buyers, Rabie has teamed up with John Savage and Liz Botha of Better Bond, who helped many of Rabie's buyers have mortgage finance approved at the best possible interest rates.

"A key bit of advice they give property investors is to check their own credit bureau reports annually as this is a critical part of the assessment process for mortgage lending," she says.

"Interest rates offered by banks can vary by as much as 1 percent, and applicants don't necessarily get the best rate from their own banks. Investors are sometimes disappointed that they can't get the same rate they were offered three years ago. But with the prime interest rate at 15 percent in December 2008 against the current 9 percent, the banks can no longer offer the previous average 2 percent discount on prescribed interest rates.

"The risk related to the loan now has more of a bearing on the rate discounts offered. In addition, applicants with positive credit ratings and deposits of 10 percent or more will be offered more favourable interest rates than applicants for 100 percent bonds."

Weekend Argus (Saturday Edition)

SA property growth loses momentum

SA property growth loses momentum

Growth in SA commercial property returns stagnated in the first half of 2011, reflecting an overall slowdown and uncertainty in local and global economic conditions. Property delivered a 4.3% total return in the six months to June 2011 according to the SAPOA/IPD South Africa Biannual Property Indicator.

Rental income provided the only return to investors at 4.3%, while at an aggregate level the market recorded zero capital appreciation. The disappearance of any capital growth takes the market back to the similarly flat conditions of the same time last year, after a small spurt of growth in the latter half of 2010.

Although returns deteriorated across the board, some sectors of the market still provided glimmers of growth. Retail property remained resilient, managing to produce 0.4% capital growth in the six months. Offices posted just 0.1% capital growth with the overall sector returns adversely impacted mainly by the performance of inner city offices. The industrial sector, however, with the exception of high-tech industrial property, suffered a contraction in capital growth of -1.5%, making it the worst performing of the three main sectors.

Downward pressure on property returns is coming from a number of directions. Vacancies passed yet another turning point and started rising again in the first half of the year. The aggregate national vacancy level stands at 6.8% as at the end of June 2011, with office vacancies of 11.7% being of particular concern for landlords. Retail vacancies are currently 6.4% while industrial vacancies are 4.2%.

These rising vacancies contributed to slower growth in rental income received by property owners, with the retail sector subjected to the earliest declines. In addition, base rental yields moved out to 9.6% as at June 2011, a softening of over 40 basis points compared to December 2010. These factors combined to wipe out growth in property values.

In much the same way that property growth in the second half of 2010 was not just due to post World Cup exuberance, the flat-lining of SA property growth in the first half of this year comes within a more subdued economic context.

Indeed, the small upturn in 2010 was supported by a number of economic factors including a return to retail sales growth, improved manufacturing output and a small rise in business confidence. There now appears to be a general loss of momentum and there are even contractions in some sectors.

Property returns are being increasingly influenced by localised conditions, resulting in greater divergence in performance between different provinces. Of the three main provinces, Gauteng produced the highest office returns, the strongest retail returns were in the Western Cape and Kwazulu-Natal had the best performing industrial market.

Stan Garrun, Managing Director of IPD South Africa, commented: “Words like “turmoil”, “volatility” and “slowdown” are again appearing in global property headlines. Is this the onset of the dreaded “double-dip‟? The latest South African results from IPD show that we are not immune to global uncertainty. In South Africa we have also had to deal with difficult local issues most notably rising costs. The protection of income streams is therefore at the forefront of owners‟ minds. These trends indicate that there will be little defined growth in property values until the imbalance between supply and demand is righted and in the near term market performance is likely to be hesitant at best”

23 September 2011

'Huge savings to be made by selling properties faster'

'Huge savings to be made by selling properties faster'

Homeowners can cut up to two months off the average time it takes to sell a property by getting the asking price right from the start.

So says Berry Everitt, MD of the Chas Everitt International property group, who points out that sellers who do this stand to save a substantial amount in holding costs, as well as sparing themselves a lot of anxiety and stress.

"According to the most recent FNB survey," he notes "the current average time for a home to be on the market before it is sold in 106 days. But a recent analysis of our sales in various areas around the country revealed that homeowners who make use of our Market Value Report to determine the correct asking price at the start of the marketing process are achieving a sale in an average of 44 days.

"And the savings they achieve through this two-month reduction in selling time can be considerable. On a home bonded for R850 000, for example, the monthly repayment will be about R7700 at the moment, while the costs of municipal rates and services, insurance, maintenance and security will add up to around R4000 at least.

"So for every month that the homeowner can cut the listing time of his property, he will be saving around R12 000, which he could perhaps use to pay a bigger deposit so as to reduce the monthly bond repayments on a new home."

The potential to reduce selling times by pricing correctly is also especially relevant at the moment, Everitt says, because of the very long transfer registration times being experienced due to Deeds Office delays.

"The average period between sale and registration is now around 114 days, or almost four months, and home sellers cannot access the proceeds of their sale until registration is complete, so it is important to get the process started as soon as possible by selling quickly."

Further analysis of recent sales figures, he says, revealed just how big an effect the wrong initial asking price can have on achieving that objective. "Homes that were between 5% and 8% overpriced to start with took 77 days to sell, while those that were 8% to 10% overpriced took 117 days to sell, on average.

"What was really revealing, though, was that homes which were more than 10% overpriced to start with took anything up to 180 days to sell - and then generally only sold when the initial asking price was reduced by around 20%. Meanwhile, the sellers also lost out on at least four months worth of holding costs."

Chas Everitt International Press Release

New property development at V&A Waterfront

New property development at V&A Waterfront

The construction of a six-storey office building at the V&A Waterfront is one of its largest developments since it was established 22 years ago, said its chief executive, David Green.

Green was speaking at yesterday's sod-turning ceremony to mark the construction of the new building which is officially named No 1 Silo. The building is part of a R1 billion development that will extensively refurbish the Clock Tower Precinct over the next four to five years.

"One of the key differentiators of No 1 Silo will be its energy efficiency due to its unique positioning to the ocean and ability to benefit from a sophisticated sea water cooling system," he said.

"The V&A Waterfront is reaffirming itself as one of the most sought-after addresses for businesses operating in South Africa. By combining ease of access, optimal parking and secure living conditions with some of the unsurpassed views in Cape Town, the V&A Waterfront is truly offering the best in lifestyle options in a centralised and secure location."

According to Anya van der Merwe, director at Van Der Merwe Miszewski Architects, the building has been registered as a Green Star SA Office Design and is aiming for at least a four-star Green Star rating. The Green Star rating was established by the Green Building Council of South Africa in 2008, with the aim of evaluating the potential environmental performance of buildings, based on energy and water efficiency, quality of indoor environments and resource conservation.

"This will be the first office building in the City Bowl with a five-star Green Star rating, because in the future all office buildings will be required to have a five-star Green Star rating," said Van der Merwe.

V&A Waterfront project manager Mark Noble said the building would have a fully glazed double-skin fa├žade to maximise views towards Table Mountain as well as the ocean, and to ensure "optimal use of natural light".

The construction of the building, including a car park, is projected to cost about R500 million and is expected to be completed in 2013. Noble said the cost was pushed up by the construction of the waterproof car park which would go below sea level.

The entire Clock Tower Precinct redevelopment is expected to attract 5 000 office workers in the next four years. Noble said the Clock Tower Centre had been reconfigured to offer more than 5 000m 2, supplemented by more than 2 500m2 of retail offering.

Cape Times

Interest rate remains unchanged at 9%

Interest rate remains unchanged at 9%

At the conclusion of this month's Monetary Policy Committee meeting, Reserve Bank Governor Gill Marcus has once again announced that the interest rate will remain unchanged at 9%.

With some economists foreseeing a possible second dip in the market, South African consumers will welcome the news that the interest rate has not increased this month as predicted earlier this year.

Although house prices continue to reflect the strain of a recovering buyers market, demand has increased and consumer confidence has remained fairly steady in the first three quarters of this year.

While for many buyers access to finance and competing with the stringent lending criteria of the major financial institutions will remain an issue, mortgage finance figures are looking more positive than they have in the past. Since April 2009 the bank approval rate for home loans has increased by 19% to its current rate of 45%, however this is still less than the 80% approval rate we saw in the boom period.

To date, market improvement has led to a 21% month-on-month growth in concluded real estate transactions for RE/MAX in the period of January to August 2011, which is the highest turnover achieved since 2007.

This points to the fact that although we still have some time before the market swings fully into a sellers' market, we are definitely on our way and the market is showing positive and encouraging increases, particularly in the middle sector.

RE/MAX Southern Africa Press Release

22 September 2011

Power cut: Tshwane law firm sues council

Power cut: Tshwane law firm sues council

Power cut: Tshwane law firm sues council

The Tshwane Metro Council is facing a R150 000 damages claim from a local law firm, whose electricity supply was cut for two days because the council and the firm's landlord were embroiled in a battle over alleged arrears in rates and taxes.

Marius Blom & GC Germishuizen Inc said they were fully paid up on their electricity bill and the rates and taxes battle had nothing to do with them, as they were mere tenants on the property.

Attorney Marius Blom said in papers before the Pretoria High Court that the council couldn't just do as it pleased.

"I am quite aware that it is quite a common phenomenon that the council suspends services without proper notice, and in cases where it is not entitled to do so. The only way of making good the unfairness of it all, is for this court to grant damages against the council."

Blom applied for default judgment against the council as the latter did not give notice of its intention to defend the matter. This was despite the fact that the council knew about the application.

The lawyer said an official of the council's legal department, after receiving summons, asked him for the background facts and said he would refer the matter to the council's accounts department for further instructions. Nothing, however, came of this.

Blom stated that during the time the firm's power was cut, it could not conduct business as it depended on electricity to operate its phones, computers, printers and fax machines. He added that while the effect of the power cut was staggering on business, the electricity bill did not even reflect any saving during the power cut.

The firm is claiming R50 000 for the loss of income it suffered during this time. It is claiming a further R50 000 as the firm believes its good name was tainted as the power cut left the impression that it could not pay the bill.

Blom said during this time clients could not make use of the main entrance to the firm, as the door was electronically operated. They had to receive clients through the back entrance into the dark premises. Blom said they had to explain to people that their electricity supply had been cut, which he said, defamed the firm in the eyes of the public. The council is facing another R50 000 in damages for this.

Blom said the council in any event had no right to cut the power supply due to the dispute regarding the rates and taxes, as the landlord had declared a dispute about this.

When a council official came to the premises to cut the power supply, he was told that the firm was up to date with its bill and that the council could not just cut its power supply because of a dispute with somebody else.

Blom said the official turned a deaf ear and went ahead to cut the supply.

The council's side was not stated, as it did not file papers opposing the claim.

The matter was postponed indefinitely.

Fewer desperate sellers, but market on a knife-edge

Fewer desperate sellers, but market on a knife-edge

Fewer desperate sellers, but market on a knife-edge

With the relatively positive turn in the South African economy and the property market showing signs of recovery, it makes sense that fewer distressed properties are entering the market, as is being widely reported by agents handling these specialised sales.

For example, Mark Brickles of RE/MAX Ultra Select, which operates in the Cape Flats and south-eastern suburbs, including Grassy Park, Strandfontein, Mitchells Plain, Lotus River, Ottery and Lansdowne, says there has definitely been a slowdown in the number of distressed properties being offered for sale.

"In 2009, I would say at least half the properties we sold were in a distressed situation.

"Last year at least 40 percent of our sales were made up of distressed sellers, while so far this year that figure has dropped to about 20 percent of the sellers we deal with," Brickles said.

Peter Gilmour, chairman of RE/MAX of Southern Africa, who also heads up the group's specialised distressed property department, says that since January, the agency has listed about 600 distressed properties, of which 10 percent have been in the Western Cape, 20 percent in KwaZulu-Natal and 70 percent in Gauteng.

"Of the distressed properties listed in the Western Cape, 40 percent have been sold. These properties have spent on average 48 days on the market and range in price from R250 000 to R2 million. RE/MAX has sold the homes at 91 percent of the bank's asking price," says Gilmour.

RE/ MAX Ultra Select undertook a number of distressed sales in the middle of the recession and Brickles says banks were accepting offers as low as 50 percent of the value.

However, the banks are no longer accepting such low offers, which he says is a strong indication that a gradual recovery is taking place.

"The banks will look only at offers that are at least 80 percent of value. RE/MAX Ultra Select has sold 16 distressed properties since the beginning of the year and we have five on our books.

"The distressed property price band has not been at the really low end of the market, but rather more in the middle, with homes priced between R600 000 and R900 000.

"Previously, it was mostly lower-end homes that were sold as distressed properties."

Brickles says that distressed properties take between 30 and 60 days on average to sell - which is roughly the same period as normal listings - as they are priced at fair market value.

He believes that despite signs of a gradual recovery, the market remains on a knifeedge.

"It's as if people are just about coping with paying their bonds now, but don't really have money to upgrade in most cases or to spend money on luxury items," Brickles said.

"In my opinion, we will have a lot of people in trouble again, even if interest rates go up by as little as two percent or three percent."

Gilmour said: "Positive trends in the property market are by no means an indication that distressed properties are a thing of the past.

"We expect that distressed properties will continue to come on stream for the next five years at least, what with interest rate hikes on the horizon, along with other factors that will influence the ability of consumers to meet their monthly payment obligations."

Tough outlook for commercial property in 2011

Tough outlook for commercial property in 2011

Tough outlook for commercial property in 2011

"When evaluating the commercial office environment, according to Sapoa's latest vacancy schedule for the second quarter of 2011, South Africa's overall office vacancy rate has now breached 10 percent." says Rodney Luntz of High Street Auctioneers.

"This is a first in many years - we hadn't seen such levels since 2004. Furthermore, what are deemed popular office nodes have now experienced a decrease, including Bedfordview, Braamfontein, Bruma, Cresta, Blackheath, JHB CBD, Fourways, Greenstone, Hyde Park, Dunkeld, Randburg and Rivonia. Sandton CBD vacancies are at 9.6 percent, which is better than the situation a mere nine months ago when the vacancies in the Sandton CBD were recorded at 11.4 percent."

"This being said, it must be noted that even at a level of 9.6 percent that this is a high figure. Additional new developments on the cards will cause this percentage to increase drastically.

"In the industrial sector, manufacturing activity plunged in July with manufacturing activity producing a reading of below 50 which reflects a contraction. Furthermore, the sector shed 68 000 jobs in the first quarter of this year. Both these factors have an impact on the sector and ultimately on South Africa's economic growth and this in turn affects the industrial and commercial office market."

He says additional costs such as electricity are also putting pressure on rental properties. Dramatic electricity tariff increases of more than 25 percent this year alone have sent operational costs skyrocketing and these cost pressures are being passed on to tenants. He says similar increases can be expected in the near future. Interest rates are expected to start increasing towards the end of the year with the expected rise in CPI.

"South Africa as an emerging economy is still very dependent on what happens globally and the effects of a double-dip recession as well as the downgrading of the USA credit rating is felt in our own economy. With manufacturing activity also slowing in Europe, Asia and the US, South Africa has seen a knockon effect on exports which too are slowing and this ultimately affects the struggling industrial market."

He says the outlook for commercial property has definitely taken a knock and the current sluggish state is here to stay for some time. However there is a definite opportunity in the market place even in these difficult economic times.

By working with professional property consultants tenants will be able to tap into expertise when negotiating with landlords who are sitting with high vacancies in desirable nodes.

"We are seeing landlords offering incentives by way of increased tenant installation allowance, as well as lower rentals and favourable terms in order to entice tenants into their buildings."

20 September 2011

Pickvest investors to discuss rescue prospects

Pickvest investors to discuss rescue prospects

How much of R4.5bn can be salvaged? A meeting on Wednesday will shed light.
JOHANNESBURG - Pickvest investors will meet on Wednesday to discuss the prospects of “rescuing” the companies they are invested in. The meeting will be held in Centurion at 15:00. In attendance will be Hans Klopper, who was recently appointed business rescue practitioner to seven of the eight Pickvest syndication companies.

On the agenda for discussion is the business rescue process and its prospects of success.

Many of Pickvest’s estimated 25 000 investors, who have invested as much as R4.5bn in its schemes, were unaware of Klopper’s appointment until a week after it happened, when it was reported on Moneyweb last Thursday.

Wednesday’s meeting has been hastily convened, but Klopper says there is nothing sinister in this. Klopper says the Companies Act dictates that a business rescue practitioner must convene, and preside over, a first meeting of creditors within ten business days of being appointed.

The only syndication excluded from the meeting will be Highveld 19. It was recently reported that a liquidation application had been lodged against Highveld 19, which prevented it from being placed under business rescue. However, Klopper told Moneyweb that this matter has since been settled, and he expects to be appointed to Highveld 19, too.

Ben van der Linde, a director of all eight Pickvest syndications, says that because of limited time, notices were only sent by e-mail to all known addresses.

The meeting will be held at Full Gospel Church Camping Grounds, 3C, 8 Jan Smuts Avenue, Irene Centurion. Financial advisers are welcome, but they must have at least one proxy from a shareholder.

Klopper says he was initially approached by Des Hudson, a director of the Highveld syndication companies, with a view to being appointed as business rescue practitioner. Klopper was later approached by Ferdinand Hartzenberg, a legal representative for the syndication companies. Hartzenberg is the son of Judge Willie Hartzenberg, who was appointed last year as chairman of the various Sharemax syndication companies.

Klopper’s fees will be paid by the income earned from the syndication companies, in accordance with the companies Act. The fees are prescribed by legislation and are currently capped at R2 000 an hour. Klopper says that a performance-related fee may be presented to investors and affected persons for their approval.

Klopper has 25 business days (unless an extension is granted) to present a business rescue plan to investors and other creditors for their consideration and possible adoption.

This plan should give investors a better idea what their companies are worth. For example, it’s been reported that there are substantial amounts owing to Nic Georgiou, who is intricately involved in the Pickvest schemes.

The business rescue plan must include a complete list of all assets and debt of the company. The practitioner must produce a projected balance sheet and income statement for the next three years, prepared on the assumption that his plan is adopted.

Klopper says he is busy familiarising himself with the Highveld syndication companies. He says he has had only one meeting with Georgiou, which took place on Wednesday last week.

13 Tips for avoiding falling victim to property rescue scams

13 Tips for avoiding falling victim to property rescue scams

Also a look at the types of scams.
1. Types of property rescue scams

i) Phantom help – In this scam, the supposed “rescuer” charges very high fees for basic phone calls and paperwork that the homeowner could have done. Or, the rescuer will make promises to represent the homeowner but will not follow through. This is really a too little too late scam as the helpless homeowner usually receives too little (or no) help too late to stop the foreclosure from taking place.

ii) Bailout – Here the scammer bails the homeowner out by helping them get rid of the house or giving the homeowner a loan on condition that he sign documents not knowing that he is selling his property. The way the scammers get the house varies, but each method ends with the homeowner surrendering the title of the house on the promise that they can stay on as renters and buy the house back once things have been "fixed." In the end, of course, the homeowner can't buy the house back and the supposed rescuers get most, if not all, of the equity.

iii) Signing over of property – This foreclosure scams involves signing away the ownership of your home. The owner only finds out that he is no longer the owner when he is evicted from his property.

iv) Debt review/liquidation/sequestration- Clients are approached by consultants to apply for these process not knowing the consequences. Assets are then handed over to these individuals/companies who will lease it to 3rd parties.

2. Tips for bank clients to avoid falling victim


Avoid doing business with companies, consultant and individuals that:

§ Guarantees to stop the foreclosure process.

§ Instruct/request you not to contact your bank/lender.

§ Collects a fee before providing any service.

§ Encourages you to lease your home so that you can buy it back over time.

§ Tells a client to pay your bond instalment to anyone other than the Bank.

§ Offers to buy your house for cash at a fixed price that is not set by the market at the time of sale.

§ Pressures you to sign paperwork that you have not read thoroughly or that you do not understand.


§ Discuss repayment options with your loan servicer/lender, and do not ignore letters and other communication from your bank.

§ Compile a budget and determine the mortgage payment you can afford.

§ Create a file to record all communication with mortgage servicers, agencies, and financial institutions.

§ Don’t be rushed into a deal with a foreclosure “rescuer” with promises to stop a foreclosure.

§ Don’t pay a foreclosure “rescuer” in full until all services are performed as promised.

§ Do not agree to a repayment program if your bank is not informed and have agreed to such a repayment plan


Avoid doing business with companies, consultant and individuals that:

§ Guarantees to stop the foreclosure process.

§ Instruct/request you not to contact your bank/lender.

§ Collects a fee before providing any service.

§ Encourages you to lease your home so that you can buy it back over time.

§ Tells a client to pay your bond instalment to anyone other than the Bank.

§ Offers to buy your house for cash at a fixed price that is not set by the market at the time of sale.

§ Pressures you to sign paperwork that you have not read thoroughly or that you do not understand.


§ Discuss repayment options with your loan servicer/lender, and do not ignore letters and other communication from your bank.

§ Compile a budget and determine the mortgage payment you can afford.

§ Create a file to record all communication with mortgage servicers, agencies, and financial institutions.

§ Don’t be rushed into a deal with a foreclosure “rescuer” with promises to stop a foreclosure.

§ Don’t pay a foreclosure “rescuer” in full until all services are performed as promised.

§ Do not agree to a repayment program if your bank is not informed and have agreed to such a repayment plan

19 September 2011

New mortgage loans granted decline sharply in Q2 2011

New mortgage loans granted decline sharply in Q2 2011


Largest segment of the new mortgage market moves into negative territory.

The September SARB Quarterly Bulletin provides some public insight as to patterns in new mortgage lending in the 2nd quarter of 2011. When it comes to the trend in the value of new mortgage loans granted (residential and non-residential included), it was not too surprising to see a further year-on-year decline in the value of loans granted. The overall mortgage market is dominated by residential mortgages, and this segment thus sets the trend.

The FNB Estate Agent Survey’s Residential Demand Rating is a fairly good leading indicator of residential mortgage grant trends, and thus for total mortgages granted. The demand rating’s year-on-year growth, too, has been negative in the 1st 2 quarters of 2011, with agents suggesting that the market has settled after a 2009/early-2010 surge.

So, after a year-on-year decline in the value of mortgages granted to the tune of -1.2% in the 1st quarter, the pace of decline accelerated to -9.7% in the 2nd quarter of 2011. On a seasonally-adjusted basis, the quarter-on-quarter rate of change for the 2nd quarter was -2.7%, which is the 4th consecutive quarter of decline by this measure.

The SARB Quarterly Bulletin also splits new mortgage loan grants according to purpose. From this we can see that the largest segment of the new mortgage market, ie, existing buildings, showed weakening growth into negative territory, recording a -13.4% decline in the 2nd quarter. By comparison, it would appear that the new development sector has bigger plans, with mortgage grants for construction of new buildings accelerating to 15.5% year-on-year growth from the previous quarter’s 8.3%, while vacant land mortgages shot up off an extremely low base to 114.1% growth, from a previous quarter’s 86.1%

The vacant land growth rate should be read with caution, though. The vacant land market remains weak, having experienced by far the most extreme slump of all the segments back in 2007-2009. It thus comes off a very low base.

Examining the value of loans paid out, which can be expected to lag the trend in loans granted, the 2nd quarter growth rate was +13.5%, virtually unchanged from the 13.5% year-on-year growth of the 1st quarter. On a quarter-on-quarter seasonally-adjusted basis, however, the growth rate was +0.3% in the 2nd quarter, down from the +5.5% of the 1st quarter, which indeed suggests a flattening out in the 2nd quarter (although quarter-on-quarter figures can admittedly be erratic)


Some data adjustments to the two major new mortgage sub-sets, namely residential and commercial segments, from early in 2011 make analysis of segment data difficult. However, the residential sector, being the largest segment of the mortgage market, remains the key trendsetter for the overall mortgage market.

The new residential mortgage sector is one of the economy’s leading sectors. As such, one could expect that its growth rate has been tapering off for quite some time (similar to the broadly slowing growth rate that one finds in the new vehicle sector), with an economy slowing and possibly headed for recession, and with the major stimulus of aggressive SARB interest rate cuts in 2008/9 having worn thin. The SARB Quarterly Bulletin data regarding the total value of new mortgages granted therefore presents little in the way of surprises, showing further year-on-year weakening.

The declining growth trend more-or-less tracks, with a lag, the year-on-year change in the demand rating provided by the FNB Estate Agent Survey panel, and we believe that this is supportive of our view that, in an environment of weak residential property and mortgage demand, house prices will remain under pressure in the near-to-medium term.

Syndication directors hope to prevent R4.5bn liquidation - Pickvest ; Highveld ; PIC

Syndication directors hope to prevent R4.5bn liquidation

The boards of seven Pickvest syndication schemes have resolved that the companies be placed into voluntary business rescue. They have appointed business rescue practitioner Hans Klopper, who is best known for his appointment as joint liquidator of Consolidated News Agencies (CNA), back in 2003.

In total there are eight syndications in the Pickvest stable. However, only seven are envisaged for the business rescue, not eight as previously reported. Moneyweb apologises for the error. The syndication Highveld 19 is excluded.

Morkel Steyn, a director of all eight Highveld syndication schemes, says in an affidavit that it was “imperative” to implement the business rescue and protect investors from liquidation and “massive losses”.

Public investors have poured nearly R4.5bn into the eight Highveld syndication schemes. The lion’s share, roughly R3.5bn, has gone to the four most recent schemes, Highveld 19-22. These syndications find themselves in the precarious position of having paid for properties they don’t own, as reported by Moneyweb in April.

A business rescue is an option in the new Companies Act. If the directors of a company have reasonable ground to believe that a company is financially distressed, and there appears to be a reasonable prospect of rescue, they can implement a business rescue.

While under business rescue, a company is temporarily protected from people and entities that have claims against it. Thus, liquidation may be prevented.

By placing the eight companies in business rescue, Steyn is admitting that all is not well in the Pickvest portfolio.

In his affidavit he refers to a dispute between Bosman & Visser and Nic Georgiou’s Zelpy group of companies.

Bosman & Visser is an intermediary that stands between the Highveld syndications and the person they buy the properties from, apparent billionaire Nic Georgiou. The syndication companies would pay investors’ money to Bosman & Visser, who would deduct Pickvest’s fees and commission, and, in turn, transfer the remaining cash to Georgiou.

At some point Georgiou became suspicious that Bosman & Visser had been short-changing him, and requested an audit. Georgiou claimed he had been underpaid to the tune of R883m.

An audit was conducted by Calculus Chartered Accountants. Calculus supposedly gave Bosman & Visser a clean bill of health. To this day, a letter (dated May 27 2011) is published on Pickvest’s website that suggests the dispute between Bosman & Visser and Georgiou has been resolved.

This flies in the face of Steyn’s affidavit, dated September 7 2011. Steyn notes: “There is a dispute between Bosman & Visser and the Zelpi [sic] group of companies whether the whole purchase price in respect of the four companies of R3.2bn had been paid. The latter group maintains that there was a short payment of R883m.”

Steyn says: “When it was clear that litigation was unavoidable it was clear that in such a case liquidations would follow and it was also clear that investors would lose the major portion of their investments. In total there are about 80 different large building complexes. The losses due to forced sales, liquidation and litigation costs and the time during which investors would not have any income would convert to massive losses to investors.”

The business rescue does not appear to have derailed a rescue plan proposed by Georgiou. The plan, known as the Orthotouch deal, would see Georgiou retaining ownership of the buildings he was supposed to transfer to investors. He will promise to pay investors an annual return of 6%, escalating by 0.25% a year for five years, after which time, Georgiou promises to repay investors their entire capital.

At least one organised group of Pickvest investors is against the Orthotouch deal, and has vowed to vote against it. Investors are wary of Georgiou’s promises. After all, it was Georgiou who “guaranteed” Pickvest’s investment products. In April this year, Georgiou walked away from these obligations, with apparent ease, leaving investors with substantially lower income.

In his affidavit, Steyn notes that there are ongoing negotiations between Georgiou’s Zephan (previously Zelpy) and the Takeover Regulations Panel (TRP) regarding the proposed Orthotouch deal. The TRP’s job is to ensure that a proposed takeover complies with legislation, before it is presented to investors. The TRP makes no finding on the merits of the transaction – that is for investors to decide themselves.

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.