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.

'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

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.