'Property trends to watch out for'
While the global property market has taken its fair share of knocks over the past few years, it's safe to say the South African market is still emerging and opportunity is out there for property investors that look for it, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
"Many buyers and sellers tend to see the market as a separate entity from themselves when in fact the market is made up of buyers and sellers. Simplified, the market can be defined as those people trying to buy at low prices and sell at high prices. Sentiment in the market and how consumers feel about the current market will largely dictate buying patterns and trends in that very environment. The secret to making the most out of the real estate market is to understand people and watch the trends and sentiment to see when buying or selling is the most advantageous," says Goslett.
According to Goslett, although technology may have changed and the tools used to search for property may differ, trends in the market have followed a very similar cyclical pattern for many decades. Knowing the pattern and seeing the signs of a changing market in a certain area will equip investors to better prepare themselves and gauge where opportunity lies.
Goslett says that predicting where housing prices will rise and where they will fall can be largely determined by watching the following trends that affect demand in the local markets:
Government policy and practice - Political unrest will have a large impact on buyers' confidence in the market as will reckless government practise that affects consumers, inflation and the interest rate. Other factors that would influence the market would be the introductions of policies and acts such as the Consumer Protection Act, Capital Gains Taxes or most recently the controversial Municipal Property Rates Bill.
Overdeveloped areas - The overdevelopment of certain areas has led to many properties in those areas standing empty, which normally leads to investors being able to buy them at reduced prices.
Overcorrection in the market - Prices that have shot up in an area too quickly and are back to boom period figures will affect demand in that area negatively if buyers know that they can get more value for their money elsewhere. Once demand decreases in an area, so will the property prices which means that opportunities will begin to present themselves.
Employment and movement - Tracking the movement of major corporations can lead to property investment opportunities. When large corporations relocate, they normally bring with them a strong demand for property in that area, which is largely due to the employees of the company wanting to reside in proximity to their place of work.
Living the life - Aside from financial gain, another factor that influences the market in an area is lifestyle choice. Nothing drives migration to an area more than the pursuit of a safe and enjoyable lifestyle. Look at the cost of living in an area, the climate and leisure trends. All of these will have an impact on where markets may shift in the future.
"While watching trends and buyer sentiment can give us an indication as to what the future may hold, it is impossible to predict with any real certainty. Perhaps the only real certainty in any market is that it is constantly changing," Goslett concludes.
RE/MAX Southern Africa Press Release
Property Law, Property Developments and related Real Estate thoughts. www.prop-law.co.za
About Me
- Gareth Shepperson
- Pretoria, Gauteng Province, South Africa
- Property Lawyer & Conveyancer ... Lover of Life in general!! www.prop-law.co.za In this Blog we have always brought you the latest PROPERTY NEWS but now we will also bring you a Q & A SECTION, where we answer readers questions. Please e-mail your questions to gareth@propertylaw.onmicrosoft.com (The information contained in this Blog does NOT constitute legal advice. If you require legal advice, you are very welcome to contact me.)
21 October 2011
'Serious property sellers will have to accept price cuts'
'Serious property sellers will have to accept price cuts'
The fact that there are now occasional signs of an eventual recovery in the SA residential market should not lead home sellers to think that higher prices are once again possible, says Lanice Steward, MD of Anne Porter Knight Frank, the Cape Peninsula estate agency.
"Although at APKF we always try to achieve the highest price for our sellers," said Steward, "they sometimes think we can achieve the impossible - but it is still a buyers' market and those not prepared to price realistically should not put their homes up for sale.
Steward drew attention to the latest FNB Property Barometer figures which show that 87% of SA's homes sold in the second quarter of this year were unable to achieve their asking prices - often, she says, because their prices were set by the seller at a level higher than the agents would have recommended.
"In real terms," said Steward, "since the price peak of February 2008, FNB show that SA prices have fallen by 15,3%. In my view that is not excessive considering that since July 2000 they have risen 64,7% (in real terms) and 313% in cash value. However, those sellers hanging on for former peak prices are, quite simply, living in an unreal world."
Steward quoted the FNB report as saying that, as there are as yet no obvious signs of a significant growth in SA's economy, house prices, which traditionally respond to growth, are likely to remain static. A further cut in the interest rate, which Gill Marcus has now said is possible, will help but in the foreseeable future "serious" sellers will have to accept a few more downward price adjustments.
"If people think that this is poor advice," she said, "they should take note how many overpriced homes stick on the market and do not sell until they have reduced their prices."
A Hout Bay property came onto the market at R11 million. It finally sold 24 months later at under R7,5 million. Another listed at R2,985 million sold after a five month wait for R2,3 million. Yet another came onto the market at R4,8 million and sold a year later at R3,5 million - a 24% drop,
Two further facts, said Steward, are worth mentioning on this subject: in these cases mentioned, the sellers lost considerable interest on money they could have collected earlier if they had priced correctly - and it is abundantly clear that most buyers detect overpricing early on and, after a perusal of the website do not even bother to visit too-high priced homes.
Anne Porter Knight Frank Press Release
The fact that there are now occasional signs of an eventual recovery in the SA residential market should not lead home sellers to think that higher prices are once again possible, says Lanice Steward, MD of Anne Porter Knight Frank, the Cape Peninsula estate agency.
"Although at APKF we always try to achieve the highest price for our sellers," said Steward, "they sometimes think we can achieve the impossible - but it is still a buyers' market and those not prepared to price realistically should not put their homes up for sale.
Steward drew attention to the latest FNB Property Barometer figures which show that 87% of SA's homes sold in the second quarter of this year were unable to achieve their asking prices - often, she says, because their prices were set by the seller at a level higher than the agents would have recommended.
"In real terms," said Steward, "since the price peak of February 2008, FNB show that SA prices have fallen by 15,3%. In my view that is not excessive considering that since July 2000 they have risen 64,7% (in real terms) and 313% in cash value. However, those sellers hanging on for former peak prices are, quite simply, living in an unreal world."
Steward quoted the FNB report as saying that, as there are as yet no obvious signs of a significant growth in SA's economy, house prices, which traditionally respond to growth, are likely to remain static. A further cut in the interest rate, which Gill Marcus has now said is possible, will help but in the foreseeable future "serious" sellers will have to accept a few more downward price adjustments.
"If people think that this is poor advice," she said, "they should take note how many overpriced homes stick on the market and do not sell until they have reduced their prices."
A Hout Bay property came onto the market at R11 million. It finally sold 24 months later at under R7,5 million. Another listed at R2,985 million sold after a five month wait for R2,3 million. Yet another came onto the market at R4,8 million and sold a year later at R3,5 million - a 24% drop,
Two further facts, said Steward, are worth mentioning on this subject: in these cases mentioned, the sellers lost considerable interest on money they could have collected earlier if they had priced correctly - and it is abundantly clear that most buyers detect overpricing early on and, after a perusal of the website do not even bother to visit too-high priced homes.
Anne Porter Knight Frank Press Release
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'What is fair market value?'
'What is fair market value?'
Those looking to buy or sell property have no doubt heard about the importance of fair market value. But what is fair market value and why is it important?
Adrian Goslett, CEO of RE/MAX of Southern Africa says that determining a property's fair market value is a key element of any property transaction and is a vital concept for all property sellers to understand in order for them to price their home correctly.
"Fair market value is the price that an educated and willing buyer is prepared to pay for a property. This definition assumes that both the buyer and seller are well-informed and that there is no pressure for the transaction to be concluded. When the parties to a sale are pressurised due to, for example, time pressures to move or financial reasons, then the negotiated price on the home may not reflect its true market value."
So how does a seller go about determining what would be fair market value for his property? Before starting, Goslett has the following tips:
•Take into account the factors that influence the value of your home such as its location and condition as well as general market conditions
•Find out the price that similar homes on the market sold for. It is important to determine the actual sales price, as it may differ from the price the home was marketed for. The properties should be comparable in terms of size, age and features. This will also give an overall picture of the market conditions in your area and what buyers are willing to pay for property there
•Consult a local real estate professional and request a valuation of your property. More often than not, an agent will use a comparative market analysis to determine fair market value. This analysis will include statistics from comparable recent sales and those currently for sale in your area
However, Goslett says that while a comparative market analysis is an important tool when assessing the market value of a property and then determining its ideal selling price, sellers shouldn't solely rely on this information from realtors; they should check it out themselves. "Sellers should drive around their area and look at homes for sale to see how they compare to theirs."
Goslett says that sellers should also make value adjustments for certain factors such as views, security and amenities like swimming pools and tennis courts. Other factors that influence fair market value that sellers need to take into account are whether it's a buyers or sellers market, interest rates, economic climate and availability of finance as well as the average amount of time that homes in the area spend on the market before they sell.
"While fair market value may not necessarily be what either the buyer or the seller wants it to be, it is an impartial calculation which will assist in determining a fair price for the home, no matter what the buyer can afford or what the seller wants to gain from the sale," says Goslett.
He concludes by saying that it is important for sellers to understand that fair market value differs dramatically from the personal value that they place on their property, which is based on their own memories, preferences and experiences. "At the end of the day, fair market value is the price a buyer is willing to pay and a seller is willing to accept. It's the value of the property in the current market, no matter how much the seller initially paid for it."
RE/MAX Press Release
Those looking to buy or sell property have no doubt heard about the importance of fair market value. But what is fair market value and why is it important?
Adrian Goslett, CEO of RE/MAX of Southern Africa says that determining a property's fair market value is a key element of any property transaction and is a vital concept for all property sellers to understand in order for them to price their home correctly.
"Fair market value is the price that an educated and willing buyer is prepared to pay for a property. This definition assumes that both the buyer and seller are well-informed and that there is no pressure for the transaction to be concluded. When the parties to a sale are pressurised due to, for example, time pressures to move or financial reasons, then the negotiated price on the home may not reflect its true market value."
So how does a seller go about determining what would be fair market value for his property? Before starting, Goslett has the following tips:
•Take into account the factors that influence the value of your home such as its location and condition as well as general market conditions
•Find out the price that similar homes on the market sold for. It is important to determine the actual sales price, as it may differ from the price the home was marketed for. The properties should be comparable in terms of size, age and features. This will also give an overall picture of the market conditions in your area and what buyers are willing to pay for property there
•Consult a local real estate professional and request a valuation of your property. More often than not, an agent will use a comparative market analysis to determine fair market value. This analysis will include statistics from comparable recent sales and those currently for sale in your area
However, Goslett says that while a comparative market analysis is an important tool when assessing the market value of a property and then determining its ideal selling price, sellers shouldn't solely rely on this information from realtors; they should check it out themselves. "Sellers should drive around their area and look at homes for sale to see how they compare to theirs."
Goslett says that sellers should also make value adjustments for certain factors such as views, security and amenities like swimming pools and tennis courts. Other factors that influence fair market value that sellers need to take into account are whether it's a buyers or sellers market, interest rates, economic climate and availability of finance as well as the average amount of time that homes in the area spend on the market before they sell.
"While fair market value may not necessarily be what either the buyer or the seller wants it to be, it is an impartial calculation which will assist in determining a fair price for the home, no matter what the buyer can afford or what the seller wants to gain from the sale," says Goslett.
He concludes by saying that it is important for sellers to understand that fair market value differs dramatically from the personal value that they place on their property, which is based on their own memories, preferences and experiences. "At the end of the day, fair market value is the price a buyer is willing to pay and a seller is willing to accept. It's the value of the property in the current market, no matter how much the seller initially paid for it."
RE/MAX Press Release
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Number of black property buyers rises
Number of black property buyers rises
Number of black property buyers rises
The number of black home buyers entering the residential property market is increasing steadily as the socio-economic tables turn, with the number of black home loan applicants already exceeding those of white applicants.
Saul Geffen, chief executive of bond originator ooba, says the number of applications by black buyers represents 45 percent of total home loan applications, and the number of applications submitted by white home buyers represents only 41 percent of the total.
Black buyers, however, represent only 39 percent of the number of the total approved home loans, whereas whites represent 47 percent of the t otal number of approved home loans. This ratio has changed considerably since last year, when blacks represented 30 percent and whites 56 percent of approved home loans.
For first-time homebuyers, the trend is clearly skewed in favour of black applicants. Currently, first-time homebuyers represent 49 percent of the total number of applications, and 44 percent in approved loans. Of these first-time applicants, 59 percent are black and 27 percent white.
When it comes to approved home loans, 55 percent of the t otal number of first-time homebuyer approved loans are for black applicants compared to 31 percent for whites. This ratio has also changed considerably since last year, when black applicants represented 48 percent and white applicants 36 percent of approved home loans.
Geffen says the higher levels and sustained increases in black buyers can be attributed t o t he changing economic demographic, as well as the fact that there are more buyers at the lower-to middle-income levels than first-time buyers. Clearly, the improved property market conditions play a role, which has resulted in more people being able to afford property.
"The shifting economic base in South Africa, largely influenced by the emerging black middle class, means the racial demographic of homebuyers is changing. The latest statistics also reveal that applications by Asian and coloured applicants remained steady year-on-year at around 8 percent and 5 percent respectively.
"The growth in first-time applications from black applicants can be attributed to improved property market conditions, a reduction in interest rates of 650 basis points since 2008, coupled with subdued property price inflation, improved bank approval rates and lower deposit requirements."
Geffen says first-time home buyers who want to take advantage of the favourable market should ensure that they have large enough deposits to put down as this will result in a more favourable interest rate, which significantly reduces the total cost over the term of the loan.
"A meaningful deposit significantly improves a buyer's chance of getting a home loan approved. Other factors that could boost the chances of a successful bond application include having positive credit profiles and stable employment histories. These reflect a pattern of consistent income, which is key when lenders assess bond applicants' risk profiles."
Geffen advises buyers to qualify for home loans through banks or bond originators before looking for properties.
"This will give buyers a good sense of the prices of properties they could get loans for. The qualification process can also pick up issues on credit records that will need to be addressed before formally applying for loans. The process streamlines the home-buying process and ensures that buyers can negotiate from a position of strength."
Weekend Argus (Saturday Edition)
Number of black property buyers rises
The number of black home buyers entering the residential property market is increasing steadily as the socio-economic tables turn, with the number of black home loan applicants already exceeding those of white applicants.
Saul Geffen, chief executive of bond originator ooba, says the number of applications by black buyers represents 45 percent of total home loan applications, and the number of applications submitted by white home buyers represents only 41 percent of the total.
Black buyers, however, represent only 39 percent of the number of the total approved home loans, whereas whites represent 47 percent of the t otal number of approved home loans. This ratio has changed considerably since last year, when blacks represented 30 percent and whites 56 percent of approved home loans.
For first-time homebuyers, the trend is clearly skewed in favour of black applicants. Currently, first-time homebuyers represent 49 percent of the total number of applications, and 44 percent in approved loans. Of these first-time applicants, 59 percent are black and 27 percent white.
When it comes to approved home loans, 55 percent of the t otal number of first-time homebuyer approved loans are for black applicants compared to 31 percent for whites. This ratio has also changed considerably since last year, when black applicants represented 48 percent and white applicants 36 percent of approved home loans.
Geffen says the higher levels and sustained increases in black buyers can be attributed t o t he changing economic demographic, as well as the fact that there are more buyers at the lower-to middle-income levels than first-time buyers. Clearly, the improved property market conditions play a role, which has resulted in more people being able to afford property.
"The shifting economic base in South Africa, largely influenced by the emerging black middle class, means the racial demographic of homebuyers is changing. The latest statistics also reveal that applications by Asian and coloured applicants remained steady year-on-year at around 8 percent and 5 percent respectively.
"The growth in first-time applications from black applicants can be attributed to improved property market conditions, a reduction in interest rates of 650 basis points since 2008, coupled with subdued property price inflation, improved bank approval rates and lower deposit requirements."
Geffen says first-time home buyers who want to take advantage of the favourable market should ensure that they have large enough deposits to put down as this will result in a more favourable interest rate, which significantly reduces the total cost over the term of the loan.
"A meaningful deposit significantly improves a buyer's chance of getting a home loan approved. Other factors that could boost the chances of a successful bond application include having positive credit profiles and stable employment histories. These reflect a pattern of consistent income, which is key when lenders assess bond applicants' risk profiles."
Geffen advises buyers to qualify for home loans through banks or bond originators before looking for properties.
"This will give buyers a good sense of the prices of properties they could get loans for. The qualification process can also pick up issues on credit records that will need to be addressed before formally applying for loans. The process streamlines the home-buying process and ensures that buyers can negotiate from a position of strength."
Weekend Argus (Saturday Edition)
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20 October 2011
Gradual recovery for commercial property: Absa
Gradual recovery for commercial property: Absa
Absa says things are slowly getting better.
(I-Net Bridge) - No more booms in growth are likely to be seen in the property sector, however a gradual recovery is very much on the way according to experts from Absa.
Mike Mortimer, head of commercial property, said: "I think we have turned the corner. We're not going to see 2005-2007's exponential growth, quite frankly it's not sustainable, but things are getting better slowly."
Bobby Malabie, Chief Executive of Absa Retail and Business Bank, said that although market conditions were difficult to read, there were tentative signs of recovery in selected sectors of the South African commercial property industry.
He added that the industry, which encompassed retail, office and industrial property, should benefit from a delayed and more gradual move to higher interest rates than was previously envisaged. However, the property market was still faced with a number of contradictory indicators.
"We have seen a stabilisation and gradual reduction in our underperforming book, indicating that the distress in the market is contained, and is not as severe as we experienced a year ago," according to Malabie. "This is symptomatic of an industry on the turn."
Malabie argued that the Eskom crisis, which came to a head in early 2008, had turned out to be a blessing for the South African commercial property sector.
"A large number of developments were put on hold as a result of uncertainty over the supply of electricity. Viewed in hindsight, those decisions have potentially saved us a great deal of pain due to an oversupply that could have occurred as a result of these developments proceeding."
Absa said, nevertheless, that there were a number of thorny issues still facing investors and financiers in the commercial property sector. A particular challenge was that rental escalations were not keeping track with rising operational costs. Utility charges were increasing at a pace well in excess of inflation, which made it difficult to forecast net income with any degree of accuracy. This added to prevailing uncertainty and weighed heavily on investment and development decisions.
Mortimer stressed that South African corporates had the highest savings rates recorded since 2000, but net investment activity had been easing since 2009.
Malabie added: "Businesses are shoring up cash reserves because of a lack of confidence. For now, there is no catalyst for significant development and fixed investment."
These concerns are reflected in the SACCI Business Confidence Index, which has continued to decline steadily from March to August.
Malabie said: "Almost half of our distressed loan book comprises of residential development, vacant land and hotels. These sectors make up a very small percentage of our overall loan book and we will not be lending aggressively into them in the short to medium term.
"Outside of these areas, there remains reasonable scope for suitable investment returns, given that we see the commercial property industry as being on a gradual upward trajectory. However, circumspection is key and sustainability of property assets and related cash flows should be aggressively interrogated before any development or investment decisions are taken."
Absa says things are slowly getting better.
(I-Net Bridge) - No more booms in growth are likely to be seen in the property sector, however a gradual recovery is very much on the way according to experts from Absa.
Mike Mortimer, head of commercial property, said: "I think we have turned the corner. We're not going to see 2005-2007's exponential growth, quite frankly it's not sustainable, but things are getting better slowly."
Bobby Malabie, Chief Executive of Absa Retail and Business Bank, said that although market conditions were difficult to read, there were tentative signs of recovery in selected sectors of the South African commercial property industry.
He added that the industry, which encompassed retail, office and industrial property, should benefit from a delayed and more gradual move to higher interest rates than was previously envisaged. However, the property market was still faced with a number of contradictory indicators.
"We have seen a stabilisation and gradual reduction in our underperforming book, indicating that the distress in the market is contained, and is not as severe as we experienced a year ago," according to Malabie. "This is symptomatic of an industry on the turn."
Malabie argued that the Eskom crisis, which came to a head in early 2008, had turned out to be a blessing for the South African commercial property sector.
"A large number of developments were put on hold as a result of uncertainty over the supply of electricity. Viewed in hindsight, those decisions have potentially saved us a great deal of pain due to an oversupply that could have occurred as a result of these developments proceeding."
Absa said, nevertheless, that there were a number of thorny issues still facing investors and financiers in the commercial property sector. A particular challenge was that rental escalations were not keeping track with rising operational costs. Utility charges were increasing at a pace well in excess of inflation, which made it difficult to forecast net income with any degree of accuracy. This added to prevailing uncertainty and weighed heavily on investment and development decisions.
Mortimer stressed that South African corporates had the highest savings rates recorded since 2000, but net investment activity had been easing since 2009.
Malabie added: "Businesses are shoring up cash reserves because of a lack of confidence. For now, there is no catalyst for significant development and fixed investment."
These concerns are reflected in the SACCI Business Confidence Index, which has continued to decline steadily from March to August.
Malabie said: "Almost half of our distressed loan book comprises of residential development, vacant land and hotels. These sectors make up a very small percentage of our overall loan book and we will not be lending aggressively into them in the short to medium term.
"Outside of these areas, there remains reasonable scope for suitable investment returns, given that we see the commercial property industry as being on a gradual upward trajectory. However, circumspection is key and sustainability of property assets and related cash flows should be aggressively interrogated before any development or investment decisions are taken."
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Gradual recovery for commercial property: Absa
Gradual recovery for commercial property: Absa
Absa says things are slowly getting better.
(I-Net Bridge) - No more booms in growth are likely to be seen in the property sector, however a gradual recovery is very much on the way according to experts from Absa.
Mike Mortimer, head of commercial property, said: "I think we have turned the corner. We're not going to see 2005-2007's exponential growth, quite frankly it's not sustainable, but things are getting better slowly."
Bobby Malabie, Chief Executive of Absa Retail and Business Bank, said that although market conditions were difficult to read, there were tentative signs of recovery in selected sectors of the South African commercial property industry.
He added that the industry, which encompassed retail, office and industrial property, should benefit from a delayed and more gradual move to higher interest rates than was previously envisaged. However, the property market was still faced with a number of contradictory indicators.
"We have seen a stabilisation and gradual reduction in our underperforming book, indicating that the distress in the market is contained, and is not as severe as we experienced a year ago," according to Malabie. "This is symptomatic of an industry on the turn."
Malabie argued that the Eskom crisis, which came to a head in early 2008, had turned out to be a blessing for the South African commercial property sector.
"A large number of developments were put on hold as a result of uncertainty over the supply of electricity. Viewed in hindsight, those decisions have potentially saved us a great deal of pain due to an oversupply that could have occurred as a result of these developments proceeding."
Absa said, nevertheless, that there were a number of thorny issues still facing investors and financiers in the commercial property sector. A particular challenge was that rental escalations were not keeping track with rising operational costs. Utility charges were increasing at a pace well in excess of inflation, which made it difficult to forecast net income with any degree of accuracy. This added to prevailing uncertainty and weighed heavily on investment and development decisions.
Mortimer stressed that South African corporates had the highest savings rates recorded since 2000, but net investment activity had been easing since 2009.
Malabie added: "Businesses are shoring up cash reserves because of a lack of confidence. For now, there is no catalyst for significant development and fixed investment."
These concerns are reflected in the SACCI Business Confidence Index, which has continued to decline steadily from March to August.
Malabie said: "Almost half of our distressed loan book comprises of residential development, vacant land and hotels. These sectors make up a very small percentage of our overall loan book and we will not be lending aggressively into them in the short to medium term.
"Outside of these areas, there remains reasonable scope for suitable investment returns, given that we see the commercial property industry as being on a gradual upward trajectory. However, circumspection is key and sustainability of property assets and related cash flows should be aggressively interrogated before any development or investment decisions are taken."
Absa says things are slowly getting better.
(I-Net Bridge) - No more booms in growth are likely to be seen in the property sector, however a gradual recovery is very much on the way according to experts from Absa.
Mike Mortimer, head of commercial property, said: "I think we have turned the corner. We're not going to see 2005-2007's exponential growth, quite frankly it's not sustainable, but things are getting better slowly."
Bobby Malabie, Chief Executive of Absa Retail and Business Bank, said that although market conditions were difficult to read, there were tentative signs of recovery in selected sectors of the South African commercial property industry.
He added that the industry, which encompassed retail, office and industrial property, should benefit from a delayed and more gradual move to higher interest rates than was previously envisaged. However, the property market was still faced with a number of contradictory indicators.
"We have seen a stabilisation and gradual reduction in our underperforming book, indicating that the distress in the market is contained, and is not as severe as we experienced a year ago," according to Malabie. "This is symptomatic of an industry on the turn."
Malabie argued that the Eskom crisis, which came to a head in early 2008, had turned out to be a blessing for the South African commercial property sector.
"A large number of developments were put on hold as a result of uncertainty over the supply of electricity. Viewed in hindsight, those decisions have potentially saved us a great deal of pain due to an oversupply that could have occurred as a result of these developments proceeding."
Absa said, nevertheless, that there were a number of thorny issues still facing investors and financiers in the commercial property sector. A particular challenge was that rental escalations were not keeping track with rising operational costs. Utility charges were increasing at a pace well in excess of inflation, which made it difficult to forecast net income with any degree of accuracy. This added to prevailing uncertainty and weighed heavily on investment and development decisions.
Mortimer stressed that South African corporates had the highest savings rates recorded since 2000, but net investment activity had been easing since 2009.
Malabie added: "Businesses are shoring up cash reserves because of a lack of confidence. For now, there is no catalyst for significant development and fixed investment."
These concerns are reflected in the SACCI Business Confidence Index, which has continued to decline steadily from March to August.
Malabie said: "Almost half of our distressed loan book comprises of residential development, vacant land and hotels. These sectors make up a very small percentage of our overall loan book and we will not be lending aggressively into them in the short to medium term.
"Outside of these areas, there remains reasonable scope for suitable investment returns, given that we see the commercial property industry as being on a gradual upward trajectory. However, circumspection is key and sustainability of property assets and related cash flows should be aggressively interrogated before any development or investment decisions are taken."
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Investors join hands in pursuing Metsi Pepa developers
Investors join hands in pursuing Metsi Pepa developers
On Tuesday I played golf in an Investec Golf Day and was paired with some other attorneys in a fourball. One of the attorneys was Johan Botha, who is mentioned in this article. He is the attorney for the developers, although he never mentioned it during the round or at the 19th hole. He was a nice enough gentleman and so I wish him luck in sorting out this mess. -- Gareth
Four years down the line stakeholders are demanding their money back.
A group of at least 70 investors in the failed North West province Metsi Pepa development have rallied together in taking civil and criminal action against developers Nicola Prinsloo and her husband, Jaco. In an e-mail dated September 23 2011, Nicola Prinsloo informed investors that the development had been sold to Land Affairs, allegedly for 30% less than its monetary value. Her legal counsel, Johan Botha, subsequently offered investors 40c in the rand as compensation.
Moneyweb knows of at least one investor who has been reimbursed but has confirmed with Johan Botha that at least 75 of 200 investors have been paid. The investor who received 40c in the rand will continue to fight for the remainder he/she is owed. A number of investors who met in northern Johannesburg at the weekend also plan legal action.
A statement following the meeting reads: “At least 70 people have already indicated that they want to go ahead with plans to criminally and civilly prosecute the developers and all associated parties in this scheme. These investors are seeking an urgent court interdict to have assets frozen to prevent more money from disappearing.”
Attorney Spencer Tarr and advocate Robin Stransham-Ford are representing the investors. One of the disgruntled investors said at Saturday’s meeting: “We never saw anything of the promises made to us in four years come true and even at this late stage we are still being lied to and kept in the dark.” Moneyweb revealed in August that the land earmarked for the development had been sold. Investors were told as recently as July that the development was still on track and that investors would be allocated shares in land. The offer was backed up by an e-mail from Botha, but this also never materialised.
The development was dogged by controversy since its inception over the alleged breach of conditions set out by a Department of Agriculture record of decision (ROD). The ROD stipulated that no building could take place within at least 30m from wetlands on the farm which is situated near the Klerkskraal dam of the Mooi River. This condition was allegedly breached by Jaco Prinsloo when he removed reeds from the wetlands. The authorities got wind of it and the development basically came to a standstill.
In the meantime Nicola and the marketer of the development, Cherie Eilertsen of Platinum Planet, were assuring investors. Now it appears a storm is brewing between the Prinsloos and Eilertsen with each blaming the other for irregularities. After Botha made the 40c offer to investors, Eilertsen SMSed investors informing them not to accept the offer as she could negotiate a better settlement. Eilertsen’s lawyer Antoon Botha confirmed the SMS. It’s understood the two legal counsel are set to meet later this week.
On Tuesday I played golf in an Investec Golf Day and was paired with some other attorneys in a fourball. One of the attorneys was Johan Botha, who is mentioned in this article. He is the attorney for the developers, although he never mentioned it during the round or at the 19th hole. He was a nice enough gentleman and so I wish him luck in sorting out this mess. -- Gareth
Four years down the line stakeholders are demanding their money back.
A group of at least 70 investors in the failed North West province Metsi Pepa development have rallied together in taking civil and criminal action against developers Nicola Prinsloo and her husband, Jaco. In an e-mail dated September 23 2011, Nicola Prinsloo informed investors that the development had been sold to Land Affairs, allegedly for 30% less than its monetary value. Her legal counsel, Johan Botha, subsequently offered investors 40c in the rand as compensation.
Moneyweb knows of at least one investor who has been reimbursed but has confirmed with Johan Botha that at least 75 of 200 investors have been paid. The investor who received 40c in the rand will continue to fight for the remainder he/she is owed. A number of investors who met in northern Johannesburg at the weekend also plan legal action.
A statement following the meeting reads: “At least 70 people have already indicated that they want to go ahead with plans to criminally and civilly prosecute the developers and all associated parties in this scheme. These investors are seeking an urgent court interdict to have assets frozen to prevent more money from disappearing.”
Attorney Spencer Tarr and advocate Robin Stransham-Ford are representing the investors. One of the disgruntled investors said at Saturday’s meeting: “We never saw anything of the promises made to us in four years come true and even at this late stage we are still being lied to and kept in the dark.” Moneyweb revealed in August that the land earmarked for the development had been sold. Investors were told as recently as July that the development was still on track and that investors would be allocated shares in land. The offer was backed up by an e-mail from Botha, but this also never materialised.
The development was dogged by controversy since its inception over the alleged breach of conditions set out by a Department of Agriculture record of decision (ROD). The ROD stipulated that no building could take place within at least 30m from wetlands on the farm which is situated near the Klerkskraal dam of the Mooi River. This condition was allegedly breached by Jaco Prinsloo when he removed reeds from the wetlands. The authorities got wind of it and the development basically came to a standstill.
In the meantime Nicola and the marketer of the development, Cherie Eilertsen of Platinum Planet, were assuring investors. Now it appears a storm is brewing between the Prinsloos and Eilertsen with each blaming the other for irregularities. After Botha made the 40c offer to investors, Eilertsen SMSed investors informing them not to accept the offer as she could negotiate a better settlement. Eilertsen’s lawyer Antoon Botha confirmed the SMS. It’s understood the two legal counsel are set to meet later this week.
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FNB and Sasol plot housing iPad
FNB and Sasol plot housing iPad
Formerly-listed Enviroserv’s subsidiary to build houses but not from bricks and mortar.
First National Bank (FNB) believes it has identified an opportunity to lend hundreds of millions of rand via green housing loans in a bid to deal with the shortage of houses in the affordable space, while on the other side giving entrepreneurs an opportunity to benefit from this initiative.
According to Marius Marais, FNBs CEO of Housing Finance (a unit of the bank offering home loans to people earning R3 500-R16 000) there is a need of about 600 000 units, based on a survey done in 2007. Marais added that its book in affordable housing space is heading close to R9bn, with loans of about R2bn on an annual basis. Because of the shortages, Marais says there is more room to grow.
“Where are these families staying at the moment, they earn that kind of income, they either rent rooms or leave in a backyard room ... We need to find the housing iPad in Africa ... the piece of technology that can be working across the whole of Africa and can meet the housing needs that are out there.
“The biggest issue at the moment is to find sufficient supply to fund, meaning new houses coming into the market place. My clear cut measure is... how many families did we actually enable home ownership for in a decent home,” Marais said.
To work around this “housing iPad” which is meant to come up with an innovative way of meeting housing needs, Marais said FNB has partnered with petrochemicals giant Sasol and Tower Technologies, a subsidiary of formerly-listed Enviroserv involved in what it calls “alternative building system”.
With the “alternative building system”, the houses are not made out of bricks and mortar, but have quality equal or exceeding that of a brick, according to Tower Technologies. The houses are made from mining, manufacturing by products and have pre-built panels derived from waste streams like fly ash and gypsum. Fly ash is a by-product of Sasol’s power production, while gypsum is a by-product of industries, such as paper making, fertiliser production, desalination of acid mine water.
CEO of Tower Technologies Mike Symons said the houses had a “look and feel of traditional brick and mortar with many superior attributes in that the walls are guaranteed straight, solid and are incombustible”.
FNB’s Marais added that “conventional building methods are becoming increasingly expensive, and impact directly on the ability of banks and developers to meet the need for affordable housing, because of this, and continued increases in labour costs, we have been compelled to consider alternative technologies that will enable us to deliver affordable quality houses to the emerging middle class.
“What we would like to do is to provide the finance for the commercial entity [involved in building] and the end-user, but our primary driver is to enable primary home ownership.”
Bridgitte Backmann, MD Sasol Chemcity, Sasol’s enterprise development vehicle supporting SMMEs in the chemical, energy and related sectors, said the affordable housing solution does not have to be inferior nor should it be more expensive than bricks and mortar.
“We have joined forces as the private sector and we believe that we found a ground breaking and innovative way of dealing with shortages,” Backmann said.
Currently three housing units have been built in an emerging middle class suburb known as Cosmo City in Johannesburg, where market acceptance is believed to be very high.
“Taking this innovation from idea to market has been particularly rewarding. By supporting the development of this technology, Sasol is showing its ongoing commitment to reducing its environmental footprint. A number of entrepreneurs and private institutions are additionally starting to explore the affordable housing space, identifying it as a market which is ripe with potential. Most significantly, it has the potential to create jobs for South Africans,” said Backmann.
Formerly-listed Enviroserv’s subsidiary to build houses but not from bricks and mortar.
First National Bank (FNB) believes it has identified an opportunity to lend hundreds of millions of rand via green housing loans in a bid to deal with the shortage of houses in the affordable space, while on the other side giving entrepreneurs an opportunity to benefit from this initiative.
According to Marius Marais, FNBs CEO of Housing Finance (a unit of the bank offering home loans to people earning R3 500-R16 000) there is a need of about 600 000 units, based on a survey done in 2007. Marais added that its book in affordable housing space is heading close to R9bn, with loans of about R2bn on an annual basis. Because of the shortages, Marais says there is more room to grow.
“Where are these families staying at the moment, they earn that kind of income, they either rent rooms or leave in a backyard room ... We need to find the housing iPad in Africa ... the piece of technology that can be working across the whole of Africa and can meet the housing needs that are out there.
“The biggest issue at the moment is to find sufficient supply to fund, meaning new houses coming into the market place. My clear cut measure is... how many families did we actually enable home ownership for in a decent home,” Marais said.
To work around this “housing iPad” which is meant to come up with an innovative way of meeting housing needs, Marais said FNB has partnered with petrochemicals giant Sasol and Tower Technologies, a subsidiary of formerly-listed Enviroserv involved in what it calls “alternative building system”.
With the “alternative building system”, the houses are not made out of bricks and mortar, but have quality equal or exceeding that of a brick, according to Tower Technologies. The houses are made from mining, manufacturing by products and have pre-built panels derived from waste streams like fly ash and gypsum. Fly ash is a by-product of Sasol’s power production, while gypsum is a by-product of industries, such as paper making, fertiliser production, desalination of acid mine water.
CEO of Tower Technologies Mike Symons said the houses had a “look and feel of traditional brick and mortar with many superior attributes in that the walls are guaranteed straight, solid and are incombustible”.
FNB’s Marais added that “conventional building methods are becoming increasingly expensive, and impact directly on the ability of banks and developers to meet the need for affordable housing, because of this, and continued increases in labour costs, we have been compelled to consider alternative technologies that will enable us to deliver affordable quality houses to the emerging middle class.
“What we would like to do is to provide the finance for the commercial entity [involved in building] and the end-user, but our primary driver is to enable primary home ownership.”
Bridgitte Backmann, MD Sasol Chemcity, Sasol’s enterprise development vehicle supporting SMMEs in the chemical, energy and related sectors, said the affordable housing solution does not have to be inferior nor should it be more expensive than bricks and mortar.
“We have joined forces as the private sector and we believe that we found a ground breaking and innovative way of dealing with shortages,” Backmann said.
Currently three housing units have been built in an emerging middle class suburb known as Cosmo City in Johannesburg, where market acceptance is believed to be very high.
“Taking this innovation from idea to market has been particularly rewarding. By supporting the development of this technology, Sasol is showing its ongoing commitment to reducing its environmental footprint. A number of entrepreneurs and private institutions are additionally starting to explore the affordable housing space, identifying it as a market which is ripe with potential. Most significantly, it has the potential to create jobs for South Africans,” said Backmann.
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House price growth to tread water
House price growth to tread water
The slowdown in house price growth runs parallel with the weakening SA econ-omy.
Standard Bank’s median house price recorded growth of 0.6% y/y in September.
Standard Bank’s median house price recorded growth of 0.6% y/y in September. Standard Bank’s median house price (smoothed) posted a growth rate of 0.6% y/y in September, from 1.6% y/y in August. Growth in real terms remains negative.
The slowdown in house price growth runs parallel with the weakening SA econ-omy. GDP growth slowed to 1.3% q/q (saar) in Q2:11, from 4.5% q/q (saar) in Q1:11.
Household consumption was undermined by receding real income growth and the sluggish SA labour market.
Growth in household disposable income slowed to 4.1% q/q (saar) in Q2:11, from 5.4% q/q (saar) in Q1:11. This slowdown was mirrored by real household con-sumption expenditure growth decelerating to 3.8% q/q in Q2:11, from a robust 5.2% q/q (saar) in Q1:11.
Data from Statistics South Africa’s Quarterly Employment Statistics shows that a mere 7,000 jobs were added in the formal non-agricultural sector in Q2:11, com-pared to 38,000 jobs in Q1:11. The formal non-agricultural sector, after losing 349,000 jobs in 2009, has added just 133,000 jobs since 2010.
Consumer confidence declined, with the FNB/BER Consumer Confidence Index falling to 4 pts in Q3:11, from 11 pts in Q2:11. Survey participants are particularly pessimistic about their future financial position as well as the state of the SA econ-omy.
Household credit growth muted despite a historically low interest rate environment.
Growth in total credit extension to households eased to 5.2% y/y in August, from 6.6% y/y in July. Growth in mortgage advances mirrored this decline, registering 1.6% y/y in August, from 3.0% y/y in July.
The combination of household disposable income growth and historically low nomi-nal interest rates (the prime overdraft rate has remained steady at 9% since No-vember 2010) has contributed to the slight improvement in the ratio of household debt to disposable income, to 75.9% in Q2:11, from 76.8% in Q1:11. However, households continue to carry a sizeable debt burden, with the household debt to income ratio in Q2:11 not significantly different from its 2008 peak of 82%.
Building activity remains subdued, with house price growth likely to follow suit.
The value of residential buildings completed (in real terms) for the period January to July 2011 fell by 7.4%, from the corresponding period in 2010. Residential con-tractors, as surveyed by the Bureau of Economic Research, suffered a fall in busi-ness confidence, to 20 index points in Q3:11, from 24 index points in Q2:11. Sur-vey respondents cited deteriorating business conditions, slower building activity, less demand for new building work and negative profitability as the culprits for this slide in confidence.
The South African economy’s growth momentum has slowed. Standard Bank believes that this trend will persist through H2:11, and has revised its estimates for GDP growth to 3.3% y/y (previously 3.8% y/y) for 2011 and 3.1% y/y (previously 3.4% y/y) for 2012.
The SARB has made similar downward revisions to their GDP growth forecast. In addition, the SARB has stated that the risks to the inflation outlook were “delicately balanced”, with exogenous factors seen as the primary drivers of inflation. The SARB has also stated that there was no evidence yet of second-round effects stemming from im-ported inflation. However, inflation is expected to marginally breach the upper end of the target range in Q4:11 and peak in Q1:12 before returning to within the target range in Q2:12.
An increasingly poor domestic economic growth outlook, coupled with the sharp fall in consumer confidence and an anticipated rise in inflation, paints an uninspiring outlook for consumer spending in H2:11. With household debt still high, and fuel, electricity and food costs on the rise, consumers face testing times. We forecast Standard Bank’s median house price growth to tread water in low single digits, in nominal terms, into 2012.
*Sibusiso Gumbi is from Standard Bank.
The slowdown in house price growth runs parallel with the weakening SA econ-omy.
Standard Bank’s median house price recorded growth of 0.6% y/y in September.
Standard Bank’s median house price recorded growth of 0.6% y/y in September. Standard Bank’s median house price (smoothed) posted a growth rate of 0.6% y/y in September, from 1.6% y/y in August. Growth in real terms remains negative.
The slowdown in house price growth runs parallel with the weakening SA econ-omy. GDP growth slowed to 1.3% q/q (saar) in Q2:11, from 4.5% q/q (saar) in Q1:11.
Household consumption was undermined by receding real income growth and the sluggish SA labour market.
Growth in household disposable income slowed to 4.1% q/q (saar) in Q2:11, from 5.4% q/q (saar) in Q1:11. This slowdown was mirrored by real household con-sumption expenditure growth decelerating to 3.8% q/q in Q2:11, from a robust 5.2% q/q (saar) in Q1:11.
Data from Statistics South Africa’s Quarterly Employment Statistics shows that a mere 7,000 jobs were added in the formal non-agricultural sector in Q2:11, com-pared to 38,000 jobs in Q1:11. The formal non-agricultural sector, after losing 349,000 jobs in 2009, has added just 133,000 jobs since 2010.
Consumer confidence declined, with the FNB/BER Consumer Confidence Index falling to 4 pts in Q3:11, from 11 pts in Q2:11. Survey participants are particularly pessimistic about their future financial position as well as the state of the SA econ-omy.
Household credit growth muted despite a historically low interest rate environment.
Growth in total credit extension to households eased to 5.2% y/y in August, from 6.6% y/y in July. Growth in mortgage advances mirrored this decline, registering 1.6% y/y in August, from 3.0% y/y in July.
The combination of household disposable income growth and historically low nomi-nal interest rates (the prime overdraft rate has remained steady at 9% since No-vember 2010) has contributed to the slight improvement in the ratio of household debt to disposable income, to 75.9% in Q2:11, from 76.8% in Q1:11. However, households continue to carry a sizeable debt burden, with the household debt to income ratio in Q2:11 not significantly different from its 2008 peak of 82%.
Building activity remains subdued, with house price growth likely to follow suit.
The value of residential buildings completed (in real terms) for the period January to July 2011 fell by 7.4%, from the corresponding period in 2010. Residential con-tractors, as surveyed by the Bureau of Economic Research, suffered a fall in busi-ness confidence, to 20 index points in Q3:11, from 24 index points in Q2:11. Sur-vey respondents cited deteriorating business conditions, slower building activity, less demand for new building work and negative profitability as the culprits for this slide in confidence.
The South African economy’s growth momentum has slowed. Standard Bank believes that this trend will persist through H2:11, and has revised its estimates for GDP growth to 3.3% y/y (previously 3.8% y/y) for 2011 and 3.1% y/y (previously 3.4% y/y) for 2012.
The SARB has made similar downward revisions to their GDP growth forecast. In addition, the SARB has stated that the risks to the inflation outlook were “delicately balanced”, with exogenous factors seen as the primary drivers of inflation. The SARB has also stated that there was no evidence yet of second-round effects stemming from im-ported inflation. However, inflation is expected to marginally breach the upper end of the target range in Q4:11 and peak in Q1:12 before returning to within the target range in Q2:12.
An increasingly poor domestic economic growth outlook, coupled with the sharp fall in consumer confidence and an anticipated rise in inflation, paints an uninspiring outlook for consumer spending in H2:11. With household debt still high, and fuel, electricity and food costs on the rise, consumers face testing times. We forecast Standard Bank’s median house price growth to tread water in low single digits, in nominal terms, into 2012.
*Sibusiso Gumbi is from Standard Bank.
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Housing market favours first-time buyers
Housing market favours first-time buyers - report
(I-Net Bridge) - Residential home prices fell slightly from last year, but purchase prices for first-time home buyers increased by 6%, according to a new report. The mixed numbers reflected changing demographics and increased demand for small properties.
According to bond-originating firm Ooba, the average house price decreased by 2% from September last year, from about R856,000 to R839,000. The average purchase price for first-time buyers increased from R585,000 to R620,000 during the same period.
Ooba CEO Saul Geffen attributed increased activity from first-time buyers to the emerging black middle class, combined with low interest rates and decreased deposit requirements. He also said increased municipal and utilities tariffs caused home buyers to choose smaller properties.
"The rising costs of home ownership and the changing economic and racial demographics amongst home buyers are influencing demand at the lower to middle end of the housing market," he said.
More than half of Ooba-bond applicants are first-time home buyers, and nearly half of applicants are black, the report said.
Although housing prices fell overall, average bond size increased 6%, reflecting a drop in deposit requirements by one-third. The average deposit requirement fell to 12.7% of purchase price.
"This is a significant improvement from the levels seen in 2009, and opens up a considerably broader homebuyer base who can now afford the lower deposit requirements," Geffen said.
Nearly a quarter of accepted applicants were previously rejected by another lender, a drop from 30% in September 2010.
The report also found a 1.1% increase in average purchase price from August 2011. Geffen expected slight positive and negative shifts such as this for the rest of the year.
(I-Net Bridge) - Residential home prices fell slightly from last year, but purchase prices for first-time home buyers increased by 6%, according to a new report. The mixed numbers reflected changing demographics and increased demand for small properties.
According to bond-originating firm Ooba, the average house price decreased by 2% from September last year, from about R856,000 to R839,000. The average purchase price for first-time buyers increased from R585,000 to R620,000 during the same period.
Ooba CEO Saul Geffen attributed increased activity from first-time buyers to the emerging black middle class, combined with low interest rates and decreased deposit requirements. He also said increased municipal and utilities tariffs caused home buyers to choose smaller properties.
"The rising costs of home ownership and the changing economic and racial demographics amongst home buyers are influencing demand at the lower to middle end of the housing market," he said.
More than half of Ooba-bond applicants are first-time home buyers, and nearly half of applicants are black, the report said.
Although housing prices fell overall, average bond size increased 6%, reflecting a drop in deposit requirements by one-third. The average deposit requirement fell to 12.7% of purchase price.
"This is a significant improvement from the levels seen in 2009, and opens up a considerably broader homebuyer base who can now afford the lower deposit requirements," Geffen said.
Nearly a quarter of accepted applicants were previously rejected by another lender, a drop from 30% in September 2010.
The report also found a 1.1% increase in average purchase price from August 2011. Geffen expected slight positive and negative shifts such as this for the rest of the year.
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