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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.

05 December 2011

Joburg`s new town planning scheme spells disaster

Joburg`s new town planning scheme spells disaster

SAPOA says the city needs to go back to the drawing board.

Johannesburg, Dec 5 (I-Net Bridge) - The City of Johannesburg's new town planning scheme is unworkable according to the South African Property Owners Association (SAPOA).

The City of Jo'burg implemented a new town planning scheme last week - The Consolidated Johannesburg Town Planning Scheme 2011 - intended to combine over a dozen different planning schemes or zoning regulations in the municipal area of Johannesburg into one set of uniform zoning provisions, without altering existing zoning or development rights attached to any particular property.

However, SAPOA argued that instead of streamlining town planning in this growing city, the errors and inadequacies of the scheme were so severe that the city needed to go back to the drawing board.

SAPOA also pointed to a number of alarming bombshells buried in its fine print.An effective appropriation of rights without compensation arose from a clause that provided for approved rights which were not exercised within 24 months to become "null and void".

The scheme also stated that the municipality was not bound by its own town planning scheme.

Neil Gopal, CEO of SAPOA said, "We acknowledge that there is a need for a town planning scheme that ensures the regulation of land is uniform and more efficient throughout the municipal area, but this is not what this document does".

According to SAPOA's professional and legal advice, the 2011 Jo'burg Town Planning scheme contradicted itself in numerous places, referred to schedules and annexures not in the document, contained an abundance of inadequate and confusing definitions, and even contradicted other legislation, such as its definition of an "erf" which doesn't conform with the Land Survey Act.

"In general the new scheme is poorly compiled. The meaning and interpretation of many provisions is impossible to understand - either logically or legally," according to Gopal, who elaborated that this was the conclusion reached by a large number of professionals and practitioners in the field of town planning.

"In fact, three full sections were missing from the copy supplied to SAPOA and despite repeated efforts requesting this information, we have yet to receive it".

"The lack of interaction in terms of acknowledgement of letters, submissions made, requests for information, and so forth, from the City of Johannesburg is a worrying trend".
He noted that this was only one in a long chain of events where the city had switched off to the needs of its commercial property owners and homeowners, who were the largest rates payers.

He said: "We, and other professionals, intend to lodge an appeal to the Townships Board".

R4.6bn Pickvest rescue hinges on property billionaire

R4.6bn Pickvest rescue hinges on property billionaire

Rescue practitioner says the choice is simple: Accept Georgiou’s deal, or liquidate.

Pickvest investors stand to lose an estimated R3.8bn, or 81% of their capital, unless they accept a rescue offer proposed by controversial billionaire Nic Georgiou. This is the message from business rescue practitioner Hans Klopper who filed his plan to save the Pickvest property syndications on Wednesday. The rescue plan can be downloaded here. It was Georgiou who, through his companies, “guaranteed” the generous returns offered by Pickvest syndications. But these guarantees turned out to be worthless when problems started to emerge at the syndication giant earlier this year. Klopper was appointed to the eight Pickvest schemes in a bid to prevent their liquidation. His appointment provides the syndications with temporary protection from their creditors. This protection gives Klopper time to decide if the syndications can be saved.

In the 62-page rescue document, Klopper effectively tells investors they can choose Georgiou’s offer, or face the liquidation of their investments. Says Klopper: “It is evident that the prospects of the investors recovering their capital without the [Georgiou] offer being accepted are bleak whereas the recovery prospects, should the offer be accepted, are considerably improved.”
Klopper adds that the Georgiou proposal, known as the Orthotouch offer, is the “only realistic opportunity” for investors to recover their capital.

The Orthotouch offer is nothing new. It was proposed to investors in April. The deal would see Orthotouch, a company controlled by Georgiou, buying all of investors’ buildings, and paying for them after five years. They will also earn an income, starting at 6% in year one, increasing to 7% by year five.

However, Klopper has renegotiated the original transaction with clauses and safeguards that he says are to the benefit of Pickvest investors. He says the deal will be underpinned by property worth more than R4bn, and that investors can appoint two directors to the Orthotouch board. Further, Georgiou’s company, Zephan, will transfer buildings worth approximately R1.5bn into Orthotouch for added security. Orthotouch may not lend any money to or invest in third parties while investors remain unpaid.

Klopper says there has been a “groundswell of optimism” from financial advisers, some of whom were steadfastly opposed to the Orthotouch offer in its original form.

Investors are scheduled to meet on December 14, where they can propose amendments to Klopper’s plan and vote to approve it. The plan amounts to the acceptance of the renegotiated Orthotouch offer.
A key feature of the Orthotouch deal is that it is dependent on its acceptance by investors in all eight property syndications. Those in the Highveld 19-22 might feel they have nothing to lose by voting for Georgiou’s proposal. But those invested in the healthiest syndication, Highveld 18, may be less inclined to invest another five years with Georgiou.

Bleak liquidation scenario

Klopper provides investors with estimates of what they can expect to receive in the event of liquidation. It is no surprise that those invested in the older syndications, Highveld 15-18, are expected to fare considerably better than the others. This is because the older syndications actually own property. The others do not.
In April Moneyweb reported that Highveld 18 is the healthiest of these four syndications, and that 16 was in the most trouble. Klopper arrives at the same conclusion in his business rescue plan.

According to Klopper’s estimates, an investor in Highveld 18 might hope to recover 61% of their capital. An investor in Highveld 16 might get 35c. Klopper’s estimates are based on the orderly sale of assets at market value. He estimates that the return could even be 50 percent lower if the assets are sold at auction prices.

For the investors in the newer syndications, Highveld 19-22, the situation is considerably bleaker. These syndications do not own any property. Their only asset is a claim against a company called Bosman & Visser, which has no assets to speak of. For more on this perilous situation, see this article.

Klopper describes the difficulties of pursuing the claim against Bosman & Visser (B&V) in his rescue plan. He says that at least R10m will be needed to sue B&V. In turn, the liquidators of B&V would need money to sue Georgiou’s company Zephan, which has so far failed to deliver investors’ buildings.

Klopper says that Zephan “will undoubtedly defend such action and institute a counterclaim for damages against B&V.”

If the syndications Highveld 19-22 are liquidated, Klopper expects investors to recover no more than R250m out of a total of R3.5bn invested. He also warns that this recovery could take years. Investors in Highveld 21, the largest, are the worst off, with an expected recovery of only 2% of their capital. The best is Highveld 22 with an expected recovery of 17.6%.

 A summary follows:

Syndication name
Expected distribution to investors (Rm)
Cents in the Rand
Highveld 15
98.96
37.08
Highveld 16
145.37
35.39
Highveld 17
149.58
60.01
Highveld 18
218.51
60.89
Highveld 19
24.22
4.01
Highveld 20
22.10
3.40
Highveld 21
26.00
1.97
Highveld 22
156.40
17.61
841.15











Global housing markets struggling

Global housing markets struggling

* Please see my page in Global Property Guide. www.globalpropertyguide.com/Africa/South-Africa/Lawyers

** This article was prepared by Global Property Guide: http://www.globalpropertyguide.com/


House prices fell in 25 countries, South Africa included. See comparison table on the
Global Property Guide Website.

The world’s housing markets had a weak third quarter of 2011, according to the latest survey of world-wide house price indices prepared by the Global Property Guide. During the year to end Q3 2011, house prices fell in 25 countries, of the 44 countries for which quarterly house price statistics are available, and rose in only 19 countries.

Moreover, 26 housing markets performed more poorly during the year to the third quarter than last year, while only 18 countries performed better.

The Global Property Guide’s statistical presentation uses price-changes after inflation, giving a more realistic picture than the more upbeat nominal figures usually preferred by real estate agents.

What is most remarkable this quarter is the wide variety of outcomes:

The BRICs’ two spectacular outperformers

India and Brazil’s housing markets have continued their spectacular outperformance, with Delhi house prices up 22.68% during the year to Q3 2011, according to National Housing Bank (NHB) figures. There were strong house price increases in almost all India’s major cities, reflecting the country’s current high rate of consumer price inflation, despite a drop in demand resulting from the repo rate hike in October (currently at 8.50%), the 13th since March 2010, making home loans costlier.

The NHB Residex only started publishing quarterly figures in 2010; from 2008 to 2009, the Residex was updated semi-annually.

Brazil’s Sao Paolo had the second highest house price rise in the world during the third quarter, with house prices up 5.88% during the quarter, according to the FIPE- Zap price index. Sao Paolo had an astonishing year, with house prices up 20.26% during the year to Q3 2011. The country is experiencing an unprecedented boom, not least because it is the host country for the World Cup in 2014 and the Olympics in Rio de Janeiro in 2016.

Europe’s housing markets mixed

The world’s second strongest quarter-on-quarter house price rise occurred in an unexpected city - Vienna, where house prices surged by 5.44% during the quarter (and +4.25% on the year), continuing 6 years of nearly unbroken price rises for Austria’s capital.

The Baltics have also performed strongly. Latvia is the third best performer among all reporting countries in our survey over the twelve months to Q3 2011. In Riga, standard type apartments rose 13.31% year-on-year, a quick comeback after a fall of 5.40% in the second quarter.

Following Latvia was Estonia, whose housing market is rallying after three years of terrific losses that began during the onset of the global financial crisis. During the year to end Q3 2011, house prices in Tallinn were up 12.30% with a quarterly rise of 2.71%.

And though prices in Lithuania’s five largest cities were down on the year to Q3 (-4.44%), their momentum is up compared to last year. During the latest quarter Lithuania’s house prices rose very slightly (+0.22%). Generally Lithuania follows the pattern of Latvia and Estonia, with a lag, so the latest quarter’s house price rises may be a precursor to a house price recovery in the new year.

Other European markets which have enjoyed satisfactory increases were Norway (+6.74%), France (+4.80%), and Switzerland (+3.35 %).

Modest house price increases were seen in Slovenia (+0.82%), Iceland (+0.76%), Germany (+0.66%) and Luxembourg (+0.55%) in the year to Q3 2011.

The Irish housing market remains the world’s weakest performer. House prices were down 15.61% year-on-year, the steepest decline since 2008. Quarter-on-quarter, Ireland’s house prices slid 4.25%.
Several other European housing markets experienced accelerated downturns during the year ending in the third quarter of 2011, includingNetherlands (-5.20%), Portugal (-6.77%), Slovak Republic (-7.94%), Warsaw, Poland (-7.95%), Spain (-8.41%) and Bulgaria (-9.65%).

Conversely, European countries which saw slower house price falls this year than the previous year include Turkey (-0.50%), Russia (-3.47%),Croatia (-4.59%), Hungary (-4.67%), Athens, Greece (-6.57%) and Kiev, Ukraine (-7.02%).

Asian housing markets now cooling

In Asia, several countries had house price increases during the year to end Q3 2011, albeit less strong than last year, following the government measures to curb the heat in their respective housing markets.
In Hong Kong, house prices were up 12.07% year-on-year, after a rise of 19.30% the previous year.
In Malaysia, house prices rose by 3.15% year-on-year, after a rise of 5.76% during the same period last year.

In Singapore, house prices rose by 2.73% year-on-year, a big drop from last year’s 18.96%.

In Taiwan, house prices were up a mere 0.46% year-on-year, after a rise of 6.97% during the same period the previous year. During the latest quarter, house prices were down 7.02%.

However, housing markets in South Korea and Philippines (Makati CBD) improved from a year earlier with price rises of 1.55% and 0.89%, respectively.

In Japan (Tokyo) and China (Shanghai), housing markets have been deteriorating since Q1 2011, and during the year to end Q3 2011, house prices dropped by 1.99% and 4.16%, respectively. House price declines are being reported across China, indicating the success of government measures during the past year. The country's skyrocketing housing prices have been blamed for social tensions and other economic problems.

Patchy progress for North America

The Canadian housing market has been a notable performer in the year to Q3 2011, with house prices in the six cities rising by 3.25% year-on-year, according to Teranet – National Bank Composite House Price Index. Record-low interest rates and a fairly stable Canadian economy have bolstered consumer confidence in the housing market. During the third quarter, house prices were up 3.46%.

In the United States, the housing market drifted lower as house prices plummeted by 7.22% (seasonally-adjusted) year-on-year to Q3 2011, according to the Federal Housing Finance Agency (FHFA). However, the number of homeowners who owe more than their homes’ worth decreased modestly in the third quarter, though levels remained high.

The seasonally-adjusted Case-Shiller index was a bit more negative, as it fell by 7.42% from a year earlier, and by 1.61% in the latest quarter.
"I don't know what will happen, but I don't see any reason to predict the recovery now," said index co-founder Robert Shiller to Reuters on November 29.

Israeli house price boom now over

House prices in Israel fell 0.58% in the year to Q3 2011, the first drop since 2009. During the latest quarter, house prices were down 3.65%.

The moderation in home prices comes against the background of the continued increase in the number of building starts, the lagged effect of the increase in the interest rate, measures introduced by the Bank of Israel affecting mortgages, and steps taken by the Ministry of Finance in real estate taxation. The effect of these moves is expected to continue and be evident going forward.

Pacific housing markets heading down

In New Zealand, median house prices were down 4.30% from a year earlier, with a quarterly house price fall of 2.26%. However, there is optimism in the housing market buoyed by low interest rates and recovery following earthquakes in Christchurch.

High interest rates and global economic uncertainty have continued to impact the Australian housing market, and it slumped 5.55% in the year to Q3 2011, the third quarter in which annual house price falls were reported this year.

Accordingly, the Reserve Bank of Australia (RBA) lowered the benchmark interest rate in November, the first time since April 2009, moving to boost the nation's economy amid uncertainty stemming from Europe's debt crisis. The benchmark rate is currently at 4.50%.

** This article was prepared by Global Property Guide: www.globalpropertyguide.com

01 December 2011

House prices on the downturn again: FNB

House prices on the downturn again: FNB

After a brief uptick around mid-year.

Johannesburg, Dec 1 (I-Net Bridge) - House price growth is on the downturn once again, after a brief uptick around mid-year according to FNB's House Price Index.

The November average house price was still 3.2% higher than November a year ago (year-on-year), but this represents a slower growth rate than the October revised year-on-year growth rate of 4%, and represents the third consecutive month of slowing year-on-year house price growth.

The average price of homes traded, according to the FNB House Price Index, was R804,242.

In real terms (prices adjusted for general consumer price inflation) the October FNB House Price Index declined by -1.9% year-on-year (November consumer price data not yet available), with consumer price inflation of 6% in that month significantly higher than the 4% nominal year-on-year growth in house prices.

FNB said that the latest data point now meant that, in nominal terms, the average house price in real terms was -16.6% lower than its long term peak reached in February 2008, a significant correction to date.

In nominal terms, the index was a marginal +5% higher than it was in February 2008.

However, compared to July 2000 when the index started, the average price at November 2011 was 209.5% higher in nominal terms, and 63.8% higher in real terms.
On a month-on-month basis, the seasonally-adjusted FNB House Price Index showed the residential market to already have been in a state of nominal price decline (negative growth) for the past 4 months.

In November, the extent of this price decline on October was -0.74%, which was slightly less decline than the revised -0.89% measured in October. Since the seasonally-adjusted price decline started four months ago, the total decline had been -2.3%.

30 November 2011

Makro`s distribution centre to be expanded

Makro`s distribution centre to be expanded

Investec Property on Tuesday said it had secured the development rights for Makro's distribution centre in Midrand, north of Johannesburg.

The distribution centre is to undergo a massive refurbishment and development that will see the existing premises expand from approximately 16,000 square metres to 27,000 square metres.

Investec Property is a division of Investec Bank (INP, INL) and one of SA's leading property operations.

Makro, which operates within Massmart's (MSM) Masswarehouse division, required an expanded facility for its central distribution centre, ideally without having to relocate, as well as being able to keep the facility fully operational during the construction period.

Investec Property, through its relationship and engagement with the tenant and the existing owner of the property were able to provide a creative and entrepreneurial solution to meet the client's exact needs, it said.

The current distribution centre will be transformed into a modern facility and will include an additional 11,000 square metres of warehousing space.
Improvements to the site will include an expanded yard area and a new perimeter ring road to facilitate more efficient vehicular movement.

The fire control systems and sprinklers will also be upgraded during this process maintaining a strong focus on safety.

"We were able to provide a long term warehousing solution to accommodate Makro's requirements. We are proud of our contribution to this important development for one of SA's major retail groups," Investec Property's David Rosmarin said.

Doug Jones, Masswarehouse commercial director, said it was particularly important for the group that its current operating capacity was not compromised during the building phase, so that it could continue to ensure that its customers' needs were met without interruption or unnecessary cost.

Construction has commenced on the facility, which will be delivered by the end of July next year.

Where to for property in 2012?

Where to for property in 2012?

No one could claim that the South African property market has done well in 2011. Sellers are finding that their estimated prices need to be lowered; buyers are eager but struggle to buy with banks hesitant to approve home loans. The result is that the market suffers and speculation is rife as to how long this downturn will last.

While the debate is relevant it is only so in the short term. This is because property really is a long term investment and seen from this perspective the current market down-turn takes on a different level of importance.

One mustn't forget that for most South African households owning a home equates to a good investment and stability which in the long term is not overly affected by the international drama. Consumers being transferred or being in need of up or downgrading or all the other good reasons for buying or selling, can do so under any market conditions. For the run of the mill property owner life goes on, for the investor the short term market remains depressed.

Those buyers who plan to sit on their newly purchased properties for the next four to six years will not be overly affected by the current property maelstrom. It also remains true that while the property market fluctuates in the short term, long term prices continue to increase. As such, those in the know still recommend buying, if you can afford it now and you can afford to sit on the property for a period.

That being said, the current market has far from recovered. It is a seriously ill patient. All indications are that the patient will recover - given the right medication such as the government's R1 billion mortgage-backed insurance fund. The National Housing Finance Corporation (NHFC) chief executive, Samson Moraba, confirmed last week that the fund will be operational by October 2012 and will aim to galvanize banks into approving more home loans.

While it is true that our banks were largely exempt from the international banking woes the current global situation has made them more skittish than usual. The insurance fund will hopefully ease their concerns through mitigating the risk to banks by being "a wholly owned subsidiary of the NHFC but registered, licensed and regulated by the Financial Services Board in terms of compliance with the regulations and its solvency requirements", says Moraba (as quoted in a Business Report:)

According to the same report Marius Marais, the chief executive of First National Bank (FNB) Housing Finance, is of the opinion that the fund could decrease the cost of mortgage insurance as all mortgage bonds would be pooled into one and the risk shared on a bigger portfolio base.

Other positive indicators are: the downward trend in the ratio household income versus debt which peaked at 82% but is now in the upper 70%. This is a positive sign but is still far too high (although much better than most first world countries at present!). The patient is getting the right treatment - household debt is coming down and the interest rates are stable.

There is however a few risk factors that need to be dealt with. Firstly the fact that the current international, financial crisis looks to be far from over with analysts and citizens alike waiting with baited breath to see if Italy will be able to make its debt repayments.

Secondly, we have our own political hot pot brewing with the leadership struggles in the ANC which are set to intensify in 2012. Anyone who witnessed the impact of the Polokwane conference knows the potential for market unrest during this period.

All being said and done does it mean potential property buyers need to wait? Not necessarily says John Loos as quoted in Moneyweb: “it’s important, I think, in these tough times to buy well within your means. Yes, some do still believe interest rates will go up later this year or early next year and ultimately interest rates always do go up. But it’s not only about that, it’s also about all the costs being heaped on to housing, we know about Eskom and we know about municipalities. So, in these tough economic times, tough financial times, I think it’s always good to buy within one’s means if one is entering the property market.”

And that seems to be the best advice for the moment – by all means buy property yes; in the long run it will be a valuable investment. But, buy within your means and take a long term view. Investors seeking to make a quick buck might want to think twice.

*Bruce Swain is the Managing Director of Leapfrog Property Group.

Best-of-the-best in SA shopping centres revealed at the Spectrum Awards

Best-of-the-best in SA shopping centres revealed at the Spectrum Awards

Mall of the North in Polokwane, Canal Walk Shopping Centre in Cape Town, Cape Union Mart Adventure Centre at Canal Walk and Supercare Cleaning Services at Paarl Mall have all claimed top honours at the annual South African shopping centre industry awards.

The Spectrum Awards recognise excellence, innovation and service across four categories which underpin the retail centre sector in South Africa. An initiative of the South African Council of Shopping Centres (SACSC), finalists for the Spectrum Awards comprise winners of the regional Special Star Retailer and Service Provider Awards, the Footprint Marketing Awards and the Retail Design and Development Awards (RDDA).

Retail plays a vital role in the SA economy and shopping centres are at the heart of this significant economic activity. Furthering excellence in retail is of wide benefit and represents vast positive outcomes for consumers, retailers, shopping centres, service providers and the economy in general.

Mall of the North in Polokwane, Limpopo, scooped the prestigious Spectrum Retail Design Development Award, much to the delight of architect MDS Architecture and the centre’s joint owners and developers, JSE-listed Resilient Property Income Fund, Flanagan & Gerard Property Development & Investment and Moolman Group. This is the second consecutive year in which the team of MDS and Flanagan & Gerard have clinched this award.

The Spectrum RDDAs recognise exceptional shopping centre design, combined with economic success, within the South African property industry. Finalists for this award included Jubilee Mall in Hammanskraal, Pick n Pay on Nicol, Eastgate re-positioning phase one and the store design of Tasha's at The Zone @ Rosebank.

Nedbank Corporate Property Finance is the principal sponsor of the RDDA awards in 2011. “We are pleased to play a role in industry events such as the RDDA Awards. This involvement allows us to celebrate the hard work that goes into property design, as this is a discipline that brings together creative and commercial elements in the design and construction of retail space to the benefit of consumers,” says Frank Berkeley, Managing Executive of Nedbank Corporate Property Finance.

Cape Union Mart Adventure Centre at Canal Walk Shopping Centre in Cape Town triumphed in the National Retailer of the Year Award, delivering first-rate service. Category finalists included Dis-Chem La Lucia Mall in KwaZulu-Natal, SuperSpar Sunridge Village in the Eastern Cape and Fruit & Veg City Food Lovers’ Market at The Wedge in Gauteng.

Holding the spotlight, Canal Walk’s ‘Snow’ marketing campaign by Marketing Concepts won the Spectrum Shopping Centre Marketing Excellence Award 2011, the hotly-contested category which celebrates excellence in shopping centre marketing.

Regional finalists from KwaZulu-Natal included ‘Sugars The Bitter Truth’ at Chatsworth Centre and ‘The Pavilion contributes towards the building blocks of education’ at The Pavilion. Wonderpark Shopping Centre’s ‘Please donate your Small/Big/Brown/Silver Change’ represented the Gauteng region. In addition to the winner, Western Cape finalists comprised ‘J&B Met 2011’ at Cavendish Square, Canal Walk ‘Gets Social’ and ‘Growsmart’ which is undertaken at four Growthpoint Properties’ centres in the province, being The Constantia Village, Longbeach Mall, Golden Acre and Middestad Mall.

Making sure that our shopping centres remain attractive and safe are the industry service providers and this year Supercare Cleaning Services cleaned up in the National Service Provider of the Year category and won the Spectrum Award for its services at Paarl Mall.

Other smart finalists in this category included Prestige Cleaning Services at Gateway Theatre of Shopping in KwaZulu-Natal, Marina Landscapers at Fountains Mall in the Eastern Cape and Life Landscapes at Lifestyle Garden Centre in Gauteng.

The strong pack of entries in 2011 an excellent indication of retail sector innovation and business savvy in South Africa. It also shows the respect in which the highly coveted Spectrum Awards are held by the industry.

*Amanda Stops is the General Manager of SACSC.

29 November 2011

Liberty Properties to expand into east and west Africa

Liberty Properties to expand into east and west Africa - Property Moneyweb

Follows the successful launch of a $200m mall in Lusaka.

The property arm of JSE-listed Liberty Holdings (JSE:LBH) says the entity is looking to east and west Africa as possible destinations for development. Liberty Properties successfully launched a mixed use development comprising a 30 000m² upmarket mall, a 10 000m² office park and budget hotel in the Zambian capital, Lusaka, earlier this week. The Levy shopping centre is named after former Zambian president Levy Mwanawasa.

Liberty Properties’ CEO Samuel Ogbu says the company hopes to launch a project in west Africa within the first half of 2012. Ogbu said after the Zambian launch: “We’re looking at west Africa , we’re looking at east Africa. We’re looking at doing another one of these projects in Zambia, possibly in the copper belt. It doesn’t’ make sense just to do one. Zambia has been identified as one of the growth areas and we are also under pressure from retailers to grow capacity for them.”

In west Africa Liberty currently has its sights set on Nigeria and Ghana, while Kenya and Tanzania are its main focus in east Africa. “We’re not at a stage yet to tell you that a site has been identified and we’re ready to go. We need to be very cautious of who our partners are because the one thing we are not willing to do is to compromise on delivery,” Ogbu said.

The CEO said that further developments in Africa will be based on the Levy model but will obviously be tweaked in line with the needs of the destination chosen. “We want to build capacity which is actually cheaper in the long run than to keep flooding the place with expats. You do need the expatriate expertise to start, and you do need to ensure the standards are complied with and at times it does take time to build capacity. South Africa does add value but for it to be sustainable, you need local partners to play an active part.”

Liberty’s first foray into Africa was indeed a learning curve for it and other stakeholders, and the approach was unique. The aim was to build a facility in line with the needs of the community together with the input of local businesses and local authorities. It wasn’t all plain sailing as Ogbu explains: “We were very hands on and was guided by the client (funder, Zambia’s National Pension Scheme Authority). We were dealing with a different set of rules. Local authorities are set up to protect their citizens. Wwe had to learn their rules and make sure we complied with them.”

The realities of Africa and its lack of infrastructure also impacted the Zambian project as the arrival of goods for some tenants were delayed for five weeks due to border problems. Shipments were stuck at the Zimbabwean border due to computer glitches. Trying to get the goods through via Botswana also experienced problems. Shrugging his shoulders, Ogbu says: “I’ve learnt a new phrase: just roll with it.”

Another encouraging element of the Levy project was the partnerships formed between South African professionals and their Zambian counterparts, which was a prerequisite of the funder. Ogbu explains: “It worked through the procurement process and was part of the tender process. We made it clear it was not a question of merely getting a local face to a South African provider. There had to be effective input from a local partner, which meant that local partner had to have the capacity to deliver. It made the process longer and it made it a bit frustrating at times, but in the long term it leads to a much better result. It leads to a true transfer of skills and building capacity in the local market which I think is essential for a sustainable offering and is the difference between the approach that makes you welcome and not an intruder.”

He says the journey for some of the South African contractors had not been easy: “The temptation is there for the skilled South African partner to say stand aside, let me do it. But we said no, no, no, you’ve got to take that person along with you.”

In instances where there were differences of opinion on building techniques, Ogbu said: “If it’s the way they build there, you have to persuade them why yours is better. Even in the design phase there was a problem when it became clear local capacity was inadequate. We said okay let the South Africans do it, but we had to find a way to skill them.”

The mall manager is Zambian with a technical back-up team of South Africans who are partnering with locals who will eventually take over the running of the facility.

On a lighter note, Ogbu says cultural differences also provided several challenges notably when stakeholders were invited to a “roof wetting”. “We had to explain what it was before they would come.”

Ogbu says what is clear is that Africa is hungry for an upmarket shopping experience.

23 November 2011

What your rights are with 'prescribed debt'

What your rights are with 'prescribed debt'

Is a debt collector hounding you via letter, e-mail or SMS to pay a very old debt you can barely recall? If so, you need to get clued up on the term "prescribed debt".

In short, according to the Prescription Act, if in the past three years you have not made any payment towards settling a debt, acknowledged owing the debt in any way - including over the phone, agreed to pay it or been summonsed in respect of it, it has prescribed, and you can raise this as a defence when asked to pay it.

This excludes mortgage debt, taxes and any staterelated debt such as a television licence.

But here's the thing: it is perfectly legal for a debt collector or attorney to demand payment from a debtor for a prescribed debt, and if you succumb to the pressure and pay it, you can't raise the defence of prescription afterwards.

In other words, if you don't realise the debt you're being asked to pay has prescribed, and you pay it, you lose.

The idea was to compel creditors and their collecting agents to collect money owed to them within a defined period, to protect consumers from unscrupulous creditors and/or collectors who intentionally delay the recovery of their debt so that it accumulates massive amounts of interest and costs.

Of course, the debt-collecting industry argues that the act was never designed to give people an excuse not to pay their debts, as this would be morally wrong.

There is some merit in that argument, of course, but what's also morally wrong is for a collector to contact a consumer many years after an alleged default and demand that they pay a sum which they refuse to substantiate.

A firm notorious for doing just this is JM Attorneys of Randburg, which continues to hound former Health & Racquet Club members for payment of subscriptions allegedly owed to the group, which went into liquidation about 10 years ago.

Many debt collectors go into "pay up" overdrive in November and December, presumably hoping to snare a share of their targets' end-ofyear bonuses.

I've heard from three former Health & Racquet Club members in recent weeks, all of whom have received fresh demands from JM Attorneys on behalf of the "client".

Dylan Mcgarry was 16 in 1999 when he was given a limited free membership to H&R as a thank you for recruiting other members.

He was under-age at the time and could therefore not have signed a legal contract. Even if he had done so, and then failed to pay, that debt would have prescribed many years ago.

Still, JM Attorneys is demanding payment, based on a contract which is, in fact, a "physical activity and readiness questionnaire" which McGarry was asked to sign.

Now 29, he received a letter from the firm, dated October 17, headed "Negative Impact on your Future Job".

It reads: "Did you know that if you are listed with the major credit bureaus, your chances of getting employment in the future will be affected?

"You are making this difficult for yourself if you do not pay your Health & Racquet Club debt on or before 31 October, 2011."

His mother, Kathy Bennett, told Consumerwatch the first letter from JM Attorneys came on ominously bright red paper, in January last year, followed by another four since.

"And they are adding R37.34 to the alleged debt for the cost of every letter," Bennett said. The latest sum being demanded is a few cents less than R2 000.

"To receive that first red letter was horrifying, firstly that it was so long ago, and especially knowing that there was no debt in the first place."

The implied threat of blacklisting had rattled both of them, Bennett said, "as Dylan has studied and worked extremely hard at getting his PHD, on scholarships".

In another case, Michael Maphutse of Joburg paid his H&R debit order for 24 months, despite visiting the Watermeyer branch just twice, and never heard from the club after that. Then the company liquidated.

His first demand for payment from JM Attorneys came in 2006, and his most recent communication was via SMS on November 4.

Despite asking for a copy of his H&R contract and proof of arrears in two e-mails in 2006, he did not get a response.

Then this month he received a fax putting the burden of proof on him - he was asked to provide a host of documents as proof of the cancelled contract, acceptance of such cancellation, an affidavit and more in order to prove his claim not to owe any money.

I wrote to JM Attorneys' managing director, Gert Visser, setting out these two cases, plus a third, and asking, among other things, why the Mcgarry file had not been closed given that no contract existed in the first place, and why the firm continued to pursue consumers for payment when they had raised prescription as a defence, and the firm was unable to prove that this was not a valid defence.

I was asked for reference numbers for all three cases but Visser began his written response by saying that "we" would not comment on each case "as there are attorney/ client confidentiality requirements that we must not violate".

"The law of prescription was… never designed to provide a mechanism to attempt to evade liability and we are really not sure why you are suggesting that merely after an elapse of time somebody may attempt to evade payments of debt and why you seem to suggest that this is proper behaviour when we surely all know that a person must honour their obligations," Visser said.

He said that any threat of "blacklisting" was contrary to company policies "and we absolutely do not do so".

"It may be your understanding was incorrect and that you inadvertently thought that we might give adverse information to credit bureaus," he said.

Well, yes, when Mcgarry got that letter last month, headed "Negative Impact on your Future Job", followed by the words "Did you know that if you are listed with the major credit bureaus, your chances of getting employment in the future will be affected?", he might have "inadvertently" thought the firm was threatening to have his credit record "blacklisted".

Incidentally, according to the Credit Ombud, prescribed debt may not be listed on a person's credit record.

I'm not suggesting people should avoid paying their debt. But this is precisely the sort of "very old debt" scenario the Prescription Act was designed to protect consumers from.

In any event, the onus is on the person demanding the money to prove that it is owed, and to substantiate the amount being demanded, which has not happened in these cases.

I'd encourage consumers to use their bonuses to settle their current outstanding debts before spending it.

Wendy Knowler

Pretoria News

'Will the Consumer Protection Act make the voetstoots clause redundant?'

'Will the Consumer Protection Act make the voetstoots clause redundant?'

With the Consumer Protection Act now making it even more essential that the seller of a home declare openly any defects of which he is aware, it has been said by some estate agents that the voetstoots clause is now becoming redundant - the repair of almost any defect in the home discovered after the transfer of the property can, it has been said, now be claimed for.

Not so, says Anton du Plessis, CEO of the Cape Peninsula central southern suburb estate agency, Vineyard Estates.

Quoting a recent High Court case (Banda and Another vs van der Spuy and Another), du Plessis said this reinforced the voetstoots principle that, if the seller was not aware of the defect, he cannot after the sale be held responsible for it.

"In the case referred to," said du Plessis, "the van der Spuys sold their home to a Mr Banda. About one year prior to the sale, severe storms had damaged the roof and caused leaking. The insurer then paid for comprehensive repairs to be carried out and these were guaranteed for six months by the thatcher. The van der Spuys also informed Mr Banda of this and of the six month warranty.

"Subsequently, heavy winter rains (the home is in Villiersdorp, Cape) fell and the roof again leaked."

At the subsequent trial Mr Banda produced a specialist witness with extensive thatching experience who testified that the problem arose from a latent defect. This was that the 26 to 35 degree pitch of the roof was not steep enough to make the thatch efficient. It had, he said, to have a 45 degree pitch.

The judge, after listening to the technical backup to this statement, accepted its validity - but, he said, the sellers and their agent themselves being unaware of this, could not now be penalised on account of it - and, as the house had been sold voetstoots, the buyer had no claim on them. The sellers had been aware of the defects, had had them repaired and could therefore rightly consider themselves in the clear.

Du Plessis said that it had to be acknowledged that throughout SA legal history, sellers have "hidden behind" the voetstoots clause but in this case only an expert would have recognised the defect and the seller could not be blamed for it.

The voetstoots clause, therefore, could be enforced.

"What is interesting," he said, "is that I would guess that a significant percentage of thatched roofs in South Africa (perhaps 15%) do not have 45 degree roofs but most get away with it because they are not in high rainfall areas. House buyers looking at thatched homes should check the pitch and sellers from now on are advised to warn buyers in advance if the pitch is possibly inadequate."

Trudie Broekmann, a director of Gunstons Attorneys in Tokai, added that if the house was sold subsequent to the CPA becoming effective on 31st March 2011, the estate agent might well have been regarded by the court as a supplier of the property and would have been liable for the defect. Agents, she said, will not, like sellers, be protected by the voetstoots clause.

Vineyard Estates Press Release

22 November 2011

The secret to Vukile’s success

Cost management the secret to Vukile’s success

Property Fund plans on growing fund more aggressively.

Vukile Property Fund CEO, Laurence Rapp, says the company’s recent performance of net rental growth can largely be attributed to cost management generally and lowering the cost of funding. The company on Monday reported a 7.5% increase in its interim distribution to 54.31 cents per linked unit.

It says plans are underway to grow the fund more aggressively. This will include seeking opportunities in the Western Cape. Rapp says in Namibia Vukile’s properties in Rundu and Katima Mulilo are performing exceptionally well and now constitute 7% of the JSE-listed company’s portfolio.

The announced acquisition of 20 properties from Sanlam forms part of Vukile’s growth path and will add around R1.5bn or 25% to the value of its portfolio. Rapp says while it remains committed to being a diversified fund, the emphasis will be on retail.

“To this end, we are exploring acquisitions of retail centres as well as joint venture development opportunities in the retail environment that would complement our existing portfolio make-up. We also continue to believe in the strength and growth of retail in the emerging market and, based on the performance of our current retail assets, we will focus our expansion on this market segment,” Rapp said.

With regards to the Sanlam acquisition, Vukile will embark on several road shows in March 2012 to raise equity and debt for the deal.

Rapp says Vukile’s pipeline will also increasingly be exposed to office space. On the retail side, Vukile will be looking at the lower LSM retail in both rural and urban areas. This does not mean however, that it will not consider opportunities serving higher income groups should they present themselves.

“We will acquire some retail assets in the portfolio, notably Durban’s The Workshop, but the office assets being acquired will enhance the overall quality of our office portfolio as well,” Rapp says.

21 November 2011

Bishopscourt mansion a bargain at R98m

Bishopscourt mansion a bargain at R98m

The price includes imported interlined silk curtaining worth R5m.
JOHANNESBURG – A sprawling 3 500m² mansion in Cape Town’s exclusive Bishopscourt suburb has gone onto the market with the asking price set at a cool R98m. The price includes imported silk interlined curtaining worth R5m and some of the furniture.

Estate agent Ingrid McFarlane of Seeff Properties says the current owner is a well-known South African mining magnate who wants to scale down. Asked about the likely profile of a prospective buyer, McFarlane said it was likely to be a “black diamond”, referring to South Africa’s and Africa’s growing affluent and influential black community.

Interest is likely to come from the who’s who of SA’s mining or business sector, someone “who loves entertaining and enjoys a lavish lifestyle”.

McFarlane says the property is akin to owning a small three acre estate in the middle of Bishopscourt. An average three to four bedroomed house usually comprises 800m². The land alone is estimated to be worth in excess or R43m.

Seeff’s Andy Todd says the property is surrounded by some of the most valuable real estate on the African continent with houses in the vicinity fetching anything from R40m and upwards.

Now, what can you expect to get for R98m? The basics include six massive en suite bedrooms including dressing rooms. The main suite includes a separate lounge with a fireplace and his and hers dressing rooms and bathrooms. McFarlane says the house consists of several other large rooms that can be converted into at least four additional suites.

The Canterbury Drive mansion includes an entrance court leading into a double volume entrance hall with a dual staircase that connects the living spaces dotted with priceless art and Persian carpets.

The entertainment area sports an opulent lounge and a formal 24-seater dining room for large scale entertaining. A central bar area is flanked by a billiard room, a cinema, a large kitchen with a separate scullery, an open plan family room and a casual dining area.

Other features the living section boasts include a cigar lounge in the basement with a wine cellar and tasting room. Here you will also find a large office with an adjoining lounge cum library and separate access for guests and dignitaries.

The sprawling exterior includes a large covered terrace leading onto a multi-million rand landscaped garden, swimming pool, tennis court and pavilion.

Of course, you will have to set aside at least R30 000 a month to maintain the property. This is the unenviable task of the “estate manager” who resides on the property in a separate two-bedroomed home.

McFarlane says the mansion was built in 2008.

Gradual recovery for listed property

Gradual recovery for listed property

Residential and commercial real estate to fall a further 10%

WITH investor demand being hampered by enduring economic challenges and stalled global growth, Auction Alliance is predicting a gradual and patchy recovery for the local commercial property sector over coming months, with certain segments expected to perform better than others.

The values of both residential and commercial real estate assets in SA are expected to fall by a further 10% over the next 12 months according to Auction Alliance.

The auctioneer warned investors considering ploughing their money into property to be thorough when carrying out due diligence.

“Three years into the recession, the question on the status of the commercial property sector’s recovery is difficult to answer, with recovery appearing to have stalled significantly in recent months in the face of renewed economic fears”, said Rael Levitt, CEO of Auction Alliance.

According to a recently released report by PricewaterhouseCoopers in the US and the Urban Land Institute, entitled Emerging Trends in Real Estate 2012: “The return landscape for 2012 presents a mixed bag, and all depends on where and when investors bought, the amount of property leverage employed, and asset quality.”

The report warned that: “As markets creep back in 2012, investors can no longer just ride the capital tide of rate compression, but instead must pick projects well and execute on management.”

Another important factor was the performance of local municipalities when considering commercial property investment. Redefine one of SA’s largest listed property groups, had already decided to stop investing in poorly run municipalities and halted further improvements on their existing properties in such areas.

“SA poses its own challenges to the property investor with rising costs and an increased risk of stagflation in the economy, as price pressures rise and economic recovery remains sluggish. Both buyers and sellers need to realign their expectations of the property sector, and face up to the tough reality of today’s market”, said Levitt.

Kirsh is king of London’s castle

Kirsh is king of London’s castle

Says £285m purchase of Natwest Tower is a great investment.

Natie Kirsh, the London-based SA billionaire, today confirmed that his £285m bid for one of London’s tallest buildings, Tower 42, has been successful.

Speaking to Moneyweb, Kirsh said: “It’s in the documentation phase, which means all the papers still have to be signed but we have secured it. The owners received 12 offers and whittled it down to three. They interviewed me to make sure I could finance the deal. They were nervous, having been let down in the past but after the interview they confirmed we were the guys.”

Kirsh is one of SA’s richest men. His biggest asset is Jetro, a successful cash and carry chain in the US styled after Metro Cash of SA. He is the sole owner. He said he will not be selling a single share in Jetro to fund the deal but its cash flow would make it easy to pay.

Asked if such a large investment in a single property was not risky at the present juncture of the UK and world economy, he said: “No. It is a fantastic building in the heart of the City. It is fully let with 300 tenants and a waiting list of corporates wanting to get it. It was built by a bank, not by a property developer. The bank was building its own head office and wasn’t fussy about lettable space. Every part of the building has huge window space. It is built in the shape of a 3-leaf clover. Each floor is 3 000 square feet.”

According to Wikipedia, Tower 42, originally named Natwest Tower, was for 30 years London’s highest building. Now it ranks fifth and second in the city. The 42-storey building is 183m (600 feet) high. It has an automated mail train and external window washing. The building was extensively damaged in the IRA’s Bishopsgate bombing.

Kirsh says even at the £285m price tag, the rental yield starts off at 7%. He intends to gear his purchase and thus to get the yield to 11%.

“With everyone printing money, inflation is not going away. If you factor in inflation, the yield could quickly exceed 20%.”

Kirsh owns a city block in Rivonia Rd, a stone’s throw from Sandton City. Did he not consider building a skyscraper there, as has been speculated?

“You tell me where SA is going. Can the government make a foreign investor comfortable?

“Right now, I feel disinclined at my age (79) to start a major development. As they say, a shroud doesn’t have pockets. I have one idea for the site, which is not commercial – a sort of museum to reflect the contribution to the SA economy made by immigrants over the years.

“I would like to ask other rich South Africans, the Ruperts, the Oppenheimers to help develop this, possibly in association with the university (Wits is Kirsh’s alma mater).

“It would be a living thing with lecture halls and so on. I am coming down there soon for a couple of months and will see how they respond.”

18 November 2011

South African billionaire buying London landmark!

South African billionaire eyes buying London landmark!

Bidding 285 million pounds for Britain's tallest building.

The family office of South African billionaire Nathan Kirsh is in exclusive negotiations to buy the former NatWest headquarters, in the heart of the London, after bidding 285 million pounds for the skyscraper, the Times reported on Friday.

The newspaper said, without citing a source, Kirsh's bid for Britain's tallest building is thought to have outweighed those of rival contenders by at least 10 million pounds.

He beat off the London-focused Exemplar Properties and the private equity firm Doughty Hanson, according to the article.

The 2.2 acre estate was put up for sale by its joint owners, BlackRock UK Property Fund and LaSalle Investment Management, with a 290 million pounds price tag.

In addition to the skyscraper, which was renamed Tower 42 when NatWest Bank moved out, the site includes four other adjacent properties. Jones Lang LaSalle, the property adviser, conducted the sale.

16 November 2011

Investec CM refinances Growthpoint BEE debt

Investec CM refinances Growthpoint BEE debt

Provides R888.5m of funding to settle the existing banks' exposure.
Johannesburg, Nov 16 (I-Net Bridge) - The AMU Trust, Growthpoint Properties Limited's largest BEE shareholder has refinanced debt raised in 2005 to fund the acquisition of 100 million Growthpoint Properties linked units as part of the company's landmark BEE transaction.

Investec Capital Markets has provided R888.5 million of funding to settle the existing banks' exposure and to partially reduce Growthpoint's mezzanine debt participation from R500 million to R200 million, thereby repaying R300 million to Growthpoint. This is being provided as a 4-year capital bullet facility.

The AMU Trust owns approximately 5.7% of Growthpoint Properties, worth approximately R1.8 billion, and represents the interests of Amabubesi Investments, Miganu Investment Holdings and Unipalm Investment Holdings.

"Investec welcomed the opportunity to participate in the funding and structuring of the transaction, enabling AMU to take advantage of the lower interest rate environment, provide funding flexibility and value extraction," said Rick Lupini of Investec Capital Markets in Cape Town.

Norbert Sasse, Chief Executive Officer of Growthpoint Properties Limited, pointed out that AMU continues to own 100 million Growthpoint linked units and that the BEE consortium has also extracted cash as a result of the debt refinancing.

"We are pleased that the beneficiaries of the AMU Trust were able to realise value from their investment, and that we've been able to distribute a portion of the Trust's existing cash resources to them. We continue to value the support and involvement of our BEE partners," noted Sasse.

The AMU trustees commented: "The refinance parameters provide the AMU Trust with a more flexible structure to utilise surplus cash, reduce the overall cost of funding and allow for upfront and semi-annual distribution of cash to beneficiaries."

Charges may await directors of failed Pinnacle Point property group

Charges may await directors of failed Pinnacle Point property group

Pinnacle Point Group's directors and former directors may face prosecution following the liquidation of the leisure property group and its subsidiaries earlier this month.

Cape Point Vineyards, which was part of the application for the liquidation of the group, wants an investigation into the affairs of all the directors and their subsequent prosecution if any wrongdoing is discovered.

The wine estate, which owns 1 percent of Pinnacle, said there was no way the property group could be rescued as it was seriously insolvent.

"There's nothing that one could have done, the group is irretrievably insolvent. We want an article 417/418 inquiry into the affairs of the directors and previous director. They should be prosecuted," Cape Point Vineyards owner Sybrand van der Spuy said.

Pinnacle Point was placed in final liquidation on November 4 after six of its subsidiaries were liquidated earlier in the month. Investec is a major creditor of the subsidiaries.

The subsidiaries - Pinnacle Point Resorts, Pinnacle Point Investments, Clarens Golf and Trout Estate, Property Promotions and Management, Eagle Creek Investments 74 and Festival Bay Trading 55 - were liquidated through a court order granted by the Western Cape High Court on November 2.

The listed holding company, Pinnacle Point Group, was liquidated following an application by Cape Point Vineyards.

Investec applied for the liquidation of the subsidiaries to recover amounts owed to the bank, arguing that Pinnacle Point subsidiaries and the holding group were commercially insolvent. Investec said the group owed it R120 million.

The bank initially submitted the liquidation application in February. The subsidiaries were placed under provisional liquidation in August.

Investec lawyers from Edward Nathan Sonnenbergs said the final orders were granted on an unopposed basis. The holding group's final liquidation at the instance of Cape Point Vineyards was also granted on an unopposed basis.

"Now that the companies have been placed into final liquidation, the liquidators are obliged to realise the assets in consultation with creditors. Investec is the major secured creditor... of the subsidiaries," lawyer Lisa Melis said.

"It is unclear what portion of Investec's claim will be settled by way of the realisation of the subsidiaries' assets."

Melis said the liquidators of the holding group had now instructed the law firm to assist with the winding up of the group, which would include an inquiry into its affairs in terms of the Companies Act.

Pinnacle Point had lodged six separate business rescue applications under the new bankruptcy protection provisions of the new act in July.

The firm lodged another host of applications during the hearing of its provisional liquidation in August.

Lawyer Leonard Katz asked the court to disregard these applications as they were a "complete abuse" of proceedings.

The applications were all removed, unprocessed, from the court roll shortly after provisional liquidation orders were granted.

In May, Pinnacle Point said it had secured the amount it owed Investec through the sale of its Pinnacle Point Resort.

The group said it had finalised a deal with Veritable Investments and Raptoguard to sell the golf and beach resort for R75m. At the time, Pinnacle Point said it owed Investec only R58m.

Pinnacle Point shares have been suspended by the JSE.

Business Report

18-month hiatus expected before property gains

18-month hiatus expected before property gains

Last week's decision by the Reserve Bank to leave the interest rate unchanged at 9 percent should not give consumers an excuse to go on a spending spree, warn the experts.

John Loos, property strategist at FNB Home Loans, cautioned consumers and said although the interest rate remained unchanged, it would be wise for households to make provision in their financial planning for future hikes.

He said although there was no certainty around how much to make provision for, the past two hikes saw the interest rate increase by four and five percentage points respectively.

"It doesn't necessarily mean not making one's desired purchases, but may mean lowering one's aspirations in terms of the home or car that one may have been considering purchasing, if there is no 'buffer'."

In an earlier report, Paul Barnard, executive financial planner at Consolidated Financial Planning, warned consumers that although unchanged interest rates made home and car loans relatively cheap, credit users should not overextend themselves.

He advised consumers to always budget for an interest rate 2 percent higher than the current rate and to increase installments accordingly. Barnard gave the example of a R1 million bond paid over 20 years at 9 percent. This would require a monthly installment of R8 997, meaning the total interest a consumer would have paid in the end is R1.2m.

"If you budget for an interest rate of 11 percent instead of 9 percent, your installment would be R10 322. If interest rates rise to 11 percent you will be able to afford the installment because you have budgeted for it."

He added that should the interest rates not rise and a consumer pays R10 322 instead of R8 997, the bond would be paid off in 14 years.

"If you adopt that approach and interest rates do not rise, then you will settle your debt early and save on costs of credit. If interest rates do rise, then you can easily absorb the increase because you are used to paying more than the minimum installment.

"Speak to your financial planner, who will advise you how to budget for your debt repayments and include a buffer of 2 percent."

Samuel Seeff, chairman of Seeff properties, said in view of the continued global and domestic economic pressure and the upward inflationary trend driven by fuel and utility hikes, a conservative approach would benefit the economy in the medium to long term.

He cautioned that while the low interest rate improved affordability for bond holders it should not be a signal for consumers to spend. They should rather focus on bringing down their household debt levels.

Seeff said he believed the introduction of a formalised policy that enabled first-time buyers to acquire 100 percent bonds was a good idea.

"I believe that prices and sales volumes will ebb along for the next 18 months and that only once there is a significant pick-up of the macro economy, underpinned by employment growth, are we likely to see any real uptick in the real estate market."

However, the CE of RE/MAX of Southern Africa, Adrian Goslett, was more optimistic.

He said RE/MAX believed the property market in South Africa had performed remarkably well compared to other markets.

Goslett said RE/MAX had found South African consumers felt better about the future of the local real estate market following improved winter sales.

"South Africa seems set to see a full recovery in the market, far quicker than our international counterparts. South Africa's inclusion into Brics (Brazil, Russia, India, China and South Africa) will also have a positive impact on the local market as this will attract investment and fuel in the economy and real estate market alike."

Cape Argus

Market 'not likely to turn for months'

Market 'not likely to turn for months'

Reacting to the latest housing data, Seeff chairman Samuel Seeff says he remains upbeat - but cautions that recovery of the property market will take longer than expected.

"Following the robust pre-2007 levels, there have been more than four years of slowed activity and market adjustment," he says.

"As with all markets, property is cyclical, and I believe we are now near the bottom of the curve and that prices and sales volumes are likely to ebb for at least the next 18 months before any noteworthy uptick. This would however, need to be driven by an economic pick-up, under pinned by positive employment growth.

"Because of significantly fewer new developments and new stock being built there is likely to be a stock shortage once the market turns."

He says the number of distressed properties continues to weigh on the performance of the market, and that normal activity levels can be expected to return only once there is a significant clearance of these.

On the upside, Seeff believes banks' deposit requirements will help bring more stability to the market in the long term. When home owners have some of their own money invested in their homes, they generally work harder to keep up their mortgage payments. This will enable owners to better withstand some of the updown effects characterised during this downswing and will result in fewer foreclosures.

The exception, he says should be first-time home-buyers, where he would encourage the introduction of a formalised policy that enables them to acquire 100 percent bonds.

There are still keen buyers in the market, but sellers need to be mindful of what buyers are prepared to pay and price correctly if they hope to sell their properties.

Buyers are negotiating strongly and on their terms. The upshot, he says, is that because of the slow turnover, there is real value to be gained at the top end of the market.

"Now is indeed a good time to buy, but buyers should be aware that these conditions are unlikely to continue indefinitely," says Seeff.

Dianne Brock, general manager of the Western Cape Institute of Estate Agents, says she is often asked to predict what direction the residential property market will take next.

"Right now Propstats data shows that that the traditional seasonal upswing is again a reality: spring always brings with it a new crop of house buyers and this year there has been increased activity, particularly in the entry level to R1.5 million bracket," she says.

"The more expensive homes are still difficult to sell, especially as so many of their owners, despite extensive media coverage on the subject, have not accepted today's lower market prices."

Looking at the bigger picture, Brock says that after attending several sessions on the state of the market, she agrees with economists like John Loos of FNB, who say there will be no significant upturn in house prices for three years.

"Here again, however, there are figures which indicate that the worst may now be over. Although growth may be insignificant, I think the likelihood of a further big drop in prices can be discounted. With national house price increases at 5.1 percent, prices are more or less holding steady against inflation. This suggests that now could be a good time to buy."

From the estate agents' viewpoint, Brock says the current scenario is quite promising because, with the total number of registered agents reduced from 86 000 to 25 000, competent agents are finding they can maintain a reasonable turnover.

"In many instances, competent, professional agents are now selling more units than they did in the boom times, but they have to work harder for them."

Weekend Argus (Saturday Edition)

Political climate 'will boost property market'

Political climate 'will boost property market'

There has always been a strong link between political confidence - faith in the future of the country - and home-buying confidence, says Bill Rawson, chairman of Rawson Properties.

"Surveys have shown that political confidence - or the lack of it - can often be more important than traditional decision-influencing factors like interest rate levels," he says.

"Right now the feedback from my colleagues and many others is that political and house-buying confidence has been significantly boosted by the far more decisive stance taken by President Zuma on maladministration, corruption and the advocating by out-of-line ANC members of policies not sanctioned by his cabinet.

"The dismissal of two cabinet ministers, the suspension of the police chief, the inquiry into the arms deal and the fact that whatever the outcome, Julius Malema has had to go on trial, have all sent out a positive message that South Africa will not be allowed to drift into a chaotic Third World state. These moves by the president, along with the Finance Minister's mid-term budget, have definitely restored confidence in a leadership that appeared to be losing control."

Rawson says what appears to be a stand against corruption at last will be especially welcome.

"Many years ago, Clem Sunter in his High Road presentations listed a lack of corruption as one of the three most important factors leading to a successful society. When state officials spend thousands of rands on useless airline trips and expensive hotels or sign leases (with colleagues) at three times the going rate, investors run fast.

"The more definite repudiation of nationalisation by various top state officials is also sending out a good message, and it is also encouraging that the main opposition party in Parliament is becoming increasingly multi-racial."

Weekend Argus (Saturday Edition)