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PRETORIA, GP, South Africa
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29 September 2011

Where to for the commercial property industry?

Where to for the commercial property industry?

....Asks Rodney Luntz.

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

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

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

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

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

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

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

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

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

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

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

Pinnacle Point risks delisting from JSE

Pinnacle Point risks delisting from JSE

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

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

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

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

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

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

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

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

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

28 September 2011

FNB/BER building index steady

FNB/BER building index steady

FNB/BER building index steady

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

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

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

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

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

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

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

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

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

I-Net Bridge

Self-employed still struggle to obtain bank home loans

Self-employed still struggle to obtain bank home loans

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

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

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

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

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

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

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

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

Weekend Argus (Saturday Edition)

Self-employed still struggle to obtain bank home loans

Self-employed still struggle to obtain bank home loans

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

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

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

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

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

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

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

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

Weekend Argus (Saturday Edition)

SA property growth loses momentum

SA property growth loses momentum

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

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

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

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

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

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

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

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

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

23 September 2011

'Huge savings to be made by selling properties faster'

'Huge savings to be made by selling properties faster'

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

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

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

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

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

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

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

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

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

Chas Everitt International Press Release

New property development at V&A Waterfront

New property development at V&A Waterfront

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

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

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

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

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

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

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

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

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

Cape Times

Interest rate remains unchanged at 9%

Interest rate remains unchanged at 9%

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

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

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

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

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

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

RE/MAX Southern Africa Press Release

22 September 2011

Power cut: Tshwane law firm sues council

Power cut: Tshwane law firm sues council

Power cut: Tshwane law firm sues council

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

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

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

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

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

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

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

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

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

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

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

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

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

The matter was postponed indefinitely.

Fewer desperate sellers, but market on a knife-edge

Fewer desperate sellers, but market on a knife-edge

Fewer desperate sellers, but market on a knife-edge

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tough outlook for commercial property in 2011

Tough outlook for commercial property in 2011

Tough outlook for commercial property in 2011

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

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

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

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

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

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

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

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

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

20 September 2011

Pickvest investors to discuss rescue prospects

Pickvest investors to discuss rescue prospects

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

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

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

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

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

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

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

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

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

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

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

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

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

13 Tips for avoiding falling victim to property rescue scams

13 Tips for avoiding falling victim to property rescue scams

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

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

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

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

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

2. Tips for bank clients to avoid falling victim


Avoid doing business with companies, consultant and individuals that:

§ Guarantees to stop the foreclosure process.

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

§ Collects a fee before providing any service.

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

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

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

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


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

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

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

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

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

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


Avoid doing business with companies, consultant and individuals that:

§ Guarantees to stop the foreclosure process.

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

§ Collects a fee before providing any service.

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

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

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

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


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

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

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

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

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

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

19 September 2011

New mortgage loans granted decline sharply in Q2 2011

New mortgage loans granted decline sharply in Q2 2011


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

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

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

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

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

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

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


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

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

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

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

Syndication directors hope to prevent R4.5bn liquidation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

12 September 2011

Tainted credit records depress property market

Tainted credit records depress property market

Tainted credit records depress property market

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

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

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

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

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

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

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

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

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

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

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

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

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

Home loans up as banks relax lending rules

Home loans up as banks relax lending rules

Home loans up as banks relax lending rules

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

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

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

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

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

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

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

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

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

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

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

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

Plan for property taxes along corridors like Gautrain

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

Plan for property taxes along corridors like Gautrain

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

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

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

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

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

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

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

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

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

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

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

08 September 2011

Nedbank backs inner city development

Nedbank backs inner city development

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

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

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

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

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

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

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

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

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

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

06 September 2011

Investec Property Fund to expand property portfolio

Investec Property Fund to expand property portfolio

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

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

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

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

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

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

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

05 September 2011

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

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

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

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

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

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

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

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

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

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

Young property buyers make a comeback

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

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

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

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

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

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

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

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

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

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

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

FNB house price index up 6%

FNB house price index up 6%

FNB house price index up 6%

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

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

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

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

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

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

02 September 2011

Banks prefer to bond wealthy properties

Banks prefer to bond wealthy properties

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

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

Property market needs stimulation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Absa lends up to 100 percent home loan

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

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

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

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

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

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

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

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

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

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

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

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

01 September 2011

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

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

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

Liberty plans 60 floor Sandton office tower

Liberty plans 60 floor Sandton office tower

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

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

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

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

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

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

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

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

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