SHEPPERSON'S FIRST LAW

Luxury house prices are falling fastest in Asia Nairobi (up 25%) was the strongest performer during 2011, Cape Town sits somewhere in the middle. The value of prime property in the world’s key cities rose by only 0.2% in the final quarter of 2011. Kate Everett-Allen examines the figures and looks at whether prime property is still the safe haven investors and the super-rich consider it to be. Although the Knight Frank Prime Global Cities Index, which tracks the performance of the world’s leading luxury residential markets, rose by 3% during 2011, the second half of the year saw the pace of growth slow considerably. The luxury housing market is now seeing the pace of price growth slip for the second time since the 2008/09 global financial crisis. In this latest cycle annual price growth peaked at 10% in Q2 2010 but has since slowed each quarter. After the collapse of Lehman Brothers European and North American cities were largely responsible for the index’s slump. Since late 2

House prices overvalued by at least 25% - Rode Report Could take at least five years for the market to recover. The latest Rode Report on the state of the property market says house prices are overvalued by at least 25% and will take five years or more to recover. Property economist and publisher of the report, Erwin Rode, has attributed this partly to “irrational exuberance”. The phrase was used by American economist and former chairman of the Federal Reserve, Alan Greenspan, during the Dot-com bubble of the 1990s. It has been interpreted as a warning that the market might be overvalued. Rode explains that over the past ten to 20 years people became so enamoured with property as an investment that they lost sight of the fundamentals. “In the end they were paying and are still paying prices that are above replacement value having taken into account ageing.” “Irrational exuberance, you had it on the stock exchange, you had it in all asset classes over the ten to 20 years. The

Third party was behind secret Sharemax settlement A mystery buyer paved the way for court to sanction rescue scheme. A mystery “investor” has paved the way for a court to sanction the Sharemax rescue scheme. The scheme, designed to save Sharemax-promoted syndication companies from liquidation, was sanctioned by the North Gauteng High Court on Friday. It is also expected to be a formality for the Reserve Bank to withdraw its directives to repay investors. The Reserve Bank-appointed inspectors are also expected to be relieved of their duties at the various syndication schemes. Last year Moneyweb reported that the Sharemax rescue had hit a speed bump. Clients of attorney Chris de Beer asked the court to delay sanction of the rescue scheme. This delay was granted. De Beer argued that proper process had not been followed, and that the rescue plan seeks to legalise an illegal scheme. The directors of the syndication companies were not impressed. They issued this media release at the ti

Propert survey shows High Net Worth segment is the weakling Propert survey shows High Net Worth segment is the weakling The “lower priced” market segments looked the healthiest in 2011. The FNB Estate Agent Survey suggests that the metro market segment that agents define as the Lower Income Segment showed the strongest demand-supply “fundamentals” of the 4 “suburban” income segments during 2011, while the so-called High Net Worth segment was the noticeable weakling. The survey asks agents to place the areas that they serve into one of 4 categories, i.e. High Net Worth areas (average price = R3.7m average in 2011), Upper Income areas (average price = R2.2m), Middle Income areas (average price = R1.2m), and Lower Income areas (average price = R679,000). One of the key questions asks agents to provide a subjective rating of demand in their area on a scale of 1 to 10. As one views the estimated demand levels in the different segments, one sees that the Lower Inc

Residential property prices to trade sideways in 2012 Impacted by the poor economic growth environment. It is expected that residential property prices are likely to continue to drift sideways in 2012, impacted by poor economic growth. However, according to CEO of ooba, Saul Geffen, with interest rates remaining at historically low levels, which may drop further in 2012, home buyers and home owners will continue to benefit. Geffen says it is expected that the South African residential property market will experience limited real growth in property prices in 2012, impacted by the poor economic growth environment. He says that 2011’s third quarter economic growth figures have confirmed that South Africa has once again had little real economic growth, which should mean further pressure on the fragile labour market and negative real disposable income growth. “All of this will lead to limited purchasing power. Whilst possible interest rate easing is possible, interest rates are not li

Residential property industry faces another challenging year Estate agencies are facing a challenging twelve months. With another sluggish year likely for residential property in South Africa, estate agencies are facing a challenging twelve months. “As with 2011, property prices are just holding their own which impacts on agents’ commissions,” says Herschel Jawitz, CE of Jawitz Properties. “Unlike other industries where professional fees are charged, our commission doesn’t go up with inflation each year. The only ways our earnings increase is if property prices increase, or we sell more properties.” If property prices only go up by two or three percent in 2012 then, in real terms, commission earnings will decline. “Added to this, costs are increasing by at least 10%, and the equation becomes interesting. Normally, if you are sacrificing margins you can try to make up the numbers with higher volumes but the numbers of sales for the most part are going to be flat year-on-year and i

'Top 10 property investor tips for 2012' According to research conducted by Auction Alliance, more than 8% of all South African homeowners with mortgage bonds are still underwater with their loans (where balances are higher than values), hinting that there are more distressed sales still to come. In effect, this will continue to restrain price growth in some areas, and create major constraints for certain sellers in 2012. "So, if it's still a buyer's market here are 5 tips for 2012 that are aimed largely at the group that needs the most advice - South African home-sellers. In addition, there are also five tips to help buyers navigate the surplus of investment opportunities available" comments Rael Levitt. 1. Price your house right from day one The old-school strategy of real estate crossing their fingers and hoping for a better offer, whilst starting at a higher mandate, will be brushed off by most home-buyers. For an objective gauge, have you

China`s big 2012 bets: South Africa rocks - China perspectives China's big 2012 bets: South Africa rocks Asian giant set to snap up more juicy assets in Africa, aiming for double-digit returns.   Many investors are looking to Asia , in particular China , for returns as the world heads into yet another tough year. China, meanwhile, is foraging in Africa for opportunities to generate superior returns. Most visible on its list is South Africa. The China-South Africa burgeoning trade relationship is in the spotlight yet again, with news just before Christmas that China's sovereign fund has acquired a sizeable stake in Shanduka. China Investment Corporation has reportedly paid a staggering R2bn for 25% of the unlisted investment holding company with interests in coal mining and other industries. Shanduka is a familiar name in business circles in South Africa. Its charismatic chairman, Cyril Ramaphosa, was widely tipped to succeed Nelson Mandela as South Afr

SA needs an education lesson from the Chinese - China perspectives China perspective - Jackie Cameron SA needs an education lesson from the Chinese   Time to fix South African education: the Chinese way?   One of the ANC government's biggest embarrassments is its abject failure to provide a high quality education to prepare young citizens for an economically productive adult life.  Now it has strengthened ties with China, South Africa would surely do well to follow many of its big brother's examples on the educational front. Many people believe China's policy of opening up its economy to the world is a major factor in lifting most of its population out of poverty in three decades. But, there's a case to be made for its education system being just as significant a factor in its turbo-charged growth. China's policymakers certainly believe education has been a vital backbone in its economic miracle and say as much in the country'

Buying vs building gap stretches Building costs set to increase by more than 12% this year: Report Building your own home at current building costs could amount to 29% more than buying an existing house. This figure is likely to increase in 2012 and even further in 2013. Property analyst of Absa Home Loans, Jacques du Toit, says it is unlikely that the gap between buying and building will shrink any time soon and if it does it’s improbable that it will drop beyond 25%. The gap peaked at roughly 34% in the fourth quarter of 2010. In mid-2007 the prices of existing and new houses met, but since then existing house prices dipped slightly in 2009 and started moving steadily upward. New house prices, however, continued moving upward from 2007 with building costs dipping slightly in 2010, peaking around 2011 and then moving sidewards. Click image to enlarge A report on building costs released in Q4 2011, forecasts that tender prices are likely to increase by 12.1% this year

Boomers worth their weight in gold Downsizing boomers could bring about a resurgence in the property market. Although it is the Generation X population, which consists of adults between the ages of 31 and 45, that are leading the property market recovery, baby boomers are making their presence felt in the market, says Adrian Goslett, CEO of RE/MAX of Southern Africa. Goslett says that as more and more South African consumers reach retirement age, downsizing boomers aged between 47 and 65 years old could bring about further resurgence in the property market. “With many of these homeowners having built equity in their homes over the years, as well as other investments, boomers may be the first demographic to move in the emerging market when other ages groups are still struggling to meet the stringent lending criteria required by banks,” he says. Goslett notes that because their children have moved out of home, the boomer generation is expected to trade their suburban homes for life

Redefine considers retail acquisitions - Property Moneyweb And remains on track to deliver its earnings forecast and strategic objectives. Redefine International Limited (RIN) released its interim management statement on Wednesday, in which it announced considerations for a number of opportunistic acquisitions in the European retail sector. The company said that it would continue to be managed on a conservative basis with consistent income generation a priority. Despite the current economic challenges, the board was confident that the company remained on track to deliver its earnings forecast and strategic objectives set out in the reverse acquisition prospectus published in July 2011. Occupancy in the portfolio remained unchanged at 95.0%. The proportion of the portfolio subject to CPI/RPI indexation or fixed increases remained broadly unchanged at 54.8%. Inflation in the UK remained well above the Bank of England's 2.0% target, benefitting rent reviews, which were subject t

Special Report Podcast: Roelof Horne - portfolio manager at Investec - Boardroom Talk with Alec Hogg Why everyone wants to invest in the African continent. DOWNLOAD THIS INTERVIEW at www.moneyweb.co.za ALEC HOGG: It’s Wednesday January 18 2012 and in this Boardroom Talk special podcast, Roelof Horne, portfolio manager at Investec and the man that, well, that big group looks at when they’re considering investing in the African continent, joins us now. Roelof, before we go into some of the interesting aspects that were introduced through the interview that I had this week with Johann Rupert of Richemont, how long have you been focusing on the African continent? ROELOF HORNE: Well, Alec, I was born in Africa and I’ve worked in Africa my whole life. We sometimes make the mistake of excluding South Africa from that but if we’re talking about continent-wide it’s since 2005. It started, I guess, in 1996 when I ventured into the Botswana market and the Namibian market but continent-wide

'Too many properties on market' There are too many houses for sale on the South African market despite dropping prices - and any improvement in the situation remains unlikely for some time. The surplus is because of the impact of the troubled global economy on the local economy and the difficulty in getting a bond, estate agents and economists say. Houses are on the market for more than four months and up to 90 percent of sellers are being forced to drop their asking price by up to 13 percent, according to First National Bank household and property sector strategist John Loos. He said it was a buyers' market, with prices having declined by about 17 percent in real terms (which refer to average house prices adjusted for consumer price inflation) since February 2008. "We believe that indications emanating from the latest results of the FNB Estate Agent Survey suggest that the residential market still has some way to go before it reaches that 'holy grail' wh

Public meetings on Joburg property rates Public meetings on Joburg property rates Joburg residents who feel that their property rates are unfair now have an opportunity to get the rating policy changed. The City of Joburg will hold public meetings over the next few weeks to get input from residents. In the past, residents have expressed little interest and the meetings have been poorly attended. But the Joburg Advocacy Group is encouraging people to attend and to influence changes to the policy. According to the group's Lee Cahill, there are some major concerns about the policy as it stands, which residents should be pushing to change. The main ones are about the valuation of property and the determination of rates. Rates are based on the council's general valuation roll, and property valuations are now based on both land value and the value of improvements - buildings and improvements on the land. Valuations are supposed to be market-related and rates charged accor

Tenders out for sale of landmark Braamfontein property Liberty Properties wants to sell off the Jorissen Place high rise.   Calls for tenders are going out for the sale of a prominent landmark in Braamfontein adjacent to the Johannesburg CBD. Liberty Properties wants to sell Jorrisen Place – an 18 storey structure spanning Jorissen, Bertha, De Beer and De Korte streets in the upgraded area of Braamfontein. Head of capital markets at Jones Lang LaSalle, Andrew Bradford, explains how the tender process, which ends on February 29, will work. “People will submit bids in a pre-determined format and then the bid will open privately, so it’s not a public forum and nobody knows what the others have bid. From the bids we receive, we make a recommendation to the seller and they disclose who the successful bidder is.” Bradford says a building like Jorissen Place usually attracts a fairly sophisticated buyer. In this case the prospective buyer would, after making his or her own calcula

Tenders out for sale of landmark Braamfontein property Liberty Properties wants to sell off the Jorissen Place high rise. Calls for tenders are going out for the sale of a prominent landmark in Braamfontein adjacent to the Johannesburg CBD. Liberty Properties wants to sell Jorrisen Place – an 18 storey structure spanning Jorissen, Bertha, De Beer and De Korte streets in the upgraded area of Braamfontein. Head of capital markets at Jones Lang LaSalle, Andrew Bradford, explains how the tender process, which ends on February 29, will work. “People will submit bids in a pre-determined format and then the bid will open privately, so it’s not a public forum and nobody knows what the others have bid. From the bids we receive, we make a recommendation to the seller and they disclose who the successful bidder is.” Bradford says a building like Jorissen Place usually attracts a fairly sophisticated buyer. In this case the prospective buyer would, after making his or her own calculations, s

Developers ask for extension of urban development tax scheme Developers ask for extension of urban development tax scheme The government has been urged to extend the urban development zone (UDZ) tax incentive by another five years to March 2019. An extension would help boost prospects for urban regeneration, says Colin Young, director of Nine Cubed Group, which proposed and brokered the R1.6 billion landmark co- development office project planned by First Rand Group and Old Mutual for the Portside site in Cape Town's central business district. Young says the incentive was introduced to promote office and residential development projects in carefully selected UDZ areas of major cities. "It aims to encourage investors and property developers to fast-track their development schemes," he says. "There are real benefits for corporates that want to invest in inner cities, notably to own and occupy their own buildings. Currently, though, any businesses considering inv

Standard Bank`s median house price eases 0.4% y/y Manufacturing production growth surprises on the upside. House price growth has by and large reached a plateau in recent months according to Sibusiso Gumbi, research analyst at Standard Bank. Standard Bank's (smoothed) median house price (using the assessed values of those houses for which mortgage finance was approved by Standard Bank) contracted by 0.4% year on year (y/y) in December from a contraction rate of 1.0% y/y in November. Manufacturing production growth surprised on the upside, buoyed by a weaker rand, rebounding to 2.6% y/y in November from growth of 1.2% y/y in October. A sustained improvement, however, remained under threat, given the ongoing churning of global economic waters (particularly in the eurozone, SA's key trading partner). Total credit extension to households crept up to 5.4% y/y in November from 5.3% y/y in October. Conversely, growth in mortgage advances had continued to ease, registering 1.9% y

Analysts warn of a bumpy property ride Say the top five performers of 2011 are too expensive. Analysts have warned of a bumpy ride ahead in the listed property sector but say the asset class remains viable over the long term. The top performers for 2011 were Fortress B, Capco, Sycom, Investec Property Fund and SA Corporate. The bottom five were Capshop, Emira, Dipula, Redefine International and Hospitality B. Paul Duncan, portfolio manager at Catalyst Fund Managers, says while Fortress B is a company run by an excellent management team, it is unlikely to sustain its outstanding 106% year to date yield. Fortress listed in October 2009 on the main board of the Johannesburg Stock Exchange as a property loan structured stock company. Duncan says the company does carry more risk due to its high levels of gearing. A company with high gearing or high leverage is more vulnerable to downturns in the business cycle as it has to continue servicing its debt regardless of how bad property fu