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PRETORIA, GP, South Africa
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03 May 2012

Schubart Park hopes for a lifeline

Schubart Park hopes for a lifeline

I have long held the believe that the South African "obsession" with housing is illogical and unsustainable. I have previously said it makes no sense to create RDP and affordable housing on large tracts of land situated very far away from most employment opportunities. Poor people have to spend large portions of their meagre income just to get to work (or even worse, to look for work) ... it is illogical. The densification of urban areas in South Africa would therefore make sense.

Having just spent a short time in China has enhanced this view. When I look at all the high rise residential developments in places like Shanghai, Guangzhou and Hong Kong, it seems to be just so much more efficient.  Such densification also allows urban planners to establish much better public transport systems and may have prevented the whole "e-tolling saga" in South Africa.

HOWEVER, such high rise residential developments require both efficient management and mechanisms for instilling a sense of pride in the occupants with regard to their accommodation.  Without these two provisos, there is a natural propensity for such buildings to turn into slums.

Unfortunately, the hijacking of buildings in Hillbrow and the ongoing Schubart Park saga in Pretoria merely serve to enhance the perception that such buildings will inevitably rapidly degrade. It is a perception that must be shattered if South Africa is to effectively house its people.



The decision by the Tshwane Metro Council to implode the problematic Schubart Park flats has been put on hold, pending an application to the Constitutional Court by the tenants to return to their homes.

The Lawyers for Human Rights (LHR) group was geared up to approach the Pretoria High Court today for an urgent application to halt the implosion of the building pending the final outcome of an application before the Constitutional Court (Concourt).

According to papers filed at court, the legal team of the residents received information that the council planned to implode the building on Freedom Day.

But lawyer Louise du Plessis said that they had received an undertaking from the council that the building would remain as it is, pending the finalisation of litigation by the residents in their bid to return. The urgent application this week would thus not go ahead.

The Pretoria News reported earlier this month that the council planned to implode the building to make way for a new housing project and shopping complex.

One of the projects earmarked for this is the provision of accommodation for students.

LHR said it had heard about the implosion for the first time in the newspaper.

Former resident Albert Mashimbye, who submitted a statement as part of the urgent application which was due to be heard this week, said their lawyers had told them the decision to implode was unlawful, as the Concourt challenge was still pending.

TAnother reason was that in preparing the building for demolition, the council would be in defiance of an earlier order by Judge Bill Prinsloo.

At the time of evicting the residents as the building had been declared unsafe, he ordered that it had to be refurbished and that the council had to report to the court on the feasibility of the refurbishment.

Mashimbye said the residents had also been advised that it would be unreasonable for the council to take a decision to destroy a public asset worth over R300 million on the basis of "flimsy and flawed" information.

"This matter was never debated in the council, nor was the public involved in this decision."

He said he had received information on April 14 that vehicles of a demolition company were parked outside Schubart Park. He had gone there and seen people inspecting the building. An employee of the company had told him that the buildings were being inspected in preparation for the demolition.

"I was told that the plan was to demolish the buildings over the weekend of April 27," Mashimbye said.

LHR, meanwhile, said it wanted to launch an urgent application to stop the demolition. Before now, it could not get an undertaking from the council that it would not go ahead with the imploding.

LHR will approach the Concourt for leave to appeal against Judge Prinsloo's order last September that none of the residents be allowed to return to the flats, as the building had been declared unsafe.

This followed evidence by council experts who told the court that in their opinion the buildings were unsafe and could at any point collapse if the residents were allowed to return.

But LHR obtained its own experts, who are of a different view. The group will ask the Concourt to allow a report by a renowned structural engineer as evidence in this application.

The structural engineer appointed by LHR offered a vastly different opinion from that proffered by the council's experts.

This engineer is of the opinion that the buildings are structurally safe. According to his report, the structures are robust and "only a major natural catastrophe" can cause failure to the structural elements.

He also did not agree with the suggestion made by the council's experts that the buildings might collapse if too many people lived there.

The LHR expert is of the opinion that the aspects of the building which affect safety are non-structural and could easily be fixed.

It was agreed that the electrical services could not be restored while there was water in the basement, but the expert said it was simply a matter of pumping out the water.

About 700 families were evicted last year and only 180 of them were given alternative accommodation.

LHR said the chaos created by the actions of the council and the the whole debacle proved that the matter involved constitutional issues that had to be resolved.

No date has yet been set for the application for leave to appeal.

Pretoria News

Tshwane Council may not levy 'illegal use' rates on properties

Tshwane Council may not levy 'illegal use' rates on properties

In a judgment that could be of importance to Pretoria property owners whose rates and taxes have significantly escalated over the years, the Pretoria High Court has ruled that the Tshwane Metro Council is not allowed to include a category of "illegal use" in its rating policy.

When the council adopted its municipal property rates policy in terms of the Municipality Property Rates Act, it created a category known as "illegal use".

This was used to levy rates and taxes on an exorbitant scale on properties it believed to be in contravention of the property's zoning.

Law firm Marius Blom & GC Germishuizen Inc approached the court to have this policy declared unlawful.

Lawyer Marius Blom said he had suddenly noticed an additional amount of more than R100 000 on the rates and taxes bill of the property in Duncan Street, Brooklyn, from where they run their firm.

"This illegal category (was used to rate) the property. It was also retrospective from the date of the inception of the rates policy."

Blom refused to pay and told the council that this higher category or rating was illegal and not provided for in the Municipal Property Rates Act. The council simply ignored him and he turned to the High Court.

The question before the court was whether "illegal use" is a valid category for the determination of municipal rates. The court was told that the rates levied by the council against Blom had always been in accordance with the rates applicable to residential properties.

However, during March 2010 Blom noticed that the rates had increased by a "gigantic amount".

The court was handed an invoice stating he owed R170 951 at the time. He was being rated under the "illegal use" category.

Acting Judge Jan Hiemstra noted that Blom did not use the property for residential purposes, for which it was zoned, but for business purposes as he ran the law firm from there. Hoever, the judge said the question was whether the council could introduce an "illegal use" category.

The judge said the council did have the power to create additional categories in its rates policy. However, all the listed categories were for lawful use of the properties.

"To include a category 'illegal use' in the list is to make illegal use lawful. Also, to levy a higher than normal rate on a property because it is used for non-permitted purposes is to impose a penalty without due process," the judge said.

He agreed with Blom that it was not permissible for the council to include a category of "illegal use" or "non-permitted use" for the rating of properties in its rating policy.

However, the judge did not let Blom entirely off the hook and said since he did not use the property for residential purposes, but as a business, it should in his view be rated according to the rates applicable to business properties in Brooklyn.

Blom told the Pretoria News that this judgment could be of interest to others rated on the same illegal basis. "They can take the necessary steps to protect their rights."

Pretoria News

R15m wasted on Pretoria building 'revamp'

R15m wasted on Pretoria building 'revamp'

Three years on and despite millions of rand being budgeted for its refurbishment, Kruger Park is nothing more than a shell, a far cry from the days it accommodated thousands of inner city residents.

A file picture of Kruger Park flats during a fire which claimed five lives.

The residents moved out after a fire claimed five lives in July 2008. They removed their possessions and what was left was cleared out by the Tshwane Metro Council so work could being on the refurbishment of the building.

But work never started and thieves have stripped the building bare, taking away the copper, alluminium and the steel which was part of the structure. Police recently arrested a scrap metal dealer, on whose property fittings from Kruger Park were found.

Over the weekend, a metro police officer who had responded to

Treports of thieves carting zinc from the building was stabbed by a wouldbe-thief when he intervened.

"The building should be demolished because the cost of rehabilitating it would far outweigh the cost of demolishing it," a city official told the Pretoria News.

Saying an inspection of the building by city officials recently revealed that the building had nothing left but the structure he added: "Since housing gave over the provision of security for the site to the Metro Police security."

The 2008 fire broke out on two floors of the building which was started by rent defaulters who had been evicted from the neighbouring Schubart Park flats. Five lives were lost and 25 others seriously injured in the blaze.

The municipality failed to respond to queries on the state of Kruger Park or to confirm the absence of security by yesterday.

Requests for an outline of plans for Kruger Park went unanswered by spokesman Console Tleane while the municipal media liaison office said they were caught up in meetings.

MEC for Housing Joshua Ngonyama agreed that security needed to be stepped up to avoid further stripping of the building.

He said housing was responsible for security at Schubart Park flats which the council hopes to implode in the near future. "Schubart Park is totally cordoned off, with security personel stationed at all key areas and dogs partolling the precinct."

The security carry live ammunition and all entrances were sealed off, making it difficult to gain entry, he added.

Sam Moimane, DA councillor for the ward in which Kruger Park falls, blamed the municipality's lack of administration for the state of Kruger Park.

"The R15m set aside for the refurbishment cannot be accounted for at the moment," he said, adding that the municipality did not discuss their plans for Kruger Park with them.

"They clearly can't manage their property," said Moimane.

Pretoria News

Outcome of Constitutional Court case 'crucial to property development'

Outcome of Constitutional Court case 'crucial to property development'

As yet, says Tony Clarke, MD of Rawson Properties, the multi-faceted residential property marketers now expanding throughout South Africa, the property sector (with a few exceptions) has not yet appreciated the huge significance of the Aengus Lifestyle Properties vs Inner City Resource Centre Constitutional Court case.

The background to this case is that a property developer bought a rundown, old fashioned block of apartments in Braamfontein, Johannesburg, an area which is much in demand by tenants, especially students, on account of its strategic position.

The developer then made known to the tenants his plan to renovate and upgrade the units - as a result of which, he said, rents would have to be raised 100 to 150%.

This was shattering to the tenants concerned because they had been paying very low rents, some of which were said to be under R1 200 per month. Furthermore, some of the tenants had lived there for over ten years.

The tenants appealed in court against this decision claiming that such huge rent increases were oppressive and unfair and contrary to the Rental Housing Act.

The case ended up at the Supreme Court of Appeal, which ruled in favour of the landlord who, it said, was entitled to a fair profit from his investment (he had claimed he was actually losing money on it) and he had no tenants on long leases - all such long leases had expired and all his tenants were, therefore, leasing on a one-month's notice basis.

The tenants then took their case to the Constitutional Court arguing that they had a constitutional right to housing and that evictions were not acceptable unless similar quality accommodation at the same price in the same area was available.

The Constitutional Court then ruled that the Supreme Court's judgement should be set aside and the eviction notices given to tenants should have been stayed.

This court also however recommended that the tenants should approach the Rental Housing Tribunal for a decision on whether the landlord's actions had been fair or unfair in terms of the Rental Housing Act and the court supported the landlord's right to appeal to the Tribunal as to whether increasing the rents was fair or unfair.

In addition, the Constitutional Court issued an order allowing any of the parties to lodge a complaint in terms of the Rental Housing Act (by 2nd May). If such a complaint is lodged the parties are granted permission to apply to the Gauteng Rental Tribunal for a ruling. The court said that if this was not done within two weeks the tenants' case would be dismissed.

Clarke drew attention to Prof Henk Delport's comments on this case. Prof Delport has said that it is significant that the Constitutional Court did not rule outright that the landlord's termination of leases was unfair nor did it rule on what rents the tenants would pay. However, the court also said that if the Tribunal rules that the cancellation of the leases was unfair, the eviction orders would probably also have to be set aside pending the stitching up of a new deal.

"As I read the situation right now," said Clarke, "no one can say how this case will be concluded. Everything now depends on the Tribunal's ruling. It should be stated, however, that if the tenants' case is favoured this is likely to lead to a freeze by developers on all further CBD upgradings, which in nine cases out of ten are only viable if higher rents can be charged for the improved accommodation. This, in turn, would exacerbate the deterioration of our inner cities. It is highly commendable that the "underdogs'" rights should be recognised but in the long run our experience indicates that where there is major interference with free market principles, a downgrading follows: no profit all too often means no growth."

Tshwane council faces R44m claim in Munitoria design dispute

Tshwane council faces R44m claim in Munitoria design dispute

The Tshwane Metro Council is facing a R44 million claim instituted by a firm of architects which won a design competition for its new municipal headquarters.

An architectural model of the building which was meant to replace Munitoria, as seen from Proes Street.

The competition, known as Project Phoenix, was run by the then Pretoria City Council, in consultation with the Pretoria Institute of Architects.

More than 70 entries were received for the competition, which was launched in November 1998 and was aimed at finding a suitable design for Munitoria, which was gutted by fire in 1997. The municipality unveiled the new-look Munitoria in July 1999.

The company's damages claim in the Pretoria High Court is based on an agreement with the council regarding the rebuilding of Munitoria.

The firm said that after the building was gutted by fire, it entered into an agreement with the council after having won the competition.

The firm had suffered damages of R44m as the council had cancelled the agreement.

The council, which is defending the claim, admitted that it had entered into an agreement with the firm as winner of the competition.

But one of the rules was that the construction of the new building had to fall within the financial means of the council.

Following a feasibility study on the construction of the new building, it was decided not to proceed, but to investigate setting up a publicprivate partnership for the construction of the new headquarters, it said.

The council denied that there was any agreement with the architectural firm after April 2003 in terms of which the firm was commissioned and appointed as architect for the building of the new municipal headquarters.

It admitted that the firm did render certain architectural services to the council relating to the design and planning of the new building, but said the firm was paid R3.2m for this and the council thus owed it nothing more.

Gerrit Jordaan, a partner in the firm, said they had sought payment from the municipality for services rendered after they were adjudged winners of the design competition.

Jordaan said they wanted to proceed with the project but could not do so because of council delays.

According to Jordaan, the municipality had insisted that they form a joint venture with a black economic empowerment company, with his company having a 70 percent stake in the joint venture while the BEE company would have a 30 percent share in the project.

The municipality's legal representative, Sam Maritz, argued that the municipality did not have funds to proceed with the project, which was estimated at R660m at that stage (2003/2004).

There was also a need to conduct a feasibility study for the project, which was now estimated to cost R2 billion, the court heard.

Jordaan agreed it would appear that the municipality did not have the necessary funds to complete the project at that stage.

He added it was not their call to decide whether the project went ahead or not.

Pretoria News

Commercial property recovery fails to take off in 2011

Commercial property recovery fails to take off in 2011

The commercial real estate market maintained modest growth over 2011, producing a 10.4 percent total return according to the SA Property Owners Association/ Investment Property Databank Sapoa/IPD) property index.

This subdued result marks a softening in the market from the mini- recovery in 2010 - which delivered a 13.4 percent return - but it is still an improvement over 2009.

Uncertainty in global markets, weak local demand and slowing consumer confidence resulted in muted capital growth of just 1.4 percent, and income returns were steady at 8.9 percent. Results improved marginally in the latter half of 2011, however.

Concerns remain, though, particularly over the health of secondary markets. Even at a national level, fundamentals are placing downward pressure on rentals and bottom line returns. Vacancies rose from 6.6 percent to 6.9 percent, rental growth reduced to 6.2 percent and at the same time rental yields softened by 36 basis points to 9.6 percent.

A sharp convergence in growth across the main market sectors highlights the increasingly important impact of macro forces and high uncertainty on the property market. Quality and location are playing a greater role in differentiating property returns.

Retail property once again proved its resilient nature with the strongest capital growth of the three main sectors for the t hird consecutive year. Its 10.1 percent total return was comprised of 8.3 percent income return and 1.6 percent capital growth, boosted by relatively strong retail sales as consumers continued to spend.

Overall , however, the growth in trading density fell below inflation and the outlook is for a continued moderation i n consumer spending. An increase in vacancies to 6 percent also put pressure on rental values, resulting in a corresponding weakening of rental growth.

As a whole, the office sector managed just 1.3 percent capital growth over the year, which combined with a 9.7 percent income return produced an 11.2 percent total return. This figure, however, masks a wide range of results in the office sector, with quality and location generally underlying the ultimate differences. Better quality offices were able to drive higher rental growth from vacancies lower than the national average of 12.1 percent.

Industrial property managed the highest total return of the three sectors with 11.9 percent, although the income return of 10.4 percent is much more significant than the 1.4 percent capital growth. Industrial vacancies continued on their downward trend, and at the end of 2011 were just 4.3 percent.

The SA results reflect a growing loss of momentum in global property markets in the wake of dampened sentiment, particularly across Europe. Outside Europe, returns improved slightly in Canada, Australia and the US.

Stan Garrun, managing director of IPD South Africa, says: "The results confirm the impact of global economic instability and subdued conditions locally, on SA property investment performance.

"On top of this, high operating costs and a serious mismatch between demand and supply are taking their toll on returns.

"Although these figures don't necessarily point to further recessionary conditions, they do indicate that it is a long haul back to pre-2008 levels. The good news is that prime assets are performing well in all sectors. Any economic uplift should quickly release major new income growth for tenants and landlords, as well as a pent-up property development pipeline."

Despite the moderation in direct property returns in 2011, it nevertheless outperformed most other major asset classes. While property unit trust listed property funds returned 12.2 percent, compared to 10.4 percent for direct property, property loan stock listed property funds only managed 7.7 percent. Equity markets and bonds returned 2.6 percent and 10.1 percent respectively.

Garrun says 2012 is the 15th year in which IPD has released a property investment index in SA. "The index has grown exponentially in this time, coincident with a growing property market and development of a sophisticated mix of investment vehicles, including a large and highly competitive listed property sector."

Weekend Argus (Saturday Edition)

Property market ticks up as supply and demand rebalance

Property market ticks up as supply and demand rebalance

The residential property market is showing tentative signs of a slow recovery despite activity levels still being significantly lower than during the previous house market boom in 2006 and 2007.

Mortgage originator ooba revealed yesterday that it had experienced significant growth in bond applications and approved home loans last month, with the value of its home loan approvals increasing by 49 percent year on year.

Saul Geffen, the chief executive of ooba, said this was the company's best performance since April 2008, but stressed it still represented only 34 percent of the value of approvals recorded by ooba in May 2007.

Geffen attributed these increases to a rise in buyer activity and easier access to finance, together with ooba's increased market share and the slow improvement in the domestic economy.

He said the Adcorp employment index revealed that about 108 000 jobs were created last month, the strongest growth witnessed since the 2009 recession. This compared with the 24 000 jobs created in February and 80 000 in January.

Geffen stressed that employment opportunities and job security played a big role in whether consumers could afford to apply for home loans.

Statistics from mortgage originator BetterBond also indicated that the market was improving and gaining momentum, with approvals rising in the past three months by about 20 percent year on year and the approval rates by the banks currently at about 50 percent and rising.

Bruce Swain, the managing director of the Leapfrog Property Group, said Absa in particular seemed to have a renewed appetite for home loan finance and had, for example, re-engaged with mortgage originators, which was bound to increase competition.

"Estate agents have willing and able buyers. Our market is much better than perceived. The dampener was to a large extent the availability of finance and things are improving in this sphere," he said.

First National Bank's (FNB) estate agent survey for the first quarter of this year revealed agents predominantly in the major metro regions were more positive because of an improvement both in demand and the balance between demand and supply or "pricing realism".

John Loos, a property and household sector strategist at FNB, said the residential demand activity indicator rose noticeably in the first quarter to 6.05 on a 10-point scale from 5.66 in the previous quarter.

He warned that some care should be taken with interpretations because the first quarter was generally a seasonally strong period.

However, Loos said South Africa did experience better economic growth late last year, which was supportive of employment and disposable income growth and, therefore, of residential purchasing power, and this may also have played a positive role.

Loos said the survey also suggested there was an improvement in the balance between demand and supply in the residential market, something that was driven by demand and by the availability of stock for sale. "This is mildly encouraging from a price performance point of view," he said.

However, Loos said survey respondents also pointed to financial pressure among households remaining high.

Estate agents estimated that 20 percent of sellers in the first quarter were selling to downscale due to financial pressure, which was lower than the 21 percent of the previous quarter.

On the other hand, Loos said the percentage of sellers selling to upgrade remained unchanged at 17 percent of total sellers in the first quarter.

He said these two reasons for selling were arguably the two most important indicators in the survey of the financial pressure and constraints on homeowners and the gap between the two had closed significantly since early-2009, despite the level of downscaling.

Business Report