Pros and Cons of Selling Privately

In tough economic times many sellers are trying to cut costs by selling privately. This might be an easy way to save money or to bring your asking price down but one should consider the pros and cons carefully before you DIY:

The advantages of selling privately are:
* You do not have to pay an agent any commission meaning you can offer a better price. In doing so you have a better chance of selling your property.
* As the homeowner you know your house better than anyone else. This means you can point out all the positives in and around your property.
* Because some new light was shed on agent's doing shady business deals, sellers has become more cynical. When selling privately you can rest assured that this won't happen.
* The internet has made advertising easy and affordable. It has also made it easy to find out the exact value of your house and its great for comparing prices to other properties.
* Some homeowners are good at driving a hard bargain. They take pride in their sales skills which results in them selling their property in no time.

If you are interested in selling privately you might want to consider these disadvantages:
* Sometimes homeowners can pay a lot for ads in newspapers. This means that they have to dig into there savings before they are guaranteed that their property will be sold.
* Buyers have the tendency to point out drawbacks while haggling for a better price. This wears you out emotionally because your home gets criticized by almost every potential buyer.
* Most DIY sellers lack the legal and negotiating skills necessary to sell a property.

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Choosing a Good Tenant

Choosing the right tenant is probably one of the most important things that a landlord must do. This is mainly because it is very hard to get rid of a bad tenant and it is often quite costly. See the process of selecting a tenant as a business decision and always make sure that your tenant meets certain standards.

Firstly, lets look at some characteristics of a good tenant:

§ A good tenant pays the rent on time. This means that your tenant must have a regular source of income and a history of prompt and complete rental payments.
§ A good tenant has good references from former landlords.
§ A good tenant does not engage in illegal activities and abide by the terms of the tendency.

It is important to make sure that you tenant has these characteristics and don’t settle for anything less. If your friends suggest a tenant be sure to check out all references and don’t take anyone’s word for it. Do all enquiries yourself.

Here are some tips for choosing the right tenant:
§ Make sure your ad reaches a large audience. This way you will have a wide choice of potential tenants.
§ Make sure to draw up a complete application form with space for present and former landlords’ names and phone numbers and a complete history of previous addresses.
§ Make sure to check all references and ask what the reason was for the termination of the contract.
§ Look for gaps in the applicant’s rental history or for a pattern of many tenancies of short duration
§ Always run a credit check on your top two applicants.
§ When you have selected a tenant make sure that all paperwork is in order and that you both sign the lease. Take time to explain all clauses to your tenant to make sure that there is no misunderstanding.
§ If you are using a property manager make sure it is someone who will use proper care and procedures during the selection process.

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Tips for Letting your Property this Holiday

A holiday home can provide you with a steady income, and with the festive season on its way, it might be a good idea to get your home or apartment ready should you plan to rent it out. If you own property on the coast you are in a very good position to cater for holiday goers and tourist flocking to the coast during summer.

You will have a substantial advantage over your competitors if you have a house or apartment with a sea view. Tourist and holiday goers who are in search of a view will be more than happy to pay more for a property with a view.

While a view will draw in many potential renters, it is simply not enough. Use the décor in your house of apartment to make renters feel at home. This will ensure that they come back next year. A popular trend is to use a lot of natural light and minimal, durable fabrics to decorate. A fruit bowl and vase with bamboo or long twigs can be used to accessorise. Satellite TV and a DVD player are a nice and necessary touch to a holiday home or apartment.

The little things go a long way when it comes to welcoming the renters. A bottle of mineral water or wine and coffee, milk and sugar are inexpensive and can guarantee the return of your renters year on year.

Preparing a thorough inventory takes time but is a very essential part of your planning. If you want to keep up with the rest of the market, make sure not to over-price your property.

This article is courtesy of Property24

Buy or rent property in the Overberg

Improve the Value of Your House

The information in the article is with courtesy of Property24 and Janice Anderssen (“Improve and Coin!” – 27 October 2008)

Janice Anderssen, home décor and DIY expert, believes that you can quickly up the value of your house by improving wisely. She also warns that improvement projects should be chosen carefully and one needs to identify which improvements would increase your resale value as well as your day-to-day comfort.

Here are some tips for home improvements that will increase the value of your investment:

§ Kitchens that are improved with modern appliances, countertops and cabinets are almost certain to give you return on your investment.
§ Updating an existing bathroom or adding a new one will increase the value of your home. Add fixtures, vanities, ceramic or marble tiles and a new coat of paint and you are sure to benefit.
§ You can recover around 85% of you cost in added value when you make improvements like decks or patio in the garden.
§ Converting unused space into a bedroom is a great way to add value to your home.
§ Painting in and around the house maintains the beauty and value of your home.

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Is this the light at the end of the tunnel?

The end of the slump in the property market might be coming to an end according to some estate agents. This follows a sudden up-tick in show home visitors and buying interest since mid-August.

Samuel Seeff, chairman of Seeff Properties, shares this optimism, saying that the SA Reserve Bank’s decision to keep the interest rate on hold might be what triggered the improved sentiment.

Others say that there is no hope of a quick recovery with the high interest rates in place. Data released by Standard Bank shows that house price growth remains in negative territory with median prices down for the 6th consecutive month.

John Botha, Standard Bank’s economist, believes that disposable income and interest rates should turn the corner before thing will start looking up. He expects that to be well into next year.

Absa Home Loans senior also thinks that the residential property market might recover late next year when financial pressure has been taken off households.

The number of residential properties up for auction is also an indicator that the slump is far from over. Rael Levitt, chief executive of Alliance Group, stated that they will put 123 residential properties up for auction this month alone as oppose to last September’s 12.

This article is courtesy of Joan Muller (“Don’t get too excited yet” ,Property24, 20 October 2008).

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Overberg Haven Booms

More and more Capetonians are finding their own piece of paradise in Tesselaarsdal, a tiny village in the picturesque Hemel en Aarde valley of the Overberg – and they are greatly rewarded for doing so.

According to Riaan Smuts of the RealNet Office, most of the properties in Tesselaarsdal are still showing promising growth of between 50 and 100 percent after the recent boom.

He explained that these increases in value come off a low base, which probably explain the fact that some pieces of land have increased tenfold in the past three of four years.

This peaceful hamlet, located 20km from the beautiful town of Caledon, was established when a farmer gave his freed slaves parcels of land. The descendants of the original owners sold their properties when prices started climbing as a result of the recent boom in the real estate market.

Here you can still pick up a cottage in need of repair, and situated on about 1000m² for around R200 000. Smallholdings in the area go for less than R500 000 while undeveloped 20-hectare units cost around R1-million.

Although the climate is suitable for growing lavender and olives, most of the buyers see their investment as a holiday or weekend getaway.

But how long will this local boom last? Smuts said that the prices would probably reach a ceiling in the next three to five years after which properties will be in step with the national property cycle.

The information in this article is courtesy of Riaan Smuts (“Overberg Hamlet Booms”, iafrica.com, 16 September 2008).

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Bottom of the Cycle Yet?

The information in this article is courtesy of Bill Rawson (“Cape property down 20% off 2007 peak – real estate veteran”, Realestateweb, 7 October 2008).

Real estate veteran Bill Rawson says that while house prices are down, national sales are up dramatically, which suggests that we have reached the bottom of the cycle. Perhaps the most common mistake made by sellers in the current market is to insist on an asking price that is no longer acceptable.

While property prices in the Cape continue to perform better than most other provinces in South Africa, they are still 20% off their peak in 2007. Often when sellers find that the offers they have been receiving reflect this then they enter a state of denial, blame the agent, the advertising or any other factor and refuse to drop below the original asking price.

This tends to leave the property on the market for six to twelve months, after which it is probably below market value due to a certain stigma that it may have picked up. Buyers are generally suspicious of homes that have been on the market for so long, assuming that there is some hidden fault that prevents them from selling.

The right time to drop your asking price is the moment you realize that the price is not going to be accepted. Once you do this, it is highly likely that some of the original potential buyers will regain interest in the property. While it can be emotionally upsetting for a seller to reduce the price on a home when he or she has spent time and money lavishing it with care, buyers are in the best position that they have been for nine years, so it is really no use trying to buck the trend – it almost never works.

The total number of homes on the market has fallen by 20% and the time taken to sell a property is now between twelve and fifteen weeks, which is nearly twice as long as in 2007. Rawson also doesn’t see the situation changing any time soon, although the Reserve Bank’s decision not to raise interest rates seems to have stabilized the market somewhat and probably signals the end of the downturn.

The veteran goes on to say that now is a great time to buy, despite the difficulties in obtaining bond finance. Property is still a top line investment and this has never been truer than in today’s tight market conditions. Consumers have grown overly cautious and negative in the current market climate and its time to dispel these reactions.

Rawson Properties, which has just over 140 franchises across the country, has recovered from a low in May/June to record a 250% increase in sales in September. However, Bill Rawson concedes that this trend is by no means universal and that his company is possibly unique in this aspect. Many smaller agencies are still going under and agents are dwindling, with the national figure down to 55 000 from 85 000.

With the latest political developments, interest may well be likely to decline, but there are questions being raised about the direction the new political leadership will take and exactly how ‘fairness to all’ will play out in terms of the dispensation. So far, it seems to have been handled quite well.

An encouraging sign is that South Africans seem to be more accepting of the new price structures in the property market, which often involves scaling down. Rawson has seen an increase in large deposits recently (up to 30% of the sale price), which also reflects that buyers are scaling down.

Rawson adds that, “Ongoing branding and marketing, with an increased emphasis on sophisticated customer related IT systems, ongoing support for franchisees with training, advice and encouragement and upgrading all of the support systems (again, particularly those that are IT related) are the factors that are taking the Rawson group forward”.

Buy or sell property in the Overberg.

Some Good News for House Prices

A recent article published by Reuters discusses South African house prices, indicating an increase of 3.6 percent year-on-year in September. This is the first increase in 10 months, reflecting fresh activity in the ailing market after an extremely difficult year.

Standard Bank’s property gauge released on a monthly basis showed an increase in the median house price at R580 000. The five month moving average is still in negative terrain, but has improved year-on-year to –5.5 percent after several months of steadily falling prices.

After sharp declines in May and June, Standard Bank said that the rate of decline slowed in July and August, but indicated that the property sector would remain under pressure until consumer spending starts to recover from its cooling period.

The bank said in a statement that, “The unexpected 3.6 percent increase in September is not seen as a new trend, but rather the result of volatile monthly data. It is anticipated that the index will once again show low or negative growth in the months to come. Nonetheless, the latest data show that there is some life in the property market”.

Household budgets have taken a beating with the enforcement of stricter lending laws and a series of interest rate increases, which has in turn put the housing sector under strain. The central bank increased the repo lending rate by 5 percentage points to 12 percent between June 2006 and June 2008 in a bid to fight inflation.

This house price increase coincides with a slowing in the upward rates cycle in August and market experts predict that the next move in interest rates will be down sometime in 2009. Slowing household spending is evident in falling retail and new vehicle sales and the bank believes that the sector may not recover until this picks up again and interest rates start falling.

“Residential property will remain in the doldrums until such time that fundamental drivers of the market turn for the better and that may be some time off,” according to Standard Bank.

The information in this article is courtesy of Reuters Africa (“S.Africa house prices up, but problems remain”, 2 October 2008).

Find property in the Overberg.

Politics Won't Affect Property Yet

The information in this article is courtesy of Realestateweb (“Politicians won’t move property market yet – bank”, 25 September 2008).

FNB’s property strategist, John Loos believes that the recent change in president may have rattled some cages, but it “is unlikely to change an already deteriorating residential market trend”.

Kgalema Motlanthe’s somewhat dramatic entry into the presidency following the ANC’s recall of Thabo Mbeki and the subsequent resignation of cabinet ministers en masse has certainly caused a stir, but Loos says that this will not have a significant impact on residential real estate.

Loos issued a report yesterday saying that, “Insofar as such events create negative sentiment in and towards the country, they are potentially negative for residential property performance”. The direct impact can be in the guise of higher emigration rates from sensitive “suburban” markets, which are still dominated by three minority population groups.

According to Loos, “Indirect impacts can occur when general investor confidence is negatively affected, which can have a negative impact on economic growth and thus on purchasing power for residential property”.

The recent events have likely created the perception of factional divisions within the ANC and highlighted a party whose succession plan was not clearly thought out, especially given the temporary uncertainty surrounding the minister of finance, Trevor Manuel, who has played an integral part in stabilizing South Africa’s economy.

Where some would refer to the situation as a crisis, Loos is more inclined to “call it democracy functioning reasonably well”. He notes that constitutional procedures have been observed and the outgoing president “has accepted the decision, has not mobilized his army or a band of thugs to protect his position, and has not started to import weapons from China or any such thing”.

Loos went on to say that the public spat between Mbeki and ANC leader Jacob Zuma “looked pretty tame” in comparison to the showdown between US politicians of late. Mbeki has merely stepped down and the country does not seem to require a special negotiation process to remove him from office.

However, the events can’t be expected to alter the trends of declining residential property sales, home loan applications and emigration selling that continues to plague the South African market. Loos believes that economic factors should overshadow political events and that there are various things needed to turn the market for the better:

- An expected turn in inflation in the final quarter of the year, with an improvement in numbers “expected to cause real disposable income growth to turn upward as from early 2009”;
- A declining debt-to-disposable income ratio for households, which in turn is expected to cause the debt service to fall in the last three months of the year;
- Interest rates falling, which is expected from April; and
- The “ultimate recovery of the global economy”, which will have a positive impact on the local economy.

Loos seems to think that “a year from now, when the dust has settled on the current process of political leadership change”, the economy will turn for the better and combined with the benefits of 2010, there will be a significant decline in emigration. He added that policy shifts are more important than people shifts or policy wish lists.

“The world’s and our own political history tells us that the utterances from new leaders on their path to power are not always a good indication of what policies are to follow,” Loos advised.

In the meantime, head of Seeff Properties, Samuel Seeff has warned that an improvement in the property market could be further off than expected, thanks in part to the latest political saga. With an estimated 20 000 estate agents being forced out of the industry, the residential sector has taken a firm beating this year, with sales plummeting and falling property prices.

The bad performance in the housing market has been linked in part to negative sentiment about South Africa, with sellers increasingly citing emigration as a motivation behind offloading a home and consumers finding it increasingly difficult to obtain finance due to the stricter credit laws in place.

Many sellers and players in the industry have been biding their time in the hope that interest rates will improve, but even that looks unlikely with recent hints being dropped by SA Reserve Bank governor, Tito Mboweni.

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Revision of Property Law in Favour of First Time Buyers Suggested

First Time Buyer Concessions Called For

Jeanne van Jarsveldt, financial director of RE/MAX Southern Africa has indicated that a serious review of the law is needed to stimulate the property market and encourage first time buyers to invest. He would like to see the current threshold on payment of transfer duty to be enforced on sales over R1 million and this should be accompanied by tax breaks for first time buyers.

A “rescue package from government” seems to be what is needed in order to avoid further distress in the South African property market. Van Jaarsveldt said that the US anchored its recently launched Housing Stimulus Bill around a tax break of over R52 000 for first time buyers in an effort to stabilize the flailing market.

A similar tax concession in South Africa would go along way towards relieving some of the pressure on affordability for first time buyers, who are trapped by the five percentage point interest rate increases over the last two years.

Van Jaarsveldt also believes that a temporary suspension of transfer duty on all price categories is worth considering, at least until the market has begun to recover. He indicated that the Real Estate Institute of Australia is pressuring the government for an exemption from stamp duty on first time buyer transactions, as well as on retirees downsizing their properties. The same is happening with Britain’s National Association of Estate Agents in the UK.

According to economists, abolishing transfer tax would cause the treasury to lose around R10 billion a year, which would not make too much of a dent in the government’s budget, but would certainly ease the buying and selling of homes.

Mike Bennet, head of ProProp Franchising Group, agrees with van Jaarsveldt in his call for a temporary suspension of all transfer duty on sales under R1 million until the market starts to improve and would also like to see banks given permission to relax the National Credit Act rules on houses selling for less than R700 000.

Van Jaarsveldt refers to the property market as “a pillar of our economy” and believes that the current high number of negatives surrounding the market make it absolutely crucial that some concession be made in order to stimulate home ownership.

He said, “To ignore the situation seriously jeopardizes the growth of the emergent black middle class who we all know are vital at this stage of our country’s transformation”.

The information in this article is courtesy of Jeanne van Jaarsveldt (“First-time buyers need a break – ReMax”, Business Report, 17 September 2008).

Property for sale in the Overberg.

Tips on How to Make Money in Property

How to make money in residential real estate
Jackie Cameron*
12 September 2008

10 of the best tips from Realestateweb.co.za's commentators. Add yours to the list

The great thing about internet news sites that are open for comments is that the only or last word isn't left to editors, official company spokespeople or whoever has the smartest PR.

Often site community members make valuable contributions, like on Realestateweb.co.za where property investors - past, present and budding - have been contributing fantastic pearls of wisdom on the bricks-and-mortar asset class.

Here's a selection of some of the best ones, sparked this week by insightful article "Property investment as your own business", which was written by P3 Investment Group CEO Dr JD du Toit.

Du Toit explains why property's returns can sound too good to be true because people mistakenly think these are passive investments instead of viewing residential portfolios as businesses.

Residential buy-to-lets can be an alternative to a pension through using other people's time and other people's money - and can help you stretch your resources to the maximum, notes Du Toit.

If you are contemplating becoming a property investor, do read the article as well as the debate and additional advice and tips generously given below it by visitors.

Realestateweb.co.za compiled this list with a view to highlighting some of the pros and cons of investing in residential real estate now.

Of course we may have missed some that you believe more important, too, so please add your favourites or new suggestions to the list by using the comments' tool below:

1. Property is painful when you first start. As time goes on it gets easier and fun (when you become cash positive). Be careful not to get greedy though...eish. From: Mthoko
2. It is no secret that currently prices and rents are out of sync, and it will take a while before the equation makes sense. I am a BTL (Buy-To-Let) investor myself , but would be very careful in expanding (and especially starting) the business now. From: Gem
3. You do not remortgage one to buy another, you treat each one individually...the more you have, the greater the economies of scale with expenses and also any possible downsides (like maintenance and vacancies). From: Gem.
4. Buying properties that are cashflow positive means that when you are ready to buy again the banks view your other properties in a positive manner.
As an example: say I have a property purchased at R500k with a monthly bond of R7 500/pm. Now let's say I purchased it 5 years ago, have been renting it out and currently getting R8 500/pm rental. So I am (in) cash to the tune of R1 000/pm.
Now if I have 10 like this, that's R10k/pm. So when I go to the bank to buy property number 11, I have R10k income to add to whatever other income I have and basically ALL my other properties are not seen as exposure - so I can basically buy forever using these principles.
At some stage I can also refinance if I choose, but it's all about cashflow. From: Brennan
5. Nothing could be simpler than buying shares. Almost no paperwork, no government departments to deal with, no lawyers, estate agents, management agents, get the picture?
Buying SATRIX40 is a no brainer. From: OS
6. Take a good alternative: ApexHi shares.
They (listed property shares) pay quarterly interest, with an initial yield greater than 10%.
Use the income that you will be sacrificing upfront on your BTL venture and buy these. As the interest is paid out to you, reinvest and buy more. From: Willem Ras.
7. If declining interest rates are a bull signal then buy now because the R157 (a government bond) indicates the falling interest rate scenario is with us. Your biggest friend is the NCA (National Credit Act) because it is keeping the masses out of the market. However, their pent up demand will be unleashed as interest rates fall. It is always best to buy when sales are slow and the mood increasingly desperate. From: Free the Rest.
8. I predict: That after the property crash, there will be a property boom.
All you property bears may laugh at me that property prices can never go up. But yes they will.
I predict so therefore I am right. From: Naustrodamus.
9. Bottom line is yes you gotta understand your investments and/or business. From: Brennan
10. Property is here to stay. Shares come and go...property is mostly for keeps. From: TJ

Got a great property investment tip? Share it on Realestateweb.co.za by commenting here or below other articles.

Find property for sale in the Overberg.

There is a Knack to Selling Property

How to Thrive in Tough Conditions

Despite the current economic conditions where the property market is particularly sluggish, there are experts who believe that there are still ways to maximize profits. Bill Gibson is a sales specialist who spoke to estate agents at a national conference of the Institute of Estate Agents (IEASA) in Johannesburg recently. He insisted that times like these can often provide the best opportunities to gain market share.

While sellers are in abundance, finding them is still the most important factor, Gibson says. “This is the time that estate agents need to be actively involved in listing properties if they want them sold,” he urges. This means increasing canvassing by between 20% and 40% and Gibson also suggested that estate agents hold show houses with properties where other agents have the mandate. This obviously requires permission from the seller and agent, as well as a follow up on all potential buyers who walk through the show house door.

According to Gibson, investment seminars are an ideal platform to mingle and circulate, while referrals are “a good source of potential buyers and sellers”. This all begins with one’s circle of friends and business associates. Even in tough times, there are still buyers and agents simply have to work that much harder to find them.

Business and coaching specialist, Graham le Sar said that the market right now is just as it should be. Estate agents, on the other hand, need to become more innovative in their response to the market if they are to sell properties successfully. He likened real estate to a contact sport, saying that estate agents constantly have to engage potential buyers, sellers and homeowners to keep the momentum going.

Le Sar went on to say that, “The biggest mistake estate agents make is doing nothing when the property market is down”. He says that estate agents really need to find ways of preparing themselves for a change in the market. While they may work less, they also need to work more thoroughly and ensure that every detail of a transaction is covered fully and clearly explained to clients. “Homeowners will always own houses and these are the first potential buyers when they sell,” le Sar points out.

Graham Gavin, author of Real Estate Power, has said that successful estate agents generate new ideas and fresh leads on a daily basis. He also believes that it is possible to thrive in a downcycle if you have the right attitude, plus a few extra measures thrown in that make the estate agent stand out in a crowd.

Gavin also said that estate agents are not paid for the time that they put into selling houses, but how they sell them. For instance, if you sell successfully to one client then you will no doubt get more referrals for the outstanding service. “To thrive in a down market, think smart and swiftly implement those strategies in every transaction you make,” advises Gavin.

The information in this article is courtesy of Denise Mhlanga (“Making money in a sluggish property market”, Realestateweb, 8 September 2008).

Find property in the Western Cape's Overberg region.

Residential property has it 'tough'

September 01 2008 at 11:59AM

Residential property is still in the doldrums, Standard Bank said on Monday in its monthly residential property gauge.

Standard Bank's median house price eased by 1,8 percent year-on-year in August, while the median house price in level terms was R550 000. The five month moving average growth was recorded at 7,7 percent year-on-year.

"After a period of mostly National Credit Act (NCA) induced volatility, Standard Bank's residential property index returned to normality during the last two months and presents a clearer depiction of house price trends, but is still reflective of the tough financial and economic conditions households face," Standard Bank said.

Tough conditions would remain for residential property until fundamental drivers of the market took a turn for the better, which may be some time off.

Recent monthly estimates of the growth in the Standard Bank median house price had overstated the extent of the decline in South African residential property prices.

This was the result of the NCA induced base effect that was established in the months leading up to the implementation of the Act last year.

"Uncertainty regarding the possibility of more stringent credit granting criteria led to an increase in the proportion of higher valued houses in the underlying home loans sample from which the median house price is calculated."

Subsequently, the reduced affordability of housing, exacerbated by higher mortgage rates, led to a decline in the demand for residential property and a substantial softening in house price growth, the bank added.

This was aggravated by the base effect, resulting in the deep negative year-on-year growth rates seen in May and June.

"The July and August outcomes are, in our view, a more accurate reflection of aggregate house price trends." - Sapa

This article is courtesy of the IOL website.

Find property in the Overberg.

Opinions Differ on the Future of Property in SA

Economists Disagree

According to a recent article published by Business Report, economists seem to have divergent views when it comes to the property market outlook. This came to light at a fractional ownership conference in Cape Town yesterday.

Property strategist at FNB’s home loans department, John Loos forecast an improvement in sentiment, saying that now is “probably as good as it gets” in terms of the best time to buy property before prices start to recover.

Erwin Rode, of property research company Rode & Associates, had a much more pessimistic view, saying that “a long period of stagnation lies ahead” and this could last as long as five years. “That means prices of houses will lag inflation. That is, if building costs go up by 8 percent, house prices will rise by 4 percent in nominal terms,” he said.

According to Rode, this is the result of people in developed countries having lived beyond their means and surviving for many years on borrowed money. Fractional ownership is governed by the same regulations as timeshare and although there are several different models, the main difference is that it is confined essentially to the very upmarket property. Rode hoped that this would continue to be the case and that banks would stay out of financing it.

Dirk Wilson, co-founder of fractionalownership.co.za and the conference organizer, said that fractional ownership differed from timeshare in that the investors gained a share of equity in the property and not just the right to occupy the premises or let it for a certain period. Fractional sales are said to be “doing quite well” considering the state of the property market, but more participants are needed in providing properties, which have dropped from 64 six months ago to just 34 companies at present.

There has been a great deal of interest in South Africa from overseas investors and buyers looking for properties available now and not in the planning stage, such as golf estates or near the beach. There have to be hospitality and leisure facilities of a high standard, such as room service and a spa. Fractional ownership is really an investment in lifestyle and thus comes with a certain standard of living.

According to Wilson, 74 percent of enquiries about fractional title investment properties in South Africa were from overseas, including the UK, the US, Australia and the UAE. Also, a large number of South African expatriates are interested in property investment here, but “not a whole house,” as he said.

The information in this article is courtesy of Audrey d’Angelo (“Economists give widely differing views on property”, Business Report, 22 August 2008).

Find property in the Overberg region of the Western Cape.

Proposed Land Bill Criticised by Civil Society

Land Bill Has Wide Implications

An article published by Realestateweb has drawn attention to the government’s proposed Land Bill and the possibility that it could be about more than just real estate, potentially allowing the government to take everything you own, including your intellectual property.

This message about the proposed land expropriation bill soon to come before parliament came from a group of well-respected economic and constitutional thinkers at a conference on the implications of the Land Bill held in Cape Town on Monday.

The conference delegates discussed how the Bill has ominous implications for the country’s economy, as well as South African society. The Bill’s main problem when it comes to property ownership is that it gives the state the right to take your house and land without paying a market-related price for it. In other words, it becomes a “take now, fight about the details later” approach.

South African farmers raised the alarm about the Bill initially, as much of the focus is on agricultural land in a bid to speed up the land redistribution program. Those in the know predict that food security and a loss of investor confidence, similar to what has happened in nearby Zimbabwe, can be expected if the new law is enacted.

Dave Steward, executive director of the FW de Klerk Foundation that played host to the conference, highlighted a “particularly nasty clause”, which gives the Minister the right to appropriate any property. This obviously has much wider implications than those specifically related to land reform.

“It could be shares. It could be on behalf of any juristic person…this could be a company where they have tried to negotiate and failed,” said Steward, indicating that this “looks like a massive expansion of BEE (Black Economic Empowerment)”. Steward goes on to say that, “It is horrifying in its implications,” and that there could be a BEE company, which could simply ask the Minister to expropriate shares.

Dr Leon Louw of the Free Market Foundation said that the Bill “is about all forms of property, including intellectual property,” and cited examples of software copyright, school text book copyright, pharmaceutical company rights over medicines and shares, as being among the types of property that might be expropriated in terms of the proposed law.

Former head of the Afrikaanse Handelsinstituut and chief economist at Transnet, Ulrich Joubert warned that the South African economy is particularly vulnerable to the loss of capital and skills. The economic growth in the 1990s and 2000s was spurred on to a large extent by consumer spending. Foreign investment is largely based on portfolios and this means easy withdrawal from South Africa.

Joubert asserted that South Africa needs to avoid adding to the risk perceptions already making investors nervous by threatening property rights entrenched in the constitution. “We need to create an environment where investors can be confident of getting a return on investment – without being expropriated,” he urged.

Schlemmer, a constitutional expert, believes that it takes a long time for events surrounding legislature to “penetrate through to the population”. At the moment, only a small number of South Africans are actually aware of the looming threat and its implications. Considering the already growing negative sentiment, he suggests that now would be a “very bad time to start messing with land ownership and property”.

He went on to say that the government appears to be disguising the lack of capacity of government departments and the lack of delivery around the land question with this new legislation. Compared to the government’s housing challenge, the land issue is a relatively “small problem”, Schlemmer said in reference to a provision in the Bill for the expropriation of real estate in towns and cities.

A number of political leaders also attended the conference, including Democratic Alliance leader Helen Zille. She referred to the legislation as a “wedge issue”, which the ANC “uses before elections to mobilize people on the basis of race to vote for the ANC”. Zille went on to say that, “There are people in the ANC who are as appalled. What we are seeing around expropriation is symptomatic of what we will be seeing in the years ahead. What we are seeing is a government claiming to represent the will of the majority – it is not in the interests of the majority…it isn’t the will of the majority. We have a venal minority posing as a righteous majority – using the race card”.

The ANC did not attend the conference and when asked for an explanation, Steward said, “We invited people from their portfolio committee and relevant government departments. I guess they are all busy on a Monday afternoon.”

The Bill was meant to go in front of the National Assembly this week, but the “fact they decided to postpone it might be a positive indication,” said Steward.

The information in this article is courtesy of Jackie Cameron (“Mind losing your house, business, shares and book royalties?”, Realestateweb, 4 August 2008).

Visit www.realty1capeagulhas.com if you would like to buy or sell property in the Overberg region of the Western Cape.

Building Practice in SA Going Green

SA to Adopt Green Star Rating Tool

An Engineering News article draws attention to the expected launch of South Africa’s green building rating tool in Cape Town in November. The Green Star rating tool will be launched at the inaugural Green Building Council of South Africa (GBCSA) convention and exhibition.

The rating tool applies to green building in offices and will be followed by specific tools that apply to retail, multi-unit residential and other building types, in order of market demand. Part of the GBCSA’s mandate is the running of its first Green Star SA Accredited Professional Course on November 5 this year, which is after the close of the main convention.

Established in 2007, the GBCSA recently launched for general membership and is an emerging member of the World Green Building Council. The council’s mission is the promotion of green building practice, to act as a resource centre for the industry, the development and operation of the green building rating system and the provision of training and education to ensure developers and investors are quickly brought up to speed on the various practices, this according to Bruce Kerswill, chairperson for the GBCSA.

The Green Star rating tools have been adapted from the rating system in Australia and similar tools have marked the mainstream adoption of green building in a number of markets overseas, which would be a crucial step in the GBCSA’s mission in South Africa, the council indicated.

The accreditation of new and refurbished developments in line with green building practices is a challenge that has already been taken up by property developers and investors around the globe, which is due largely to the demand from tenants for more productive spaces.

According to Kerswill, “The challenge to the South African commercial and industrial development industry is to see how quickly and effectively they are able to embrace the need for green accreditation”. The council noted that, “Detailed, practical guidance on green building techniques will also be showcased as a key element of the convention, using both local and international case studies”.

There are a number of international speakers lined up for the convention, including Che Wall, past chairperson of the World Green Building Council and managing director of Lincolne Scott, a building services consultancy practicing in Australia and Asia Pacific; Richard Fedrizzi, president, CEO and founding chairperson of the US Green Building Council; as well as Andrew Borger, managing director of Leighton Properties, who will have key members of his consulting team to present a case study on the 5 Star Green Star project in Queensland.

Speakers specializing locally include Indresen Pillay, managing director of Davis Langdon SA and a member of the same company’s global international Sustainability Group, who is scheduled to discuss the costs involved with green building. The GBCSA will also present a range of green building technologies, products and services, alongside the convention.

The information in this article is courtesy of Christy van der Merwe (“Green building rating tool to be launched in November”, Engineering News, 5 August 2008).

If you would like to buy or sell property in South Africa's Overberg region, please visit www.realty1capeagulhas.com.

Owning Property Comes With Other Expenses

Things You Should Know Before You Take Out That Bond

An article published on the property iafrica website indicates that the there is more than meets the eye when it comes to owning property. The current gap between asking prices and selling prices continues to widen, but while this may create more value for money investment opportunities in the residential property market, it does not necessarily mean that you can afford to buy that dream home. This is because the cost of home ownership could be a lot more than you might think.

Marketing director at Betterbond, Deon Lessing says that many people renting property often think that they could easily buy a home and pay the money that would have gone towards rent as their monthly bond. “But what prospective buyers need to understand is that the true cost of home ownership involves a lot more than just a monthly bond payment,” he adds. “Underestimating the true costs of owning and maintaining a house and the land on which it sits is one mistake first-time buyers often make,” Lessing asserts.

Putting interest rate increases aside; there are a number of expenses that homeowners need to take into consideration:

Homeowners insurance: This is a prerequisite when it comes to applying for a home loan. Homeowners insurance cover (HOC) protects owners of property from damage caused to the actual building and all the fixtures and fittings therein. The cover includes fire damage, lightning, explosions, storms, earthquakes, water, hail and even accidental damage to sinks, toilet bowls or other sanitary ware.

Rates and taxes/levies: Homes that are free-standing are subject to rates and taxes determined by the municipality, which cover the collection of rubbish, electricity and water, while sectional title units or complexes charge each unit a levy to cover these costs. Often these levies may include water, but exclude electricity.

Household contents insurance: While this form of insurance is optional, it covers all your personal belongings contained in your home and with the ever-increasing level of crime in South Africa, many households opt for this kind of insurance cover.

Security: Putting in burglar bars or paying an alarm company to fit a security system linked to armed response is considered a necessity, even if your home is located within a security complex.

Maintenance costs: When you own a home, it becomes your responsibility to take care of all the repair work and maintenance costs. There will no longer be a landlord to help you on this. While the cost of maintaining your home may vary depending on the size, Lessing suggests that putting aside R1000 a month is generally a good average amount. Remember that if you do not keep up with the maintenance then the costs could grow exponentially. A house that is in less than perfect condition tends to be on the market longer and sells for less than a house that has been impeccably maintained. Other areas of a home that require maintenance include the garden, swimming pool, painting, carpet repair and replacement, as well as other incidentals that are bound to come up through the ownership cycle.

According to Lessing, “When calculating your total cost of home ownership, you should add up to 40 percent to your base bond payment and that is the amount that you will eventually have to pay. The best way to be ready for the cost of owning and maintaining your home is to plan for it”.

The information in this article is courtesy of Property iAfrica (“True cost of ownership”, 4 August 2008).

If you would like to buy or sell property in Cape Town's Overberg region, please visit www.realty1capeagulhas.com.

Court Rules in Favour of SA Farmer with Property Lost in Zim

Farmer Wins Landmark Case

An article published on the IOL website discusses the results of what some are calling a landmark case for South African farmers and other citizens with business interests in crisis torn Zimbabwe. On Tuesday, the Pretoria High Court ruled in favour of a Bothaville farmer who lost a number of farms and businesses in Zimbabwe due to the ongoing political upheaval.

The Judge, Bill Prinsloo, ruled that Crawford von Abo had the right to diplomatic protection of his assets in Zimbabwe from the South African government, specifically regarding the violation of his rights by the Zimbabwean government. Prinsloo also ruled that the government had 60 days to remedy the situation and report back to the court regarding the steps taken to restore his rights in Zimbabwe.

Von Abo has been struggling for more than six years to get the South African government to act against the Zimbabwean government’s confiscation of land owned by South African citizens. Up until now, his pleas have fallen on deaf ears and von Abo’s counsel told the court that his efforts to obtain help from the government were like “the Yellow Brick Road – the road to nowhere”.

According to von Abo, in 1997 the Zimbabwean government violated his rights by destroying his property interests in a number of farms in the country, which occurred as part of its national policy to expropriate white-owned farms. To this end, he was not paid compensation for his loss.

Judge Prinsloo said he regretted how difficult it had been to resist the conclusion that “the respondents (government) were simply stringing the application along and never had any serious intention to afford him proper protection”.

Prinsloo went on to say, “Their feeble efforts, if any, amounted to little more than quiet acquiescence in the conduct of their Zimbabwean counterparts and their ‘war-veteran’ thugs”. According to the judge, von Abo had demonstrated that his rightful property in Zimbabwe was unlawfully expropriated under international law and that he had not been compensated for it.

Von Abo’s attempts to protect his interests by suing the Zimbabwean government within the country had proved futile. Prinsloo said that given the state of the country’s legal system and the government’s disregard for the orders of its own courts, particularly in light of expropriation, no more remedies were available to him.

Prinsloo added that the South African government had dealt with the von Abo matter in bad faith and irrationally. “For six years or more, in the face of a stream of urgent requests – they (government) did absolutely nothing to bring about relief to the applicant and hundreds of other white commercial farmers in the same position. Their ‘assistance’ was limited to empty promises”.

He went on to say, “They (government) exhibited neither the will nor the ability to do anything constructive to bring their northern neighbour to book. They paid no regard, of any consequence, to the plight of valuable citizens such as the applicant with a 50-year track record in Zimbabwe and other hard-working white commercial farmers making a substantial contribution to the GDP in Zimbabwe and providing thousands of people with work in that country”.

The judge thus concluded that von Abo qualified for diplomatic protection from the South African government, which “may involve effective diplomatic pressure on the Zimbabwean government to restore the properties to the applicant and his companies and to pay compensation for losses and damages”.

As part of the ruling, Prinsloo indefinitely postponed von Abo’s claim for damages against the government regarding the farms and business interests he had lost in Zimbabwe. Von Abo indicated during the trial that the conservative total in damages pertaining to his six farms, including the implements and other assets lost, amounted to around R60 million.

According to Ernst Penzhorn, von Abo’s lawyer, in response to the verdict, his client indicated that he “is grateful that he could have turned to a court in his own country to protect his rights. This is comforting if one looks at how he was treated with no sympathy by members of the executive”.

Penzhorn said that the next step would be to approach the Constitutional Court to confirm the judgment. He said he believed that the decision would open the door for many South African citizens who lost business interests in neighbouring Zimbabwe. Regarding the claim for damages, he said that they would first see what the government’s response is before going any further.

The information in this article is courtesy of Zelda Venter (“Landmark win for SA farmer”, Pretoria News, 30 July 2008).

Visit www.realty1capeagulhas.com if you would like to buy or sell property in Cape Town's Overberg region.

No Need to Pull Out of the SA Market

Experts Say Keep Investing

An article published on the Personal Finance website draws attention to concerns over the current downturn in the South African market and urges investors not to bail out just yet. You will lose the substantial gains of the past five years and this may seriously hamper your ability to retire financially secure.

The article likens the hammering being experienced by the property and equity markets in the current economic conditions to a war zone, suggesting that investors will most probably have to “keep their heads below the parapet for some time”. However, the equity and property experts are of the opinion that survival is possible if investors don’t panic and aren’t strangled by debt.

Prices of property and equity have been falling fast this year; with Standard Bank’s house price data reflecting a 9% drop in median house prices in the year to April. Equity markets, both local and foreign, have been in the spotlight since May, with the FTSE/JSE All Share Index (Alsi) down to 27 995 at the close of trade on Thursday, after having capped 33 000 in May.

Of course, the weakening of property and equity values this year has been impacted by the rising inflation rate. In factual terms, any nominal returns are reduced and any losses are increased by the loss of real value due to an inflation rate of 10.9% for the year to May.

Considering the previous five years of growth up until now though, most people don’t have to panic, as they have rarely seen it so good. As Paul Hansen of Stanlib puts it, investors in his company’s Small Cap Fund may have received a “huge klap” by the fund’s 40% drop from a record high last year, but the fund “is still triple the value it was in 2003”.

According to Rian le Roux, chief economist at Old Mutual, over the past five years investments in almost all sectors in South Africa have fared exceptionally well. The average annual return for unit trust funds in the domestic general equity sub-category has realized over 30% each year, while the ABSA house price index increased by 18% each year. Over the same period, inflation was stable at an annual average of 6%.

Essentially, this translates into a sharp growth in the wealth of most South Africans who invested in residential property and equity over the past five years, mainly through retirement funds, insurance policies and unit trusts. However, le Roux asserts that such high returns could not be sustained and the current slowdown was to be expected.

“Investors who invested in the past year or two are hurting, especially those who invested in financial and industrial shares,” says le Roux. He warns that during “bear markets”, investors “need to guard against any inclination to panic as they see their wealth falling”.

Instead of panicking prematurely, investors should rather remind themselves of the volatility of markets and that historically, those who have chosen to ride out the storm have been rewarded in the long term. Most asset managers are following their own advice and hanging in, even if their short term performance is negative, as they believe that the current volatility will reflect better pricing in the medium term.

Johan de Lange, director of South Africa’s top performing asset manager Allan Gray Investor Services, says that his company focuses on finding shares that offer basic value, with an investment horizon of at least four years. He adds that individuals should be considering long term investment objectives and “guard against acting irrationally”.

Trevor Pascoe, head of investment services at Old Mutual, says that many investors are tempted to move their money from equities to cash, even when their budgets are not really under pressure, simply because they are afraid the markets will continue to fall.

“Even investment professionals struggle to get market timing right on a regular basis. Investors who panic and disinvest from the market during downswings and reinvest during upswings usually destroy value. Smart investors realize the importance of continuing to invest through a dip, making the bear market work for them by picking up equities cheaply,” says Pascoe.

Le Roux insists that those facing difficulties in the current economic climate are people are entrenched too deeply in debt. He goes on to say that Old Mutual estimates that household debt interest repayments increased from 6% of household after-tax income at the end of 2003 to 11.5% currently.

His advice seems to be not to give into temptation and dip into your long term savings to see you through the rough times, as this may be beneficial in the short term, but in the long term it may leave you with insufficient funds for retirement. “If budgets are under pressure, you should rather try to reduce your monthly spending”.

According to Jeremy Gardiner, of Investec Asset Management, the two primary risk factors investors now face are being overweight in either commodities or cash. “While the long run commodity story is fundamentally sound, a significant correction within the next two years is quite possible. Commodities are an important part of any investment portfolio, but your exposure should be appropriate to your risk profile. Similarly, be careful of being overweight in cash for too long. The risk of being out of the market when it turns up is as high as the risk of being in when the markets turn down,” says Gardiner.

The information in this article is courtesy of Bruce Cameron (“Now is the wrong time to stop investing”, Personal Finance, 19 July 2008).

Visit www.realty1capeagulhas.com if you would like to buy or sell property in Cape Town's Overberg region.

How to Beat the Tax Man When You Own Property

Property Tax Pointers
An article published by Real Estate Web provides some excellent insights on how to beat property tax. “For expenses to be tax deductible against rental income, there must be a genuine intention to conduct the trade of letting” (David Warneke, tax fundi).

In cases where the property was not let fully during the tax year then reasonable steps must have been taken to find another tenant and if losses were incurred, there has to be a reasonable prospect of the investment turning a profit (even after a number of years). Where losses did result, these may be “ringfenced”, which means that they might not be deductible against income from any other trade. This only applies to an investor who is a natural person.

The following is a list of the most common income tax deductions on residential property that is rented out:

§ Interest on bond or other loans
§ Repairs and maintenance
§ Rates
§ Letting agent’s commission
§ Sectional title levies
§ Advertising
§ Insurance
§ Wear and tear on movable assets let with the property
§ Accounting fees
§ Bad debts
§ Bank charges
§ Write-off of the cost of the property in terms of section 13 (relating to certain properties in ‘Urban Development Zones’)

The following are not tax deductible, but can be added to the base cost for CGT, which is calculated when the property is sold:

§ Transfer duty or VAT on the purchase of the property
§ Bond registration fees
§ Conveyancer’s fees
§ Cost of improvements to the property (provided that these are still reflected in the state of the property when it is sold)
§ The remuneration of a surveyor, valuer, auctioneer, lawyer or consultant relating to the acquisition of or disposal of the property
§ Any expenses incurred to establish, maintain or defend a legal right or title in the property.

When it comes to the various problems related to the expenses outlined above, these include:

Interest:
The loans must be used to finance the property. This will preclude cases where the bond is raised using the property as security and the funds are then used to finance private expenses.

Repairs versus improvements:
There are a multitude of income tax cases that deal with the distinction between repairs and improvements to property. While repairs are tax deductible, improvements may qualify for inclusion as part of the base cost of the property for CGT. In other words, for an expense to qualify as a ‘repair’, there has to be damage or deterioration and the intention of the taxpayer must be to restore the item ‘repaired’ to its original condition. The repairs also have to apply to a part of the property and not amount to the reconstruction of substantially the entire property.

Wear and tear on assets let with the property:
Wear and tear can be claimed only if the assets have not been integrated into the building. Once an asset becomes integrated, it loses its status as a separate asset in its own right. For example, this applies to light switches and fittings.

Bad debts:
The debt must have gone bad in order to claim it. This means that the taxpayer must be able to produce evidence that the amount has become irrecoverable during the tax year – it cannot simply be doubtful.

Although these pointers are relatively straightforward, it is still optimal to seek professional advice when discussing tax deductions.

The information in this article is courtesy of David Warneke, a tax partner at Cameron & Prentice, senior lecturer on Tax at UCT and author of a text used at universities throughout South Africa. (“Property tax beaters: 24 quick pointers”, Real Estate Web, 14 July 2008).

If you would like to buy or sell property in Cape Town's Overberg area, please visit www.realty1capeagulhas.com.

Homeowners Taking Out New Bonds Beware

Negative Equity the Latest Risk

An article published on the Business Report website draws attention to the latest trend in the property market, where homeowners now face the risk of negative equity on their homes as house prices continue to drop.

Standard Bank’s median house price in June dropped by 11.3% year-on-year to R550 000, which only increases the possibility that some homeowners now owe more on their homes than they could sell them for. The moving average growth in median house prices over the last five months stands at minus 7.8%.

Standard Bank’s property economist, Sizwe Nxedlana has said that these negative numbers had been distorted somewhat by the surge in median house prices at the same time last year, ahead of the National Credit Act implementation.

This entire year, Standard Bank has recorded either flat or negative median house price growth. In January and February, the figures were at zero, with minus 5.2% registered in March, minus 8.6% in April and minus 13.2% recorded in May.

According to Nxedlana, declines of this magnitude and duration in the demand for property “are not inconsistent with national house price deflation”. He added that negative equity in mortgage bonds was now a possibility, particularly for those who bought houses at the peak of the property boom.

However, this would only become an issue if a sale of the property were to take place in the current climate. Homeowners might be better served to stay in the property and ride out the storm rather than sell it for a price that would be much lower than expected.

A senior property analyst at ABSA, Jacques du Toit said that a homeowner who obtained a 100% bond early this year and now wanted to sell the property might well be unable to sell it for a price that covered the bond. Essentially, the more recently a bond has been taken out, the higher the likelihood of this happening.

Another important contributing factor is the size of the mortgage bond as compared to the cost of the property. “Those who have not put down a deposit and [have] taken out a 100 percent bond are more at risk,” said du Toit.

It is also possible that some homeowners have “dipped into their bonds” and taken out some of the equity to finance or pay off other debts, but it would be impossible to determine to what extent this has occurred. The problem is that those who have done so will have accumulated more debt as a result.

Eventually, these homeowners would no longer be able to afford the bond repayments and would not have equity left in their bonds. Nxedlana maintains that the short-term outlook for the residential property market remains bleak.

The information in this article is courtesy of Roy Cokayne (“Homeowners risk negative equity as house prices drop”, Business Report, 2 July 2008).

If you would like to buy property in South Africa's Overberg area, please visit www.realty1capeagulhas.com.

Some Positive Steps Taken by Emerging Markets to Quell Inflation

Emerging Markets Rising Inflation

An article published on the Sify website has highlighted increasing inflation in a number of emerging markets over the last year. While this problem is also being experienced in developed markets, rising inflation is especially acute in emerging markets because food tends to account for a much larger percentage of consumer price indexes.

To add insult to injury, many countries are working close to full capacity because investment has not kept up with economic growth, which consequently pushes up wage inflation. Official statistics may actually mask the true extent of inflationary pressures in some cases, but there is evidence that the skyrocketing food and energy prices are seeping through to core inflation (in other words, having an effect on other inflationary factors).

Concern has also been raised in terms of the effect of price increases and the various official responses to the situation. Vietnam reported a year-on-year inflation rate of 25% in May, which has seen a proliferation of labour strikes in reaction to this and growth forecasts have since been cut. China is also experiencing a core problem with rising food prices. Even Egypt has hiked public sector wages by 30% in a bid to prevent social unrest. Indonesia is said to be willing to spend a fifth of its annual budget to shield citizens from energy price increases.

Without a doubt, the inflation pressures being experienced by emerging markets seem much worse than in developed countries. Such a development is certainly worrying, as measures including subsidies, price controls and export bans can only provide short term relief at best, while probably just storing up long term problems for the future.

However, there has been a responsible approach taken by various authorities in many countries affected that is somewhat encouraging. For example, Egypt’s decision to pay for the state sector’s wage hikes by curtailing tax exemptions for firms operating outside of ‘free zones’, imposing taxes on interest earned from Treasury bills and cutting state fuel subsidies.

Indonesia announced recently that it would reduce fuel subsidies by 30%, while Taiwan has decided to abandon them entirely. Continuing the trend, Malaysia and India have also decided to reduce fuel subsidies. The current policies will go a long way towards stabilizing the finances of these countries and help direct necessary resources to other parts of their economies.

While moves by central banks in South Africa to raise interest rates in a bid to quell inflation are generally considered bad news for stocks, when it comes to the long term, it is encouraging to see the increasing credibility that these banks have acquired in battling rising prices. The same policies have been applied by banks in Korea and Chile, which ensures that the responsibility for dealing with inflation is taken out of the hands of politicians.

It is important to keep the threat of inflation in context, as policy makers in some emerging markets insist that the spike in inflation is due in part to a short term supply stock in food and energy that will soon ease as higher prices lead to increased supply. There is merit to such arguments and while recent developments are concerning, inflation should not yet be seen as a ‘crisis’ that poses a threat to the overall attraction of the world’s fastest growing economies.

Some countries have also pegged their currencies to the US dollar and successive cuts in interest rates in the US have made the inflationary problems in these countries worse, while already struggling with their economies in overdrive. How long this policy remains in place depends largely on the economy in question, as well as the priority each central bank puts on inflation control.

In general, local currency appreciation and higher interest rates should really help combat inflation. It is believed that the prospect of currency appreciation will not exacerbate the problems being experienced by emerging markets by pulling in more capital, simply because there a number of emerging market currencies are still relatively undervalued.

Equity investors are concerned about emerging markets partly because of the possible severity of measures implemented by governments in an effort to cool the economy and partly because of the cost pressure that local manufacturers might face as a result of price increases. Of course, another concern is the depreciation in value of future money. However, in places like Latin America and Russia, the recent spike in global inflation has been concentrated in commodities and this has actually helped stock indexes.

While the price of commodities may drop from their peaks, these prices are not foreseen to reach extremely low levels in the near future. This is due in part to the continued demand from emerging markets and the relatively inelastic supply. Thus commodity companies should remain in a profitable position and constitute an attractive investment opportunity.

The information in this article is courtesy of Mark Mobius (“Rising inflation in emerging markets”, Sify Finance, 29 June 2008).

If you would like to buy or sell property in Cape Town's Overberg area, please visit www.realty1capeagulhas.com.

War of Opinions on State of Property Market in SA

SA property market in 'serious trouble'

Tanya Farber June 10 2008 at 12:25PM

A war of words has broken out between estate agents and bond originators as news of a pending property crash gathers force, with price drops from 10 percent to 40 percent predicted.

While some agents insist homeowners should not be swept up in the panic, others are frank that the property market is in serious trouble.

On Monday, the Cape Argus received an e-mail marked "urgent" from ooba, formerly Mortgage SA, which charged that "recent alarmist forecasts by property market commentators" had caused homeowners "undue concern".

Homeowners, they urged, should not be swept up in the "scaremongering" because the current weakness was only a "short-term situation".

The fracas started with a letter from Lew Geffen, head of Sotheby's International Realty South Africa, to his franchise owners in which he predicted the pending crash at a 40 percent decrease, adding that there were 60 percent fewer buyers in the market now than at the same time last year.

While other industry players have lashed back rejecting his predictions, Maurice Levin, PR manager for Sotheby's, has defended Geffen's claims.

"Lew is not afraid to pronounce that the industry is in a pickle. Many agency bosses talk it up because their livelihood depends on it," he said.

Lee Gautschi, owner of Lee Gautschi Properties, said she was "honestly" not experiencing panic-selling in her market.

She did, however, agree that there was a range of negative factors which had dampened the market.

These included the National Credit Act; hikes in interest rates; and "worldwide political trends of recession" that have had an impact on the local market, resulting in lower prices.

Media reports have also pointed to emigration spurred on by high crime rates; xeno-phobic attacks; and other factors such as power cuts, political dissent and corruption in the ANC.

The FNB Property Barometer has indicated that emigration accounts for 12 percent of the total number of homeowners putting their homes on the market, while 21 percent is made up of sellers downsizing due to financial pressure.

The chief executive officer of the Pam Golding Property Group, Andrew Golding, also tried to quell the myths of a property crash.

"The reality is not as gloomy as portrayed in some of the commentary," he said, adding that the residential property market, particularly the middle-class sector, was "characterised by an under-supply and over-demand".

But Marsha Haupt, sales director at Betterbond, had an opposite view.

"At this point there is more supply than demand," she said.

And, according to a franchise agent who did not want to be named, "if (Reserve Bank governor) Tito Mboweni does increase the interest rate by another 2 percent, there will most certainly be panic selling in seven to nine months, whether that trend has begun or not".

He said many agents were also evaluating properties beyond their scope so that they could secure a sole mandate for themselves. However, once the seller had signed, the price began to fall, with fewer and fewer people at show days.

This echoes what Geffen said in his letter. He said attendances at show houses were generally poor, and that "only when the agent has convinced the seller to use the most aggressive parameters, namely 40 percent below asking price, does the showhouse receive 10 couples or more leading to a subsequent sale".

Geffen went further: "All the guns are loaded against us in this market and it will take your own courage and perspicuity in order to survive."

This article was originally published on page 5 of Cape Argus on June 10, 2008

If you would like to buy or sell property in Cape Town's Overberg region, please visit www.realty1capeagulhas.com.

Burden on Property Prices

Coastal Property Prices Somewhat Resilient

An article published in Business Report draws attention to growing concern over the ever-lengthening list of negative factors burdening property prices in South Africa. Reserve Bank governor, Tito Mboweni has made hawkish statements to the effect that the market should expect a repo rate hike of 100 basis points this month, which takes the prime interest rate to 16% and there is chance of a yet another hike of 50 basis points in August.

According to First National Bank (FNB), this would push monthly repayments on a R250 000 home loan over 20 years to R3 478 at 16%, from R2 496 in June 2006, when prime was just 10.5%. Property strategist for FNB, John Loos acknowledges that times in the residential property market are “tough”. The list of negative influences continues to expand, including high interest rates, rising inflation, a slowing economy, the National Credit Act, post-Polokwane unease, the Eskom crisis, Zimbabwe’s political dramas, xenophobic violence and low income yields.

Loos said that, “The list has become significantly longer than previously anticipated and especially interest rate hiking has gone further than we had forecast. As a result, a 21% decline in the value of new mortgage loans and re-advances is projected in 2008 and a period of national house price deflation is now forecast”.

Lightstone Risk Management’s national house price index reflects an annual property inflation drop to 7.8% in April, which is half a percentage point lower than in March and significantly lower than the rate of 14% in April 2007. Lightstone reported that higher value areas seem to be performing the worst and may have moved closer to zero or even negative nominal growth. Furthermore, house price inflation appears to be declining the fastest in smaller provincial markets.

According to the index, “Although nominal house price inflation is still positive, one major difference from last year is the decline in real house price inflation (adjusting for consumer price inflation). Currently, real house price inflation is around –3%, which is significantly down from last year when real house price inflation was 7%”.

Based on external economic forecasts involving factors such as domestic product growth, consumer inflation, disposable income growth and debt service ratios, Lightstone expected the downward trend in national house price inflation to continue and bottom out towards the middle of 2009. There is still a good chance that the low point for national nominal house price inflation will remain positive, although in some segments house prices are likely to decline even more.

In the analysis for January, Lightstone’s indication of national inflation came in at 9.2%. The high value segment, which includes properties priced between R1.5m and R750 000, continued its steep decline, dropping to 6.4%, while the more affordable sector (less than R250 000) continued to outdo the other segments and reached inflation of 24.3%.

As far as freehold property price inflation was concerned, it continued to outperform sectional titles by 3 percentage points. In January, a drop to 10.8% inflation was reported for freehold against 8% for sectional titles. Provincial growth performance in Gauteng for January reached 8.5%, which is lower than any of the other major provinces. The Eastern Cape performed best, with prices increasing by 9.7%.

The growth in coastal property prices, Lightstone found had shown surprising strength until the end of last year, but took a sharp downturn in January, dipping 2.7 percentage points to 8.5%. Growth fell back below non-coastal inflation, which came in at 9.4%,

The information in this article is courtesy of Wiseman Khuzwayo (“Growing list of negative factors burdens property prices”, Business Report, 1 June 2008).

If you would like to buy or sell property in Cape Town's Overberg area, please visit www.realty1capeagulhas.com.

Struisbaai Area Information

Struisbaai is a coastal village in the Overberg that boasts the longest stretch of white sand coastline in the Southern Hemisphere, extending an unbelievable 8km. The fishermen's cottages at Hotagterklip have been declared national monuments and are often featured in the paintings of South African artists. The beautiful surrounding landscape and the ideal seaside lifestyle offered in these parts make Struisbaai, together with the neighbouring communities of Hotagterklip and Molshoop, a popular choice for holiday property investment along the coastline up to Cape Agulhas.


You can find a range of houses and homes, apartments and flats, as well as stands and vacant land plots through real estate agents specialising in the Struisbaai area. If you are interested in buying or selling property in Cape Town's Overberg region, please feel free to visit www.realty1capeagulhas.com.

Bredasdorp Area Information

Where Cape Agulhas is fast-becoming one of South Africa's premier tourist destinations, Bredasdorp is primarily an agricultural region and lies in a lush and fertile valley, producing mostly wool, wheat and dairy. The administrative centre of the Overberg, Bredasdorp is also home to the Heuningberg Nature Reserve, famous for its indigenous fynbos and lilies. With quite a close-knit community, the properties for sale in the area are mostly farms and smallholdings.


A place of interest here is the Shipwreck Museum, which displays the remains of many ships that have sunk off the coast. The community in Bredasdorp is close-knit and most of the jobs are of an agricultural nature.


If you are interested in buying or selling property in the Western Cape's Overberg region, please feel free to visit www.realty1capeagulhas.com.

Cape Agulhas Area Information

Cape Agulhas takes its name from the Portuguese word for "needle" after seafarers arrived on the shore and noticed that their compass pointed straight north with no deviation. It is renowned as the southernmost point in Africa and is officially where the Atlantic and Indian Oceans meet. Offering a picturesque rocky landscape, there are numerous shipwrecks that have occured off the coast and attest to the stormy seas. Those who buy property here are guaranteed a blissful seaside life. One of the main attractions is the lighthouse, which is still in use today, despite the modern satellite navigation systems that ships now have in place.


The Cape Agulhas area is arguably one of the most stunning natural landscapes along the Cape coast. Set in undulating hills and bordered by mountain ranges, Cape Agulhas has beautiful ocean views and endless beaches, offering those who buy property here everything you could possibly ask for. If you’re looking for an escape from the rest of the world, Cape Agulhas is somewhat desolate and can really feel like the end of the earth. Close by is Struisbaai, which is famed for its long expanse of sandy white beach and is a popular choice with locals who buy holiday houses and homes in the area.


If you would like to buy or sell property in Cape Agulhas or the Overberg region of South Africa's Western Cape, please visit www.realty1capeagulhas.co.za.