Sunday, 24 April 2011

UK's most expensive flat sold for £135.4 million

The UK’s most expensive flat has been sold in London for £135.4 m.

One Hyde Park
Prices for a one-bedroom apartment at One Hyde Park start at £6 million Photo: BLOOMBERG

The buyer of “Flat a” at the One Hyde Park development is understood to be a Ukrainian who purchased the penthouse in cash in 2007.

The new owner is thought to be spending up to £60 million on interior work after receiving the apartment with bare walls and no amenities.

The Ukrainian used an offshore company called Water Property Holdings to buy the flat, which covers the top three floors in the Richard Rogers designed complex next to Knightsbridge.

The complex, built by a development group led by the Candy brothers, the upmarket property investors, has become the most expensive residential development with almost £1bn of sales transacted across 45 apartments.

The scheme finished in January and almost all the apartments have been bought through offshore trusts.The law firm used in the purchase is based in Russia and Ukraine. There is no mortgage linked to the property and the identity of the buyer is covered by confidentiality clauses with Project Grande (Guernsey) Limited, the developer.

Home loans - applications up 36%

Home loan applications last month reached their highest level in three years according to mortgage originator ooba. It says that home loan applications in March were up by 36% compared to the average monthly figure for last year.

However, ooba points out that home loan applications remained depressed and were almost 40% lower than those recorded at the peak of the property boom in 2007.

According to ooba, the average price of houses increased from R850 864 last year to 860 492 in the first quarter of this year.

Saul Geffen, ooba’s chief executive says that the results are both surprising and positive because the property market had been floundering for at least two years.

He says that house prices were not expected to rise this year so the increase recorded in the first quarter went against forecasts made by property analysts.

However, Geffen says that it will be necessary to wait until next month to see if the spike in loan applications is a sign that the property market is improving.

Geffen says that the value of home loans granted in March was the highest since October 2008 and the higher value of home loan applications is expected to continue for the rest of this year.

He says that the increase in the number of applications for a home loan may be a result of lower interest rates that make buying a property now particularly attractive for people in the affordable housing sector.

The average size of loans granted by the bank was 7% higher in the first quarter of this year at R725 973 compared with the same period last year.

The average deposit as a percentage of the purchase price dropped by 23,9% to 15,6% equivalent to R134 519.

The average deposit as a percentage of purchase price was 19,9% in February and 14,7% in January.

SA recovery still on track despite Global Shocks

South African consumers can find some reassurance in the fact that, despite the serious shocks seen around the globe in the first quarter of the year, the economic recovery underway in South Africa is still on track and growth prospects remain positive.

We have experienced some unexpectedly serious shocks in recent months, such as the tragic earthquake and tsunami in Japan and political strife in the Middle East and North Africa, exacerbated by rising oil and food prices, further debt bailouts in Europe and concerns over tightening fiscal and monetary policies in many countries. All of these have negative consequences for economic growth, and have combined to spark uncertainty around the consequences for the global economic recovery, and in turn on South Africa’s own recovery. on the positive side, we believe that none of these threats has so far been substantial enough to derail South Africa’s growth path this year. In fact, we have kept our GDP growth forecast for 2011 unchanged at 3.7%.

Although we have not yet seen all of the negative fallout from the economic and nuclear disaster in Japan, that country contributes only 9% of global GDP, 4.5% of world imports and 5% of world exports, making it too small to cause more than a temporary “blip” in the global economic upturn.

Although it is the world’s third largest economy, we don’t see Japan as a ‘game-changer’ for the global economy,” he observes. “Its impact is likely to be relatively limited, and in a few months’ time we should start to see a positive growth momentum generated by rebuilding there.

Meanwhile, the political strife in the Middle East and North Africa (MENA) has important implications for emerging market governments everywhere.

The countries so far hit by the unrest – like Tunisia, Egypt, Libya, Bahrain and Syria, among others – are too small to slow down the global economic rebound. However, should the turmoil spread further in the Middle East and disrupt oil supplies, serious consequences could be felt. For now, we know that poverty and inequality is rife in many emerging markets. Other emerging market governments (especially autocracies and poorly performing democracies) could learn some valuable economic policy lessons from the uprisings to date. These include:

  • - Making growth, employment, poverty reduction and wealth redistribution even higher priorities;
  • - Placing special emphasis on price stability and improving efficiency in government delivery;
  • - Boosting food production to improve self-sufficiency; and
  • - From a global perspective, ensuring fast growth is not limited to China and India.

Turning to China, the Chinese government is “very much aware” of the impact the MENA uprisings could have on its own people. So even though the rest of the world is concerned about tighter monetary policy choking off growth there, it is unlikely that the Chinese economy will experience a sharp growth slump. The policy balancing act between containing inflation and stimulating growth is a delicate one that so far the Chinese government has proved to be very good at, and this is likely to continue for the foreseeable future. We don’t see Chinese growth falling off a cliff, despite their ongoing policy tightening, although it is gradually slowing from very high levels.

Some of China’s economic slowdown is being offset by the US, where the strength of the recovery continues to surprise to the upside. For example, the March Purchasing Managers’ Index (PMI) and Leading Indicator show the manufacturing sector and wider economy continue to rebound.

All this is good news for South Africa’s growth prospects, as the global economic recovery underpins our own. The rand has stayed surprisingly strong, helping to cushion the inflationary impact of higher oil and food prices. this is due to a number of factors: still structurally strong growth in emerging markets; high commodity prices; a healthy current account balance; our relatively high interest rates; and a strong fiscal position.

I don’t expect any of these factors to change significantly any time soon, which is why the rand is likely to stay relatively strong on a trade-weighted basis in the short term. Our budget deficit for the current fiscal year is likely to come in better than expected, our interest rates remain relatively high (they may start rising from late this year or early next year), the current account could deteriorate somewhat as imports rise into the recovery, but commodity prices should stay well supported over the longer-term.

The main concern remains our lack of progress in raising our growth levels structurally, from the current 3-4% to 6-7%, closer to the other BRICS members. We are expecting 3.7% GDP growth for 2011 and 4.0% for 2012. There are several measures we believe government must focus on to improve our growth prospects: lift SA’s relative competitiveness by encouraging a more competitive and productive labour force; increase infrastructure investment; improve service delivery (especially education); preserve a business-friendly environment to encourage private sector investment and continue to focus on keeping inflation low.

*Johann Els is a senior economist at Old Mutual Investment Group SA (OMIGSA).

Friday, 15 April 2011

Rental Property to improve this year

While data availability for the South African rental market is somewhat sparse, available indicators suggest some improvement in the fundamentals driving the rental market, the FNB property barometer indicates.

"It is difficult to determine the level of rental demand, but we believe that the current economic and financial times may have led to some improvement in the demand side of the rental market too," said FNB property strategist John Loos.

He said household sector financial pressure could be a positive factor for the rental market, because it could increase the short-term appeal of renting for a certain group of financially stretched households.

The risks of interest rate hikes later in 2011 were also believed to be a positive for rental demand, as this could lead to some more cautious would-be home buyers adopting a "wait and see" approach, remaining in the rental market for longer and supporting rental demand.

"Our home-buying survey respondents suggest that, although having declined significantly since 2008-09, the percentage of home sellers selling in order to downscale due to financial pressure remains high at about 22%, and many of these sellers move into the rental market," Loos said.

As to how much of the rental market's performance was due to supply factors and how much due to demand-side forces was debatable, Loos said. "We believe that there are elements of both, particularly on the supply side due to weak buy-to-let buying in recent times. The net result, though, appears to be one of mild rental market strengthening through 2010."

Using data from Rode and Associates regarding flat rentals, it would appear that at least the flats component of the rental market had responded, Loos said.

"By major city, while one saw no fireworks yet, our calculations of flat rental averages per major city showed a broad increase in market rental inflation rates since the 2009 slump. The two-quarter moving average for Johannesburg showed the most impressive increase of 16.2% year on year as at the fourth quarter of 2010, while Pretoria showed the slowest rate of increase of 5.5%," he said.

More first time home buyers show confidence in market - FNB

There were more first time home buyers in the first quarter of 2011, indicating improved confidence in the property market, FNB Home Loans strategist John Loos said on Wednesday.

"The increase in first time buyer demand relative to the overall market demand is a good confidence indicator due to the greater degree of flexibility that an average first time buyer has in terms of timing his/her entry into the market," Loos said in a statement.

He said this reflected "improved new buyer confidence in lagged response to a dramatically improved interest rate environment since 2008".

It also showed improving confidence by the banks offering home loans.

First time buyers made up 22 percent of total buyers in the first quarter of the year, compared to 17 percent in the previous quarter.

"This percentage now compares favourably with the percentages recorded around late-2006, although the absolute volume would still be significantly lower than then because the overall market volumes are considerably lower these days compared to then," Loos said.

The "ageing buyer" trend seen in recent years was being reversed as a result of the improved interest rate and credit environment, and the resultant emergence of a more significant group of first time buyers.

Loos said using Deeds Office data on individuals' transactions, it was estimated that in the four quarters up to and including the first quarter of 2011, 15.3 percent of total buyers were aged 30 and below.

This was up from 14.7 percent in the fourth quarter of 2010, and even higher than the low point of 11.4 percent in the third quarter of 2009.

Loos said the most noticeable increase in market share was among the 31 to 40 years age group -- making up 28.1 percent of total buying in the first quarter of 2011.

This was up from 21.8 percent for the four quarters up to the third quarter of 2009.

The 41-50 year age increased its share of total buying from a 17.7 percent low as at the third quarter of 2008 to 21.7 percent as at the first quarter of 2011.

The 50-plus age group had seen its share drop from 48.8 percent as at the second quarter of 2009 to 35 percent as at the first quarter of 2011.

Loos warned potential first-time home buyers to be aware that inflation could rise, leading to increasing interest rates, so they had to be sure that they could absorb any increases.

"... Three percentage points [from prime rate of nine percent to a rate of 12 percent] would mean that on a bond amount of, say R700,000 at prime rate, the monthly instalment would increase by about R1410 per month."

He also reminded buyers to take into account above inflation increases in municipal rates and tariffs "which have become a far more significant property-related cost in recent years".