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We offer property investment opportunities throughout South Africa and Europe
Showing posts with label Horizon Consultancy. Show all posts
Showing posts with label Horizon Consultancy. Show all posts
Monday, 16 January 2012
Monday, 21 November 2011
Top 10 property Safe Havens Abroad
The euro is in crisis. Stock markets are in freefall. Two
prime ministers have been sacked. Italian debt is at record levels, and Spain America
Barbados Britain UK ,
Canada and the US
Little
Cayman (10 miles by one mile, population 150) and Cayman Brac (11
miles by two miles, population 1,800) are relatively untouched. Grand Cayman is bigger and blingier, attracting tax haven
lovers as well as those who want sandy beaches and sun.
One by one the traditional destinations for British
house-hunters are becoming badlands. Rather than stay in the quagmire, it’s
time for buyers to seek new pastures. There are always safe havens if you look
hard enough.
Even when buying outside the eurozone
and the United States
Even at the top end, though, you
have to be selective. Here is our guide to where, what and why to buy overseas
to minimise your risk.
1 Canada
The US Canada
Brits tend to
prefer Eastern Canada, because it is only five to seven hours’ flight from the UK , and has plentiful leisure and ski resorts
around Newfoundland and Quebec
The country has a
French-style buying process. A notary carries out conveyancing, and transaction
costs are often 15 per cent of the price. You pay 25 per cent capital gains tax
when you sell but, unlike the rest of North America, Canada
Because space is
plentiful, the choice is vast. There are ski chalets in Mont Tremblant, Quebec , for as little as £200,000, while timber lodges in
parts of the Rockies can be even less.
Websites such as sportfishcanada.ca list private sales of cabins at modest
prices. More flamboyant buyers may prefer Nova Scotia
Insider tip Offers are normally made in
writing, accompanied by a deposit, so can be hard to withdraw.
2 Hong Kong
Crowded, flooded by
neon lights over street markets and overlooked by sumptuous tower blocks for
expats in the hills.
The local housing
market is booming, because it is no longer reliant just on foreign buyers.
Chinese mainland purchasers now account for a third of all deals. One-bedroom
flats go from £200,000 upwards but even so, demand for homes outstrips supply
by 20 per cent, according to the Hong Kong Housing Authority.
Similarly, Savills
says house prices have risen 11 per cent in the past year and about 80 per cent
since mid-2005. Yet experts insist this is sustainable.
“Given the
continual support from mainland buyers and the limited supply of homes –
especially high-end ones – we expect prices and rents to grow steadily,” says
Knight Frank’s HK representative, Colin Fitzgerland.
Insider tip Best-value areas
are Southside, The Peak, Discovery Bay and Kowloon
3 Switzerland
Knight Frank says
12 per cent of buyers here are from the UK ,
with Russia , Germany , France
and Asia close behind. They come for three
reasons: to improve their skiing, for their tax status and for stable house
prices. Though there were falls of 15 per cent in French-speaking parts of Switzerland
But only some
locations, such as Vaud and Valais, permit overseas purchasers and prices can
be high.
“Montreux, on Lake Geneva in Vaud canton, continues to defy the market
conditions of its neighbours,” says Alexander Koch de Gooreynd of Knight Frank.
“It’s one of the few lakeside locations in Switzerland
Insider tip Each canton has different
rules regarding maximum sizes of homes foreign purchasers can buy, so do your
research.
4 Mauritius
Long a favourite
with holidaymakers, this island is now open to foreign buyers for the first
time thanks to a new scheme to encourage investment.
Most people would
be happy enjoying the watersports, unspoilt beaches and charming villages that
dot this Indian Ocean idyll, but now there are
financial perks too.
If you pay £310,000
or more for a villa or apartment in a designated coastal zone, you will also
have the right to become a Mauritian resident, and enjoy low levels of personal
and business tax.
“The political
situation is strong,” says Maribeth Davies of Hamptons International. “And the
economy has grown at an average of 4 per cent a year for the past eight years.”
One new designated
scheme is Azuri, a beachfront complex with 169 homes for foreigners and 100 for
wealthy locals. Properties come with parking, boat moorings, golf membership
and access to swimming pools.
Insider tip Island transport is slow, so
buy near Port Louis , the capital of Mauritius
5 Gibraltar
Little wonder Spain wants to govern Gibraltar .
This tiny British colony, still reminiscent of a sunny Sixties Saturday in Surrey , is a haven of stability compared to its mainland
neighbour. Better yet, the Rock has no VAT, no capital gains or inheritance tax
and relatively low income tax.
As well as
financial services, shipping and tourism, its economy is geared to telecoms and
internet gaming. The latter is a growing sector, that now accounts for 11 per
cent of gross domestic product.
Buying in Gibraltar is easy, but there are eccentricities. You pay
a 2 per cent deposit when you exchange contracts. Many homes are flats, so you
should budget for service charges too.
Some older houses
are freehold, but most homes are leasehold.
Do not expect open
space. Gibraltar ’s tiny size and 30,000
permanent residents put it among the world’s most crowded locations.
Insider tip Gibraltar has complicated
stamp duty rules, varying from zero to 5.5 per cent of the purchase price.
6 South Africa
This is a country
like no other. Beyond its cities lies endless countryside with vast open
plains, unspoilt villages and a burgeoning wine culture. All in the glow of a
wonderful year-round climate. The country is also a natural destination for
Britons. Cape Town is only two hours ahead of London
To make it even
more attractive, house prices are low by global standards. One-bedroom
apartments in Cape Town
What’s more, local
agents say South Africa
“It’s seen as a
safe haven due to exchange control regulations. Cape Town
Insider tip Crime remains high,
but most Britons buy in gated estates with private security systems.
7 Barbados
Overseas buyers are
welcome, and there is no capital gains tax. Mortgage availability, even for
foreigners, remains good.
John Morphet owns
the Royal Westmoreland resort, where British sports stars including Wayne
Rooney, Joe Calzaghe and Rio Ferdinand have villas. He says: “There’s been some
discounting of property, up to 25 per cent, but on the west coast this hasn’t
really been the case. The market for individual beachfront villas and
constructed properties on gated communities has remained strong. Purchasers are
more risk-averse, so prefer to buy somewhere built rather than off-plan.”
Prices are not
cheap. Two-bedroom homes can cost £400,000 or more on the west coast, but
properties are truly spectacular.
Insider tip Some homes take
years to sell. If you hear that a property has been on the market for a while,
bargain hard.
8 St Lucia
This Caribbean island has long been popular with Britons, even
though its roads are poor and some areas can be crowded with owners and cruise
ship visitors. There are rugged mountains, rainforests and coral reefs. Barbados
Most popular is the
north-west area of the island, especially close to Rodney Bay
Insider tip Castries
9 Kenya
Emerging holiday
home locations are few and far between, but Kenya
Most land is
government-owned, so foreigners buy on pre-built resorts, many of which have a
mix of beachfront and interior wildlife.
Respected British
estate agency brands such as Aylesford (aylesford.com) are becoming more common
and will guide you through the buying process.
Insider tip Most homes in
resorts have small gardens, but owners have use of vast, private and secure
estates.
10 The Cayman Islands
The Caymans are
home to more than 200 banks and expats from 100 countries. They also boast the
world’s 14th highest GDP per capita, and the highest standard of living in the Caribbean . The country has the confidence of many from
around the globe.
Flights are plentiful,
and it’s easy to hop over to neighbouring Jamaica
and Cuba
Some apartments,
like those at the Riviera Grand Cayman scheme at South Sound, cost just
£110,000 (century21cayman.com), but
foreigners are charged six per cent stamp duty. Yet there is no other property
tax.
Insider tip Many foreigners buy land and
build their own homes, but imported construction materials attract up to 22 per
cent tax.
http://www.telegraph.co.uk/property/overseasproperty/8898858/Top-10-property-safe-havens-abroad.html
Thursday, 11 August 2011
How to manage Property Cycles anywhere in the World
The dizzying heights of the most recent property boom, when house price growth peaked at an average annual rate of 32% in 2004, as well as the protracted recovery period in which the property industry has been languishing since late 2009, are prime examples of fluctuations that obscure the otherwise clear cyclical movements in the property industry.
One of the fundamental basics of economics is that markets move in cycles. Markets experience boom times, followed by a period of market correction and a downturn, before the next boom arrives. This is a natural phenomenon evident in all markets, and whether it is called "boom and bust", "bulls or bears" or simply "peaks and troughs", investors can be absolutely certain that neither a growth period nor a downturn in any market will last forever.
What was uncertain, however, was the highs or lows that may be reached during an upturn or a downturn, and the duration of either.
"In the property industry in SA, the average cycle normally spans around seven years," says Dr Koos du Toit, CEO of the P3 Investment Group.
"But given the heady heights reached in 2004, when many analysts and experts warned of a 'property bubble', as well as the subsequent economic turmoil as the world experienced the worst recession in living memory, it is not surprising that many have lost sight of the fact that we are simply moving through another cycle.
"Yes, the market correction and downturn of this property cycle were nothing short of terrifying for speculators and those investors who had overextended themselves financially. And the long, slow recovery has been painful for even the most prudent investors. But the cycle is turning, as it always does, and the market will again experience an upturn.
"What remained uncertain wass when the upturn will commence - many predict only towards the end of 2012; what level property price inflation will reach before the next market correction; and how long the upturn will last."
The question arises: How can a property investor protect a portfolio against the ravages of the property cycle?
"Many property investors do attempt to 'time' the market, but this is akin to speculation. The 2004 boom and this long, protracted recovery provide ample proof that 'timing' the market can be a dangerous game," comments Du Toit.
"Professional - and thus successful - property investors take a long-term view of their investment and the market. They don't speculate; they are building sustainable property investment businesses. This includes keeping an eye on the property cycle, but their focus is not on 'timing' the market, but rather finding the right investment properties that will yield an ongoing passive income and capital growth over the long term. Seasoned and professional property investors know that these investment properties can be found regardless of where we are in the property cycle."
Du Toit explained that professional property investors did not simply acquire properties, they acquired property assets with long-term income-generating potential.
"In layman's terms, this approach can be compared to buying a cow. You can either keep the cow for milking over the long term, or you can sell it quickly at the highest price for slaughtering. If you acquire a cow for milking, you will have an asset, which is appreciating in value, and you will benefit from the milk it produces on an ongoing basis for years to come. If you sell the cow for slaughtering, you might make a quick 'killing' - to use the terminology speculators are fond of. But you may not, particularly if several other cow owners have the same idea. Either way, both the cow, as an asset, and the milk it would have produced over the long term, are gone."
Du Toit notes that a property should be acquired as a cash cow.
"The intention is to hold the property over the long term, milking its ability to produce a passive monthly income that keeps pace with inflation year after year.
"While the property will also appreciate in value, this is regarded as an added bonus, since the objective is not to sell the cash cow, but rather to milk it. This approach is almost immune to the property cycles, since regardless of whether property prices are rising or falling, there will always be demand for good entry-level rental properties in well-established and growing areas.
"And while capital appreciation is not the main objective, investors are richly rewarded for their patience and long-term perspective by superior capital growth over the years, as the ups and downs average out, producing a steady upward trend in property price inflation."
This, clearly, was an entirely different approach when compared to speculating, in which property investors try to "time" the market by buying at high prices, and hope to "make a killing" by selling even higher in the short term.
Du Toit says that while fortunes have been made in this way, it is a high risk approach that has certainly seen many investors lose their investments, and has given many South Africans a distorted understanding of property investment.
"Property investment - acquiring property assets that can be 'milked' over the long term for their income-generating potential - may not be as thrilling and exciting as wheeling and dealing with properties, timing the market and making a killing.
"But it is a proven, tried-and-tested recipe for virtually failsafe property investment. And it is a system that allows investors to sleep peacefully at night, knowing that wherever we are in the property cycle, whatever highs or lows may be reached during an upturn or a downturn, or the duration thereof, their properties are generating an inflation-linked passive income, and in the long term, even their most optimistic capital appreciation expectations will be realised."
This article is to inform and educate, not to advise.
One of the fundamental basics of economics is that markets move in cycles. Markets experience boom times, followed by a period of market correction and a downturn, before the next boom arrives. This is a natural phenomenon evident in all markets, and whether it is called "boom and bust", "bulls or bears" or simply "peaks and troughs", investors can be absolutely certain that neither a growth period nor a downturn in any market will last forever.
What was uncertain, however, was the highs or lows that may be reached during an upturn or a downturn, and the duration of either.
"In the property industry in SA, the average cycle normally spans around seven years," says Dr Koos du Toit, CEO of the P3 Investment Group.
"But given the heady heights reached in 2004, when many analysts and experts warned of a 'property bubble', as well as the subsequent economic turmoil as the world experienced the worst recession in living memory, it is not surprising that many have lost sight of the fact that we are simply moving through another cycle.
"Yes, the market correction and downturn of this property cycle were nothing short of terrifying for speculators and those investors who had overextended themselves financially. And the long, slow recovery has been painful for even the most prudent investors. But the cycle is turning, as it always does, and the market will again experience an upturn.
"What remained uncertain wass when the upturn will commence - many predict only towards the end of 2012; what level property price inflation will reach before the next market correction; and how long the upturn will last."
The question arises: How can a property investor protect a portfolio against the ravages of the property cycle?
"Many property investors do attempt to 'time' the market, but this is akin to speculation. The 2004 boom and this long, protracted recovery provide ample proof that 'timing' the market can be a dangerous game," comments Du Toit.
"Professional - and thus successful - property investors take a long-term view of their investment and the market. They don't speculate; they are building sustainable property investment businesses. This includes keeping an eye on the property cycle, but their focus is not on 'timing' the market, but rather finding the right investment properties that will yield an ongoing passive income and capital growth over the long term. Seasoned and professional property investors know that these investment properties can be found regardless of where we are in the property cycle."
Du Toit explained that professional property investors did not simply acquire properties, they acquired property assets with long-term income-generating potential.
"In layman's terms, this approach can be compared to buying a cow. You can either keep the cow for milking over the long term, or you can sell it quickly at the highest price for slaughtering. If you acquire a cow for milking, you will have an asset, which is appreciating in value, and you will benefit from the milk it produces on an ongoing basis for years to come. If you sell the cow for slaughtering, you might make a quick 'killing' - to use the terminology speculators are fond of. But you may not, particularly if several other cow owners have the same idea. Either way, both the cow, as an asset, and the milk it would have produced over the long term, are gone."
Du Toit notes that a property should be acquired as a cash cow.
"The intention is to hold the property over the long term, milking its ability to produce a passive monthly income that keeps pace with inflation year after year.
"While the property will also appreciate in value, this is regarded as an added bonus, since the objective is not to sell the cash cow, but rather to milk it. This approach is almost immune to the property cycles, since regardless of whether property prices are rising or falling, there will always be demand for good entry-level rental properties in well-established and growing areas.
"And while capital appreciation is not the main objective, investors are richly rewarded for their patience and long-term perspective by superior capital growth over the years, as the ups and downs average out, producing a steady upward trend in property price inflation."
This, clearly, was an entirely different approach when compared to speculating, in which property investors try to "time" the market by buying at high prices, and hope to "make a killing" by selling even higher in the short term.
Du Toit says that while fortunes have been made in this way, it is a high risk approach that has certainly seen many investors lose their investments, and has given many South Africans a distorted understanding of property investment.
"Property investment - acquiring property assets that can be 'milked' over the long term for their income-generating potential - may not be as thrilling and exciting as wheeling and dealing with properties, timing the market and making a killing.
"But it is a proven, tried-and-tested recipe for virtually failsafe property investment. And it is a system that allows investors to sleep peacefully at night, knowing that wherever we are in the property cycle, whatever highs or lows may be reached during an upturn or a downturn, or the duration thereof, their properties are generating an inflation-linked passive income, and in the long term, even their most optimistic capital appreciation expectations will be realised."
This article is to inform and educate, not to advise.
Wednesday, 15 June 2011
South African Property: Rent or Buy?
The news that South Africa has now been included in the BRIC group (Brazil, Russia, India and China) can only mean good news for property investment.
According to Maite Nkoana-Mashabane, South Africa’s Minister of International Relations and Co-operation, the inclusion, “legitimises South Africa as a future global power and as an investable country - bolstering its position as Africa’s gateway and champion.”
According to the Sage Property Report from Standard Bank in September 2010, “confidence in the South African property market is returning”.
This is confirmed by the 8.3 percent year-on-year growth rate in the median property prices in August and 7.3 percent year-on-year in July and has given rise to the prediction that the average nominal growth will be around 6 percent for the year.
So is this the time to buy? Herman Slabbert, from Ronnie Matthews Estates in Cape Town says, “The answer whether to buy or lease depends on the profile of the buyer and to what extent current market conditions dictate or influence the choice (or limit the options).
“For an investor the question may be to either invest in the share market or property or both, but after the good bull run of worldwide equity markets the past year, share analysts warn of a dangerously over-bought market and that investors should expect a medium to large correction in the near future.
Rent
Buying is naturally the preferred choice for someone or a couple starting out, but the credit crunch and resulting stricter lending criteria of the banks makes it difficult to get loans, unless you can put down a substantial deposit.
The irony for the first time home buyer is that interest rates are at their lowest level in 30 years and home prices are at very attractive levels compared to the property bubble before 2008.
One strategy proposed is to rent and then invest or save the difference between the rental payment and the monthly bond amount one would have expected to pay, in the share market. These ‘savings’ though must to be invested in the stock market. In 10 to 12 years there should be enough accumulated capital to buy a house.
Buy
Michael Bauer, General Manager of property management company IHFM,says, “The biggest resistance to buying versus renting is the mental block caused by short-term thinking. People ask themselves why they should buy when they can rent for 30 to 40 percent less than their monthly bond repayments. They are also not responsible for repairs and maintenance and can move on whenever they feel like it.
“However, the fact is that monthly rental will generally rise by 8 to 10 percent per year and by the time the property owner has paid off the bond (are debt free) the rental will be about ten times more than it was 20 years earlier when they decided to buy not rent.
“In contrast, property owners will find that their bond repayments will no longer be a major burden and will probably be less than 15 percent of their gross salary. In essence, if you pay a deposit of 20 to 25 percent on the property, it makes sense to anybody to buy.
“If you compare for example a R400,000 bond issued at an interest rate of 11 percent, the property owner would pay around R990,000 in capital and interest over 20 years, but would own an asset worth R1.06 million.
Bauer continues, “The tenant starting with a rent of R2500 a month (subject to annual increases) would at the end of 20 years find that his total rent payments have been about R1.7m. However, there would be no asset to show for his outlay.
“Rental escalations and capital growth are usually far above annual adjustments to income so it will become less and less affordable to rent in future if you continue living in an area of your choice. When you retire of course and your income is reduced by 30 to 40 percent, rental may be prohibitively expensive.
“For the buyer or investor who qualifies financially to buy, there are many options available in the market. Remember it is still is a buyer’s market coupled with the low interest rates, notwithstanding mediocre capital appreciation expectations. For the shrewd/smart investor who knows the market and the product there are opportunities in the buy to let market.”
Buy to let
Slabbert says, “Recent activity shows a positive sentiment in the buy-to-let market, which is an important segment of property investment.
“According to a report in the Financial Times (in the UK), banks in London have for the first time started to give loan packages, one of up to 85 percent of the value of the property. (Coincidentally it is a subsidiary bank of Investec, the South African bank).
“However, one dilemma for the South African buy-to-let investor is stock. Since 2008 banks and other financial institutions have ceased to provide funding for new developments, resulting in supply constraints – limitations on the ability to deliver new developments. However, the supply constraint also has benefits.
“It must also be remembered,” says Slabbert, “that a market or area where supply is constrained generally will have higher rent levels, greater rent growth and higher capital values.
“The investment strategy focusing on supply constrained areas could potentially provide more durable income and stronger capital appreciation.
“As an example, one can look at the Atlantic Seaboard in Cape Town and then at a specific area like Camps Bay/Clifton area which is considered the most expensive real estate in South Africa has a legal as well as geographic supply constraint.
“In essence local government zoning for development is restricted and geographically there simply is not any scope for extending this area.
“Lastly, local opposition to development is fierce; the Camps Bay rates payer association plays an activist role to monitor any proposed developments and take action where necessary,” Slabbert concludes.
Interest rates, investor confidence in a stable economy, high growth prospects together with some incredible bargains in the real estate market make this a good time to buy if you are able to and reap the rewards over the long term.
According to Maite Nkoana-Mashabane, South Africa’s Minister of International Relations and Co-operation, the inclusion, “legitimises South Africa as a future global power and as an investable country - bolstering its position as Africa’s gateway and champion.”
According to the Sage Property Report from Standard Bank in September 2010, “confidence in the South African property market is returning”.
This is confirmed by the 8.3 percent year-on-year growth rate in the median property prices in August and 7.3 percent year-on-year in July and has given rise to the prediction that the average nominal growth will be around 6 percent for the year.
So is this the time to buy? Herman Slabbert, from Ronnie Matthews Estates in Cape Town says, “The answer whether to buy or lease depends on the profile of the buyer and to what extent current market conditions dictate or influence the choice (or limit the options).
“For an investor the question may be to either invest in the share market or property or both, but after the good bull run of worldwide equity markets the past year, share analysts warn of a dangerously over-bought market and that investors should expect a medium to large correction in the near future.
Rent
Buying is naturally the preferred choice for someone or a couple starting out, but the credit crunch and resulting stricter lending criteria of the banks makes it difficult to get loans, unless you can put down a substantial deposit.
The irony for the first time home buyer is that interest rates are at their lowest level in 30 years and home prices are at very attractive levels compared to the property bubble before 2008.
One strategy proposed is to rent and then invest or save the difference between the rental payment and the monthly bond amount one would have expected to pay, in the share market. These ‘savings’ though must to be invested in the stock market. In 10 to 12 years there should be enough accumulated capital to buy a house.
Buy
Michael Bauer, General Manager of property management company IHFM,says, “The biggest resistance to buying versus renting is the mental block caused by short-term thinking. People ask themselves why they should buy when they can rent for 30 to 40 percent less than their monthly bond repayments. They are also not responsible for repairs and maintenance and can move on whenever they feel like it.
“However, the fact is that monthly rental will generally rise by 8 to 10 percent per year and by the time the property owner has paid off the bond (are debt free) the rental will be about ten times more than it was 20 years earlier when they decided to buy not rent.
“In contrast, property owners will find that their bond repayments will no longer be a major burden and will probably be less than 15 percent of their gross salary. In essence, if you pay a deposit of 20 to 25 percent on the property, it makes sense to anybody to buy.
“If you compare for example a R400,000 bond issued at an interest rate of 11 percent, the property owner would pay around R990,000 in capital and interest over 20 years, but would own an asset worth R1.06 million.
Bauer continues, “The tenant starting with a rent of R2500 a month (subject to annual increases) would at the end of 20 years find that his total rent payments have been about R1.7m. However, there would be no asset to show for his outlay.
“Rental escalations and capital growth are usually far above annual adjustments to income so it will become less and less affordable to rent in future if you continue living in an area of your choice. When you retire of course and your income is reduced by 30 to 40 percent, rental may be prohibitively expensive.
“For the buyer or investor who qualifies financially to buy, there are many options available in the market. Remember it is still is a buyer’s market coupled with the low interest rates, notwithstanding mediocre capital appreciation expectations. For the shrewd/smart investor who knows the market and the product there are opportunities in the buy to let market.”
Buy to let
Slabbert says, “Recent activity shows a positive sentiment in the buy-to-let market, which is an important segment of property investment.
“According to a report in the Financial Times (in the UK), banks in London have for the first time started to give loan packages, one of up to 85 percent of the value of the property. (Coincidentally it is a subsidiary bank of Investec, the South African bank).
“However, one dilemma for the South African buy-to-let investor is stock. Since 2008 banks and other financial institutions have ceased to provide funding for new developments, resulting in supply constraints – limitations on the ability to deliver new developments. However, the supply constraint also has benefits.
“It must also be remembered,” says Slabbert, “that a market or area where supply is constrained generally will have higher rent levels, greater rent growth and higher capital values.
“The investment strategy focusing on supply constrained areas could potentially provide more durable income and stronger capital appreciation.
“As an example, one can look at the Atlantic Seaboard in Cape Town and then at a specific area like Camps Bay/Clifton area which is considered the most expensive real estate in South Africa has a legal as well as geographic supply constraint.
“In essence local government zoning for development is restricted and geographically there simply is not any scope for extending this area.
“Lastly, local opposition to development is fierce; the Camps Bay rates payer association plays an activist role to monitor any proposed developments and take action where necessary,” Slabbert concludes.
Interest rates, investor confidence in a stable economy, high growth prospects together with some incredible bargains in the real estate market make this a good time to buy if you are able to and reap the rewards over the long term.
Sunday, 30 January 2011
Timing is Everything !
Seasonality is a well-established phenomenon in the global property market and, although it follows a different time frame, it is also clearly evident in the local property market. Seasonality essentially refers to changes in sales volumes and sales prices during the same calendar month from year to year, that reveal a similar magnitude and direction.
This seasonality is caused by natural factors such as the weather, administrative dates such as the beginning and end of the school year as well as social, cultural or religious traditions which include fixed holidays such as Christmas.
"Regardless of the overall trend in the property market, or the specific phase of the property cycle in a certain sector of the market, the property market displays seasonality, with higher prices driven by increased activity at certain times of the year. In South Africa, during the spring and summer months, sales activity increases and, as a natural consequence, property prices are firmer on the back of this increased demand. The effect on prices may not always be remarkable – but the effect on sales activity is often quite noticeable," explains Adrian Goslett, CEO of RE/MAX of Southern Africa.
He adds that two seasonal factors are at play during our spring and summer months.
"Firstly, the summer brings lush gardens, green grass and colourful flowers, and this certainly goes some way to create a favourable first impression among potential buyers. Secondly, the school year in South Africa runs from mid-January to early December, and families planning to relocate always prefer to do so at the end of the year to allow the children to complete a school year at one school and to start afresh at a new school at the beginning of the new year," he says.
But seasonality extends further into other sub-sectors of the market.
"In the student accommodation sector spring brings an increase in activity as students going to university in the new year look for accommodation and those who have completed their last year of study move away. While many people are on holiday in December, this does not detract from the seasonality of property sales during the summer, but simply shifts the locus of the seasonal upswing to the coastal and holiday towns in the country," comments Goslett.
Seasonality is not simply a phenomenon of interest to estate agents; it also has implications for buyers and sellers. Prices may not boom during the seasonal upturn during the spring and summer months, but the average percentage by which a seller needs to reduce the asking price to achieve a sale may be noticeably lower than in the winter months. This reflects the increase in potential buyers during these seasonal peaks, and more buyers mean a better chance of selling the property at a higher price.
Buyers and sellers who understand the seasonality of the property market are able to make better informed decisions. For example, buyers looking for student accommodation may find few available properties in April when all available student accommodation is fully occupied, but may be able to acquire such a property at a better price at the end of the year when more properties become available as students complete their studies.
"Understanding the seasonality of the property industry allows buyers and sellers to maintain a longer-term perspective on the immediate state of a specific property sector. Sellers considering taking a property off the market just before the summer holidays could well miss a sales opportunity given the uptick in interest during this time. Similarly, buyers should bear the seasonal factors in mind when making an offer on a property, particularly in areas where the effect of seasonality is particularly evident, such as in coastal towns and other holiday destinations," concludes Goslett.
Friday, 10 December 2010
UK commercial property an investment for South Africans
The continued recovery of the UK commercial property market, coupled with the strengthening of the rand relative to pound sterling, has presented South African investors with a unique opportunity to invest in the UK while capitalising on the recovery cycle.
This is according to Eric Mounier, CEO of the Pam Golding Properties/Athanor International Property Investments joint venture which markets direct offshore commercial property investments.
"Since 2000, the joint venture has been involved in property asset transactions valued at over R5 billion and currently is involved in supporting over 40 active property investments,he said.
Despite commercial property values in the UK being devalued by over 40 percent following the global credit crisis, the asset management team has been successful in ensuring all properties under management remain operational and income producing, and favourably positioned to take advantage of the expected recovery cycle.
Illustrating the UK commercial property market's recovery is the Investment Property Databank (IPD) UK monthly index, which indicated a 0.1% growth in un-geared commercial property values for the month of October 2010.
This growth concluded the 15th consecutive month of capital appreciation, bringing the compounded upturn in values since the recovery to 15.9%, according to the IPD.
While there had been significant growth during this period there was still a long way to go to get back to the values prior to the global credit crisis.
"This trend is supportive of the market commentary which indicates that investors are starting to re-enter the market, with the UK providing a popular investment destination.
During the period of downturn following the global credit crunch, the UK experienced a significant re-pricing of commercial property values, and as a result investors were taking advantage of the favourable prices which were now possible.
In addition, during the past year we have seen a significant strengthening of the rand against the pound with a slight reversal of this trend more recently, Mounier said.
For those taking the view that the pound was likely to remain strong against the rand and the euro, the timing seemed opportune to invest in a solid pound-related asset class, he added.
The aim of the Athanor/PGP JV is to facilitate property investments which derive the vast majority of their returns from the large net yields currently available as a result of the positive gap between the rental income and the cost of finance. "
Consequently, less dependence was placed on capital growth to achieve the expected return which reduced the risk associated with these investments.
As an example of such an investment, a recently launched property in Parkhouse West Industrial Estate in Newcastle-under-Lyme in Staffordshire, England, is expected to produce cash flow of around 11 percent per annum, from which a portion will be used to pay down the bank loan and the remainder available to return to investors.
The majority of the projected return will come from the annual cash flow," he said.
This is according to Eric Mounier, CEO of the Pam Golding Properties/Athanor International Property Investments joint venture which markets direct offshore commercial property investments.
"Since 2000, the joint venture has been involved in property asset transactions valued at over R5 billion and currently is involved in supporting over 40 active property investments,he said.
Despite commercial property values in the UK being devalued by over 40 percent following the global credit crisis, the asset management team has been successful in ensuring all properties under management remain operational and income producing, and favourably positioned to take advantage of the expected recovery cycle.
Illustrating the UK commercial property market's recovery is the Investment Property Databank (IPD) UK monthly index, which indicated a 0.1% growth in un-geared commercial property values for the month of October 2010.
This growth concluded the 15th consecutive month of capital appreciation, bringing the compounded upturn in values since the recovery to 15.9%, according to the IPD.
While there had been significant growth during this period there was still a long way to go to get back to the values prior to the global credit crisis.
"This trend is supportive of the market commentary which indicates that investors are starting to re-enter the market, with the UK providing a popular investment destination.
During the period of downturn following the global credit crunch, the UK experienced a significant re-pricing of commercial property values, and as a result investors were taking advantage of the favourable prices which were now possible.
In addition, during the past year we have seen a significant strengthening of the rand against the pound with a slight reversal of this trend more recently, Mounier said.
For those taking the view that the pound was likely to remain strong against the rand and the euro, the timing seemed opportune to invest in a solid pound-related asset class, he added.
The aim of the Athanor/PGP JV is to facilitate property investments which derive the vast majority of their returns from the large net yields currently available as a result of the positive gap between the rental income and the cost of finance. "
Consequently, less dependence was placed on capital growth to achieve the expected return which reduced the risk associated with these investments.
As an example of such an investment, a recently launched property in Parkhouse West Industrial Estate in Newcastle-under-Lyme in Staffordshire, England, is expected to produce cash flow of around 11 percent per annum, from which a portion will be used to pay down the bank loan and the remainder available to return to investors.
The majority of the projected return will come from the annual cash flow," he said.
Tuesday, 23 November 2010
Reserve Bank cuts again, but will it matter?
Last week, Reserve Bank governor Gill Marcus announced yet another rate cut, bringing the repo rate down to 5।5% and prime down to just 9% - the lowest rate the country has seen since 1974.
The move was not unexpected. Inflation has been close to or within the 3-6% target range for about a year (see chart) and has for several months surprised on the downside, while growth remains somewhat feeble, as illustrated by recent weak manufacturing data. In addition, the rand continues to display Schwarzenegger-like strength against the dollar (see chart), and, as Ireland teeters on the verge of a debt meltdown, the global economy looks more and more risky.
Against this backdrop, then, the decision to cut rates was not a surprise। It is an open question, however, whether or not the cut will have the kind of beneficial economic effects that many hope for.
In general, rate cuts tend to have two stimulating effects on the economy. First, they encourage households and businesses to borrow (and hopefully spend and invest) more, and second, they tend to weaken the currency and thus to stimulate exports. But will either of these things come to pass in South Africa, given the current context? Let's look at each in turn.
It's highly questionable whether the latest rate cut will have much effect on consumer or business borrowing.
In addition, a lot of rand/dollar volatility is actually just dollar/euro volatility in disguise, and so events in the US and Europe, which South Africa can do nothing about, are often the major drivers of the currency। Overall, then, it's unlikely that a 50 basis-point cut in domestic rates will have much effect on the rand.
What, then, can we conclude about the latest rate cut? While the reasons behind it are obvious, solid, and sensible, it remains an open question whether or not it will pay off। Given current circumstances, there seems to be no easy way for the cut to boost the economy through currency weakness or increased borrowing. Only time will tell if we can cut our way to faster growth.
Write to Felicity Duncan: felicity@moneyweb.co.za
*This article first appeared in Discovery Invest
The move was not unexpected. Inflation has been close to or within the 3-6% target range for about a year (see chart) and has for several months surprised on the downside, while growth remains somewhat feeble, as illustrated by recent weak manufacturing data. In addition, the rand continues to display Schwarzenegger-like strength against the dollar (see chart), and, as Ireland teeters on the verge of a debt meltdown, the global economy looks more and more risky.
Against this backdrop, then, the decision to cut rates was not a surprise। It is an open question, however, whether or not the cut will have the kind of beneficial economic effects that many hope for.
In general, rate cuts tend to have two stimulating effects on the economy. First, they encourage households and businesses to borrow (and hopefully spend and invest) more, and second, they tend to weaken the currency and thus to stimulate exports. But will either of these things come to pass in South Africa, given the current context? Let's look at each in turn.
It's highly questionable whether the latest rate cut will have much effect on consumer or business borrowing.
On the consumer side, people just don't have much capacity to borrow. As the FNB Property Barometer noted last week, "The most recent Reserve Bank Quarterly Bulletin indicates that household levels of indebtedness remain stubbornly high, with the debt-to-disposable income ratio for the 2nd quarter (of 2010) at 78।2%, not far below the all-time high of 82%.
This would suggest that households as a group are not able to aggressively grow their borrowing off such a high base."
Given this, it's unlikely that the latest rate cut will boost borrowing; more likely, South Africans will try to pay down their debt as their monthly repayments decrease.
This isn't written in stone, of course। After all, last week's retail sales numbers showed that sales rose by 0.4% month-on-month in September, and 6.1% year-on-year. This growth soundly beat analysts' forecasts of around 4.7%, and suggests that South African consumers are still willing to spend.
But being willing to spend is not the same as being able to borrow and it looks like South African households are still too deep in hock to think of taking on more debt just yet। Backing up this view, last week's FNB/BER consumer confidence index reported a slight fall in the fourth quarter. Overall the index has been stuck between 14 and 15 this year, suggesting that consumers are no more upbeat now than they were at the beginning of the year, and making major new borrowing unlikely.
On the business side, there's nothing to suggest that South African businesses will borrow more at lower rates। Businesses borrow primarily when there are opportunities available for them to profitably invest in, and the current climate of uncertainty is not encouraging of such investment.
When it comes to weakening the currency, it's again not clear whether or not the rate cut will help. There's no doubt that the government is keen to see the rand weaken against the dollar; finance minister Pravin Gordhan announced measures to weaken the currency during his recent Budget speech, including further exchange control relaxation and the further accumulation of foreign exchange reserves, and economists have speculated that a general push to weaken the rand was behind last week's rate cut, although Marcus was adamant that this wasn't the case।
Either way, however, it seems very unlikely that South Africa can actually do much about the level of the rand. As Marcus noted, "Since the previous meeting of the Monetary Policy Committee [in September], the rand has appreciated by over 3% against the dollar. This has been despite lower domestic interest rates and the higher pace of reserve accumulation."
In large part the problem is that even after 650 basis points in cuts, South Africa's interest rates are still high by global standards (see table), and will doubtless continue to attract hot money (foreign money from investors looking for better yields), which will keep the currency strong।
In addition, a lot of rand/dollar volatility is actually just dollar/euro volatility in disguise, and so events in the US and Europe, which South Africa can do nothing about, are often the major drivers of the currency। Overall, then, it's unlikely that a 50 basis-point cut in domestic rates will have much effect on the rand.What, then, can we conclude about the latest rate cut? While the reasons behind it are obvious, solid, and sensible, it remains an open question whether or not it will pay off। Given current circumstances, there seems to be no easy way for the cut to boost the economy through currency weakness or increased borrowing. Only time will tell if we can cut our way to faster growth.
Write to Felicity Duncan: felicity@moneyweb.co.za
*This article first appeared in Discovery Invest
Friday, 12 November 2010
Buy a house – but how?
If you buy a house that has been lived in for a number of years it will cost you about 30% less than if you buy a brand new place that has never been occupied before according to figures released by First National Bank last week.
That got me thinking about the high cost of building and the more research I did – and the more thinking I did too – the angrier I became. Angry because building materials suppliers and property developers are ripping off the South African consumers.
A brand new ‘affordable’ apartment of 30 sqm costs around R300k in different parts of South Africa. It can be considerably more if you’re buying something in Clifton or Camps Bay but the average cost per square metre for an ‘affordable’ property in reasonable suburbs (including Mitchell’s Plain or Cosmo City) is around 10k per square metre.
Talk to the developers and they say the high costs of developing a site, combined with the high costs of labour and materials determine the price of the property when it is released onto the market.
All the developers are really quick to claim that the profit levels are minimal particularly when the money is tied up for so long before the first unit is sold. So if they’re not making good profits, why are they doing it?
The answer is actually that they are making huge profits and they’re just fudging their answers to dissuade me (and you) that they’re making lots and lots of bucks.
Much the same pattern applies to material suppliers. These organisations blame everybody else except themselves for the exorbitant prices of cement, bricks, plaster, tiles, fixtures and fittings and even glass.
The manufacturers and suppliers point fingers at the retailers claiming that they are the ones who are keeping prices high; then they point another set of fingers at the high costs of transporting their products from the factory to the site (or the retail outlet). They even blame the low productivity of workers for the high prices of products made for the building industry.
Do they blame themselves or do they reduce their margins? Not a chance. In fact year after year your large material suppliers provide handsome dividends for their shareholders. So, like developers, they too are making money – and lots of it.
The final culprit in this rather depressing cycle of profiteering is the banks themselves. You see it’s the banks that are prepared to fund the developers and then grant the bonds for each pokey little flat measuring five metres by six metres into which has been crammed a kitchen and bathroom too.
Recently, Human Settlements Minister Tokyo Sexwale urged developers, material suppliers, architects and engineers to come up with innovative ways to resolve the housing problems that face South Africa.
Well, here’s a thought Mr Minister: how’s about getting the developers, the materials suppliers and the banks to stop profiteering. How’s about getting them to stop driving prices higher and higher?
How can we do that?
Well let’s look at the existing position first of all. One of the attractions for buying a new property – particularly for first-time homebuyers – is that a new property is free from transfer duty and, in many cases, first-time buyers even qualify for 100% bonds.
Sometimes buyers are supported by a developer who offers a cash-back advance to them if they sign the deal. In fact, on a 140 sqm house costing R1,4-million I was offered a R50k cash-back (to spend on new furniture or other things I was told) if I agreed to buy the home.
If I was prepared to buy a slightly bigger place, costing R1,6-million then I’d get R100k cash-back advance. Sign the deal, get the money and spend it on a new plasma TV for the lounge, curtains for all the bedrooms, new furniture for all the rooms, buy some new appliances and so on. Even spend it on having a holiday after all the stresses of moving if I choose to.
And developers tell me that they’re not making handsome profits. Pull the other leg Mr and Mrs Property Developer.
Do you ever hear about a cash-back advance on the sale of an older property? Do you get any relief on transfer duties, bond costs, legal fees or any of the other charges that are added to a property transaction? You don’t even get a discount on stamp duty.
So what we know, clearly, is that the deposit, the transfer fees and the other charges make older properties unaffordable for first-time buyers unless they have a large amount of cash in their pockets to spend on the property.
So the stumbling block that’s preventing sales of second-hand homes is the additional costs that must be covered. That being the case, Mr Minister, why don’t you and your advisers come up with a way to reduce those costs or at least make them affordable for many millions of South Africans?
Of course the argument is that developers are paying Value Added Tax on the materials they buy and because of the VAT the property doesn’t attract transfer duties.
So what about a VAT amount that gets included in the sales price of older properties (and therefore is included in the price) instead of transfer duties.
That way people could get a bond (including VAT) for the second-hand property they want to own and not pay any transfer costs at all. Sure, they’d have to cover the legal fees to feed the ever-hungry attorneys that do all the paperwork but those costs are relatively small compared with the many other charges.
Perhaps there are other ways that you, Mr Minister, can come up with to resolve the sales of property in the second-hand market and I think that there are many possible solutions too. But the reality is that the problem of transfer fees, deposits and other costs must be addressed.
More importantly than that, though, is that if you re-energise the second-hand property market the bottom will fall out of the market for new properties. Particularly so if banks come to this party and provide the bond finance required to buy older properties.
If that happened, the price of new homes would plummet.
And, if developers stop developing new properties, the materials suppliers would find that their sales levels fell sharply and they’d be forced to do something about their prices too. Like a pack of cards, the materials prices would come tumbling down too.
And so the entire cycle for reducing costs would start to work: Materials prices fall; new property prices drop correspondingly and stay there until new buyers come into the market and start buying properties that are actually affordable.
But to claim, as developers do right now, that a pokey little apartment costing R10k per square metre in a distant suburb far is ‘affordable’ is nonsense.
If you ask me, affordable is about half of that?
*Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn’t pretend to be facts or advice.
That got me thinking about the high cost of building and the more research I did – and the more thinking I did too – the angrier I became. Angry because building materials suppliers and property developers are ripping off the South African consumers.
A brand new ‘affordable’ apartment of 30 sqm costs around R300k in different parts of South Africa. It can be considerably more if you’re buying something in Clifton or Camps Bay but the average cost per square metre for an ‘affordable’ property in reasonable suburbs (including Mitchell’s Plain or Cosmo City) is around 10k per square metre.
Talk to the developers and they say the high costs of developing a site, combined with the high costs of labour and materials determine the price of the property when it is released onto the market.
All the developers are really quick to claim that the profit levels are minimal particularly when the money is tied up for so long before the first unit is sold. So if they’re not making good profits, why are they doing it?
The answer is actually that they are making huge profits and they’re just fudging their answers to dissuade me (and you) that they’re making lots and lots of bucks.
Much the same pattern applies to material suppliers. These organisations blame everybody else except themselves for the exorbitant prices of cement, bricks, plaster, tiles, fixtures and fittings and even glass.
The manufacturers and suppliers point fingers at the retailers claiming that they are the ones who are keeping prices high; then they point another set of fingers at the high costs of transporting their products from the factory to the site (or the retail outlet). They even blame the low productivity of workers for the high prices of products made for the building industry.
Do they blame themselves or do they reduce their margins? Not a chance. In fact year after year your large material suppliers provide handsome dividends for their shareholders. So, like developers, they too are making money – and lots of it.
The final culprit in this rather depressing cycle of profiteering is the banks themselves. You see it’s the banks that are prepared to fund the developers and then grant the bonds for each pokey little flat measuring five metres by six metres into which has been crammed a kitchen and bathroom too.
Recently, Human Settlements Minister Tokyo Sexwale urged developers, material suppliers, architects and engineers to come up with innovative ways to resolve the housing problems that face South Africa.
Well, here’s a thought Mr Minister: how’s about getting the developers, the materials suppliers and the banks to stop profiteering. How’s about getting them to stop driving prices higher and higher?
How can we do that?
Well let’s look at the existing position first of all. One of the attractions for buying a new property – particularly for first-time homebuyers – is that a new property is free from transfer duty and, in many cases, first-time buyers even qualify for 100% bonds.
Sometimes buyers are supported by a developer who offers a cash-back advance to them if they sign the deal. In fact, on a 140 sqm house costing R1,4-million I was offered a R50k cash-back (to spend on new furniture or other things I was told) if I agreed to buy the home.
If I was prepared to buy a slightly bigger place, costing R1,6-million then I’d get R100k cash-back advance. Sign the deal, get the money and spend it on a new plasma TV for the lounge, curtains for all the bedrooms, new furniture for all the rooms, buy some new appliances and so on. Even spend it on having a holiday after all the stresses of moving if I choose to.
And developers tell me that they’re not making handsome profits. Pull the other leg Mr and Mrs Property Developer.
Do you ever hear about a cash-back advance on the sale of an older property? Do you get any relief on transfer duties, bond costs, legal fees or any of the other charges that are added to a property transaction? You don’t even get a discount on stamp duty.
So what we know, clearly, is that the deposit, the transfer fees and the other charges make older properties unaffordable for first-time buyers unless they have a large amount of cash in their pockets to spend on the property.
So the stumbling block that’s preventing sales of second-hand homes is the additional costs that must be covered. That being the case, Mr Minister, why don’t you and your advisers come up with a way to reduce those costs or at least make them affordable for many millions of South Africans?
Of course the argument is that developers are paying Value Added Tax on the materials they buy and because of the VAT the property doesn’t attract transfer duties.
So what about a VAT amount that gets included in the sales price of older properties (and therefore is included in the price) instead of transfer duties.
That way people could get a bond (including VAT) for the second-hand property they want to own and not pay any transfer costs at all. Sure, they’d have to cover the legal fees to feed the ever-hungry attorneys that do all the paperwork but those costs are relatively small compared with the many other charges.
Perhaps there are other ways that you, Mr Minister, can come up with to resolve the sales of property in the second-hand market and I think that there are many possible solutions too. But the reality is that the problem of transfer fees, deposits and other costs must be addressed.
More importantly than that, though, is that if you re-energise the second-hand property market the bottom will fall out of the market for new properties. Particularly so if banks come to this party and provide the bond finance required to buy older properties.
If that happened, the price of new homes would plummet.
And, if developers stop developing new properties, the materials suppliers would find that their sales levels fell sharply and they’d be forced to do something about their prices too. Like a pack of cards, the materials prices would come tumbling down too.
And so the entire cycle for reducing costs would start to work: Materials prices fall; new property prices drop correspondingly and stay there until new buyers come into the market and start buying properties that are actually affordable.
But to claim, as developers do right now, that a pokey little apartment costing R10k per square metre in a distant suburb far is ‘affordable’ is nonsense.
If you ask me, affordable is about half of that?
*Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn’t pretend to be facts or advice.
Friday, 22 October 2010
1000s of repossessed houses up for sale
Anyone wanting to buy a house right now should start by checking out the repossessed properties that all the banks have listed on their websites (or websites hosted by some other company on their behalf).
This week I was wondering what prices were like in the repossessions and auction markets because, frankly, I’m flabbergasted at just how much money people are currently spending on properties.
I regularly see sales of luxury homes costing R38-million in Constantia, R54-million in Sandhurst or a staggering average price of R11,8-million in Clifton. That’s not for some mighty mansion, but for one of those pokey little apartments with no parking that scorches under the blaze of the setting sun.
I set about researching some of the auction and repossession websites and found some interesting information lurking in the pages: first of all, if you thought that houses in the middle- and low-income groups were the only ones being auctioned or repossessed, think again.
There are screeds and screeds of properties with bonds of R3-million and more listed by the banks. There are even properties of close to R10-million listed alongside the rather quaint commentary that the estimated bond repayment is R87,973,38.
To afford that sort of bond, the monthly household income would have to be at least three times that, at about R265,000. Some people in South Africa are obviously earning great sums of money.
None of the banks’ websites give any clear indication of whether or not the offer you might make will be accepted but there are guidelines: for instance, on one property I saw the asking price was R2,5-million but the best offer received so far was R1,8-million or R700k less.
It hasn’t yet been accepted (so I guess the bank is waiting for someone to offer a bit more) but if no-one does offer more for the property then it will probably be accepted and somebody will have just saved himself or herself a fistful of money.
I tried to establish exactly how many properties in possession are listed by the banks but they clearly are not too keen to publish this information so you have to laboriously count the properties that are listed. And, predictably, some of the information on the website itself is bound to be out of date too.
My calculations reveal that there are at least 5,000 properties in possession among all the banks but that is probably a hopelessly low estimate because the banks do not provide any kind of full disclosure when it comes to these figures.
What it does tell me though are some other interesting things:
- At least 5,000 families have lost their homes and are probably living in rented accommodation or have moved back to the family home;
- The banks will have to protect these properties from being vandalised at an enormous cost to their shareholders. Any property that stands empty for more than a couple of days is bound to have its fixtures and fittings stripped out by greedy thieves;
- There are at least 5,000 bargain properties to be had in the current market in places that many people would like to live;
- The prices that are reflected on the websites are a guideline and nothing more.
Of course the range of properties on offer is enormous and, I suppose, in the main centres of Johannesburg and Pretoria, Cape Town and Mandela Bay, Durban and Bloemfontein the number of properties in possession is predictably higher than in the more remote, smaller cities such as Kimberley.
Absa, which has an unusually unfriendly website of repossessed properties provides simple guidelines on the asking price only and it lists the least number of properties in possession despite claiming to be the largest mortgage lender in the country.
I find this strange but I must admit that I find a lot of things about Absa strange and I’m not sure that the information on its website reflects the true picture. That’s academic, however, because the real point of the exercise was to establish whether there are bargains to be had from the banks directly.
And it certainly seems that there are.
Of course, some people might like to actually attend the auction sales when a distressed property is sold in a particular suburb. But for those people like me who have to work for a living, it makes sense to browse through the properties that are available and then make an offer directly to the bank (or in some cases, to the estate agent working for the bank).
Of course this was another anomaly for me: why, if the bank is advertising properties in possession would it want to pay an estate agent to market the property for them. That’s me being naïve because, I suppose, the banks are putting the house on show (via the agent) every weekend to prevent vandalism and, hopefully, to get an offer that vaguely resembles the price being asked.
And, worse than that, they’ve probably negotiated a specially low commission rate with the agent too because that’s the way the banks work.
So if I were about to buy a house I would start off with the properties in possession and then I would make a ridiculously low offer for the property. The worst that can happen is the offer is rejected and you have to revise the price.
More importantly, where there is an agent listed for the property, I’d insist inspecting the property as soon as possible. The reality is that these properties do get stripped, vandalised and damaged. And the garden, the swimming pool and those pretty ponds soon become an eyesore and you will have to pay for all the necessary repairs yourself – or insert special conditions in the purchase agreement stipulating what remedial work must be done before occupation.
The other thing to ensure is that you will be absolved of all liability when it comes to electricity, rates and taxes. While these charges are obviously not for your account, more and more councils are refusing to reconnect services or provide clearance certificates if there is an outstanding amount on the previous account.
This means, of course, that the bank would have to pay these charges and not you. But what’s the point of moving into a new house and then discovering that you can’t get the electricity supply connected until the outstanding account of R69,781 has been paid. So make sure that these things are tied up and sorted out when you sign the offer to purchase.
If you can’t find a house that you like through the properties in possession of banks then scour the neighbourhood for auction sale signs and watch the Thursday and Friday editions of the newspapers as these usually carry details of auctions that are pending or properties about to be repossessed too.
There are thousands of bargains to be had in the auction and repossessed property market and while it may seem rather mercenary, the reality is that the banks and the auction houses want to dispose of the property as quickly as possible.
So keep your eyes open wide.
*Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn’t pretend to be facts or advice.
This week I was wondering what prices were like in the repossessions and auction markets because, frankly, I’m flabbergasted at just how much money people are currently spending on properties.
I regularly see sales of luxury homes costing R38-million in Constantia, R54-million in Sandhurst or a staggering average price of R11,8-million in Clifton. That’s not for some mighty mansion, but for one of those pokey little apartments with no parking that scorches under the blaze of the setting sun.
I set about researching some of the auction and repossession websites and found some interesting information lurking in the pages: first of all, if you thought that houses in the middle- and low-income groups were the only ones being auctioned or repossessed, think again.
There are screeds and screeds of properties with bonds of R3-million and more listed by the banks. There are even properties of close to R10-million listed alongside the rather quaint commentary that the estimated bond repayment is R87,973,38.
To afford that sort of bond, the monthly household income would have to be at least three times that, at about R265,000. Some people in South Africa are obviously earning great sums of money.
None of the banks’ websites give any clear indication of whether or not the offer you might make will be accepted but there are guidelines: for instance, on one property I saw the asking price was R2,5-million but the best offer received so far was R1,8-million or R700k less.
It hasn’t yet been accepted (so I guess the bank is waiting for someone to offer a bit more) but if no-one does offer more for the property then it will probably be accepted and somebody will have just saved himself or herself a fistful of money.
I tried to establish exactly how many properties in possession are listed by the banks but they clearly are not too keen to publish this information so you have to laboriously count the properties that are listed. And, predictably, some of the information on the website itself is bound to be out of date too.
My calculations reveal that there are at least 5,000 properties in possession among all the banks but that is probably a hopelessly low estimate because the banks do not provide any kind of full disclosure when it comes to these figures.
What it does tell me though are some other interesting things:
- At least 5,000 families have lost their homes and are probably living in rented accommodation or have moved back to the family home;
- The banks will have to protect these properties from being vandalised at an enormous cost to their shareholders. Any property that stands empty for more than a couple of days is bound to have its fixtures and fittings stripped out by greedy thieves;
- There are at least 5,000 bargain properties to be had in the current market in places that many people would like to live;
- The prices that are reflected on the websites are a guideline and nothing more.
Of course the range of properties on offer is enormous and, I suppose, in the main centres of Johannesburg and Pretoria, Cape Town and Mandela Bay, Durban and Bloemfontein the number of properties in possession is predictably higher than in the more remote, smaller cities such as Kimberley.
Absa, which has an unusually unfriendly website of repossessed properties provides simple guidelines on the asking price only and it lists the least number of properties in possession despite claiming to be the largest mortgage lender in the country.
I find this strange but I must admit that I find a lot of things about Absa strange and I’m not sure that the information on its website reflects the true picture. That’s academic, however, because the real point of the exercise was to establish whether there are bargains to be had from the banks directly.
And it certainly seems that there are.
Of course, some people might like to actually attend the auction sales when a distressed property is sold in a particular suburb. But for those people like me who have to work for a living, it makes sense to browse through the properties that are available and then make an offer directly to the bank (or in some cases, to the estate agent working for the bank).
Of course this was another anomaly for me: why, if the bank is advertising properties in possession would it want to pay an estate agent to market the property for them. That’s me being naïve because, I suppose, the banks are putting the house on show (via the agent) every weekend to prevent vandalism and, hopefully, to get an offer that vaguely resembles the price being asked.
And, worse than that, they’ve probably negotiated a specially low commission rate with the agent too because that’s the way the banks work.
So if I were about to buy a house I would start off with the properties in possession and then I would make a ridiculously low offer for the property. The worst that can happen is the offer is rejected and you have to revise the price.
More importantly, where there is an agent listed for the property, I’d insist inspecting the property as soon as possible. The reality is that these properties do get stripped, vandalised and damaged. And the garden, the swimming pool and those pretty ponds soon become an eyesore and you will have to pay for all the necessary repairs yourself – or insert special conditions in the purchase agreement stipulating what remedial work must be done before occupation.
The other thing to ensure is that you will be absolved of all liability when it comes to electricity, rates and taxes. While these charges are obviously not for your account, more and more councils are refusing to reconnect services or provide clearance certificates if there is an outstanding amount on the previous account.
This means, of course, that the bank would have to pay these charges and not you. But what’s the point of moving into a new house and then discovering that you can’t get the electricity supply connected until the outstanding account of R69,781 has been paid. So make sure that these things are tied up and sorted out when you sign the offer to purchase.
If you can’t find a house that you like through the properties in possession of banks then scour the neighbourhood for auction sale signs and watch the Thursday and Friday editions of the newspapers as these usually carry details of auctions that are pending or properties about to be repossessed too.
There are thousands of bargains to be had in the auction and repossessed property market and while it may seem rather mercenary, the reality is that the banks and the auction houses want to dispose of the property as quickly as possible.
So keep your eyes open wide.
*Hartdegen writes a regular column for Property24.com. The content of his columns constitutes his personal opinion and doesn’t pretend to be facts or advice.
Friday, 8 October 2010
Home buyers need 40pc higher deposit
The average deposit reached 43 per cent in September, up from 30 per cent in December 2006.
It is a fresh blow to first-time buyers as it equates to £70,000, based on average house prices. This is almost three times the average salary and £20,000 more than the deposit required four years ago.
However, it is not the highest average deposit since records began four years ago. Levels reached 49 per cent in December 2008 as the credit crisis began to tighten its grip.
It comes after the Bank of England warned last week that banks are becoming even stricter about who they will lend money to amid fears that higher unemployment will lead to home owners defaulting on their loans.
The latest mortgage research by surveyors e.surv also found that not all buyers are being treated equally. Those buying cheaper properties are being squeezed the most, typically needing a 35 per cent deposit compared to 25 per cent four years ago. It means they can borrow 11 per cent less than previously.
By contrast, those buying properties worth at least £500,000 can borrow just 4 per cent less.
Richard Sexton, business development director of e.surv said: “Tighter loan to value criteria have hurt everybody, but those at the bottom of the ladder have been hit disproportionately.
“One in five borrowers wants to buy a home worth less than £125,000. They are the classic first-time buyers, but they are still trailing far behind wealthier home buyers in their access to finance.
“Those financing homes in the £500,000 price bracket are only around one twentieth of buyers. For them, it’s as if the credit crunch hardly happened. This is a concern as first-time buyer participation is central to any sustained recovery in house prices.”
It comes after property experts warned declining house prices are “inevitable” after Nationwide revealed its latest house price index last week.
It reported typical values rose 0.1 per cent in September to £166,757 compared with the previous month. But this was not enough to halt the drop in annual house price growth, which slid from 3.9 per cent in August compared with the previous year to 3.1 per cent in September.
Mr Sexton added: “House prices today are almost exactly at the same level as four years ago, but the size of deposit needed has risen £20,000 to buy a typical home.
“Lenders are nervous about the state of the economy and the future direction of house prices, and their ability to fund their mortgage lending is constrained by the demands from regulators to bolster their capital reserves.
That means only the best quality borrowers are offered loans, and on much tighter criteria than before.”
It is a fresh blow to first-time buyers as it equates to £70,000, based on average house prices. This is almost three times the average salary and £20,000 more than the deposit required four years ago.
However, it is not the highest average deposit since records began four years ago. Levels reached 49 per cent in December 2008 as the credit crisis began to tighten its grip.
It comes after the Bank of England warned last week that banks are becoming even stricter about who they will lend money to amid fears that higher unemployment will lead to home owners defaulting on their loans.
The latest mortgage research by surveyors e.surv also found that not all buyers are being treated equally. Those buying cheaper properties are being squeezed the most, typically needing a 35 per cent deposit compared to 25 per cent four years ago. It means they can borrow 11 per cent less than previously.
By contrast, those buying properties worth at least £500,000 can borrow just 4 per cent less.
Richard Sexton, business development director of e.surv said: “Tighter loan to value criteria have hurt everybody, but those at the bottom of the ladder have been hit disproportionately.
“One in five borrowers wants to buy a home worth less than £125,000. They are the classic first-time buyers, but they are still trailing far behind wealthier home buyers in their access to finance.
“Those financing homes in the £500,000 price bracket are only around one twentieth of buyers. For them, it’s as if the credit crunch hardly happened. This is a concern as first-time buyer participation is central to any sustained recovery in house prices.”
It comes after property experts warned declining house prices are “inevitable” after Nationwide revealed its latest house price index last week.
It reported typical values rose 0.1 per cent in September to £166,757 compared with the previous month. But this was not enough to halt the drop in annual house price growth, which slid from 3.9 per cent in August compared with the previous year to 3.1 per cent in September.
Mr Sexton added: “House prices today are almost exactly at the same level as four years ago, but the size of deposit needed has risen £20,000 to buy a typical home.
“Lenders are nervous about the state of the economy and the future direction of house prices, and their ability to fund their mortgage lending is constrained by the demands from regulators to bolster their capital reserves.
That means only the best quality borrowers are offered loans, and on much tighter criteria than before.”
Outlook for UK housing market bleak
House prices in Britain fell by 3,6% in September, the largest drop in prices since 1983 according to mortgage lender Halifax.
It says the figures show that the housing market there is rapidly losing steam after a brief recovery last year.
However, rival mortgage lender, Nationwide claimed last week that house prices actually rose by 0,1% and analysts point out that the drop in prices may just be a seasonal blip rather than a worsening trend for the property market.
Halifax says that for the three months to September house prices in Britain were down by 0,9% compared with the same period last year and points out the rate of decline is significantly slower than the quarterly changes of between 5% and 6% seen in the second half of 2008.
Mortgage approvals data supports Halifax’s views that the outlook for the property market in Britain remained bleak. The September data conflicts with the data released in August when house prices rose by 0,4% and showed an increase in the three-month annual rate of 4,6%.
Halifaxexpects the housing market to fall slowly for the rest of this year and it to continue to decline in 2011.
It says the figures show that the housing market there is rapidly losing steam after a brief recovery last year.
However, rival mortgage lender, Nationwide claimed last week that house prices actually rose by 0,1% and analysts point out that the drop in prices may just be a seasonal blip rather than a worsening trend for the property market.
Halifax says that for the three months to September house prices in Britain were down by 0,9% compared with the same period last year and points out the rate of decline is significantly slower than the quarterly changes of between 5% and 6% seen in the second half of 2008.
Mortgage approvals data supports Halifax’s views that the outlook for the property market in Britain remained bleak. The September data conflicts with the data released in August when house prices rose by 0,4% and showed an increase in the three-month annual rate of 4,6%.
Halifaxexpects the housing market to fall slowly for the rest of this year and it to continue to decline in 2011.
Friday, 1 October 2010
UK mortgage approvals hit 16-month low as housing market slows
Published: 10:35AM BST 23 Sep 2010
The number of mortgages approved for house purchase in Britain slumped to a 16-month low in August as activity in the housing market continued to decline.
For most of the year the number of loans approved for people buying a home has been running below 36,000 - a level economists consider to be consistent with house price falls Photo: Reuters
Only 31,767 loans were approved for people buying a property during the month, the lowest level since April last year, according to figures from the British Bankers' Association on Thursday.
It was the third consecutive month during which mortgage approvals fell, despite the fact that the property market usually sees a bounce in activity during the summer months.
The number of loans approved for people buying a home has been running below 36,000, a level economists consider to be consistent with house price falls, for most of this year.
David Dooks, BBA director of statistics, said: "Demand for mortgages continues to be weak despite more properties coming on to the market.
"Even with stable or falling house prices, the current economic climate makes it unlikely that demand will pick up in the near future."
Today's figures are the latest in a run of gloomy data on the housing market, with Nationwide reporting price falls of 0.9% in August.
The Council of Mortgage Lenders said earlier this week that lending in August fell to its lowest level for the month for a decade, while HM Revenue & Customs reported a fall in the number of homes changing hands during the month.
The drop in activity since the beginning of this year has prompted some economists to predict the market could be heading for a double dip.
But others have said recent falls in house prices are not unhealthy as the recovery in the property market had got ahead of improvements in the wider economy.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The BBA data showing mortgage approvals sinking to a 16-month low in August heightens our belief that house prices will trend down over the coming months.
"We suspect that house prices will fall by around 10pc between now and the end of 2011.
"In our view, the housing market really has not got much going for it at the moment, apart from low mortgage rates - and that is if you can get a mortgage."
But there was some slightly better news in the BBA figures, with net lending, which strips out redemptions and repayments, rising to £2.55bn - its highest level since February.
However, the figure was well down on the £3.35 billion advanced in August 2009.
The BBA attributed the ongoing weakness in net lending to the fact that homeowners were focusing on paying down their mortgage.
Credit card repayments were higher than new spending during the month, but once interest and charges were factored in, outstanding plastic debt rose by £172m.
Borrowing through loans and overdrafts contracted for the 16th consecutive month, with consumers repaying £187m more than they borrowed.
Savings levels bounced back in August to reach their highest level since March, when figures are often boosted by the approaching end of the tax year.
The amount consumers deposited rose by £2.19bn, up from an increase of £514m in July.
The number of mortgages approved for house purchase in Britain slumped to a 16-month low in August as activity in the housing market continued to decline.
For most of the year the number of loans approved for people buying a home has been running below 36,000 - a level economists consider to be consistent with house price falls Photo: Reuters
Only 31,767 loans were approved for people buying a property during the month, the lowest level since April last year, according to figures from the British Bankers' Association on Thursday.
It was the third consecutive month during which mortgage approvals fell, despite the fact that the property market usually sees a bounce in activity during the summer months.
The number of loans approved for people buying a home has been running below 36,000, a level economists consider to be consistent with house price falls, for most of this year.
David Dooks, BBA director of statistics, said: "Demand for mortgages continues to be weak despite more properties coming on to the market.
"Even with stable or falling house prices, the current economic climate makes it unlikely that demand will pick up in the near future."
Today's figures are the latest in a run of gloomy data on the housing market, with Nationwide reporting price falls of 0.9% in August.
The Council of Mortgage Lenders said earlier this week that lending in August fell to its lowest level for the month for a decade, while HM Revenue & Customs reported a fall in the number of homes changing hands during the month.
The drop in activity since the beginning of this year has prompted some economists to predict the market could be heading for a double dip.
But others have said recent falls in house prices are not unhealthy as the recovery in the property market had got ahead of improvements in the wider economy.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The BBA data showing mortgage approvals sinking to a 16-month low in August heightens our belief that house prices will trend down over the coming months.
"We suspect that house prices will fall by around 10pc between now and the end of 2011.
"In our view, the housing market really has not got much going for it at the moment, apart from low mortgage rates - and that is if you can get a mortgage."
But there was some slightly better news in the BBA figures, with net lending, which strips out redemptions and repayments, rising to £2.55bn - its highest level since February.
However, the figure was well down on the £3.35 billion advanced in August 2009.
The BBA attributed the ongoing weakness in net lending to the fact that homeowners were focusing on paying down their mortgage.
Credit card repayments were higher than new spending during the month, but once interest and charges were factored in, outstanding plastic debt rose by £172m.
Borrowing through loans and overdrafts contracted for the 16th consecutive month, with consumers repaying £187m more than they borrowed.
Savings levels bounced back in August to reach their highest level since March, when figures are often boosted by the approaching end of the tax year.
The amount consumers deposited rose by £2.19bn, up from an increase of £514m in July.
Airports let property markets take off
The development of airport infrastructure around SA is fuelling nearby commercial and residential property markets and while there are many who decry the effects of noise pollution, the impetus seems unstoppable.
So says Gerhard Kotzé, CEO of the ERA South Africa property group, who adds that airports and their expansion still generate mixed reactions, but there’s little doubt that the economies of surrounding areas benefit.
“South Africa, under the impetus of the Soccer World Cup and other influences, has extensively upgraded its airport infrastructure recently in terms of both international and regional feeder services.
“Unsurprisingly, the biggest investment of late has come from the Airports Company of South Africa (ACSA), which has now come to the end of a R17bn development programme, including the commissioning of spectacular new terminal buildings at OR Tambo International, Cape Town International and KZN’s King Shaka International airports among others.”
This kind of parastatal development is to be expected, he says, particularly in support of a major sporting event such as the World Cup but it’s interesting to note the private sector development of airports in recent years as well, including the major upgrades of Lanseria and Wonderboom airports.
“And new property development flows in the wake of these projects - in the case of Lanseria International for example, now Gauteng’s second biggest airport, a new R200m industrial estate with further investment of some R7bn over time is in the pipeline which in turn is expected to spark off additional residential development.
“Surrounding Wonderboom, a residential air park is being constructed along the lines of much talked-about developments of this nature in the US elsewhere in the world, while in the Welkom area a R3bn, three-phase development project including residential, entertainment, cultural and sports facilities is reportedly on the cards.”
Similarly, the development of King Shaka International north of Durban has definitely stimulated property markets in La Mercy, Umhlanga, Ballito and other north coast centres while in Mpumalanga, the Kruger Park
Mpumalanga International airport is credited with spurring all manner of economic activity in Nelspruit and beyond, Kotzé notes.
“Clearly there will always be those who avoid acquiring property in airport approach areas, but on balance it would seem the benefits of airport development for the property sector are very positive.”
Elwyn Schenk, Pam Golding Properties (PGP) area principal in Umhlanga, Umdloti and La Mercy areas, says the Umhlanga node north of Durban is firmly entrenched as the area of choice for residents, investors and commercial end users alike.
“Thus prices in the area have remained fairly stable during the difficult economic conditions. Part of the reason for this, we believe, is that the potential for the area has been enhanced by the King Shaka International Airport and the Dube Tradeport.”
Durban's north coast has all the ingredients to develop into a similar, but still different, version of Cape Town's Atlantic Seaboard.
“The mild and sunny climate year round, beautiful beaches – add to this the rapid growth of the Umhlanga node and proximity to Gauteng (one hour's flight) and you have all the ingredients for rapid future growth. While certain areas such as Umhlanga and Umdloti are heavily developed, there is significant coastal land still available for expansion, in particular La Mercy, 5km from King Shaka Airport, offers substantial potential.”
“Global trends have shown that areas in close proximity to an international airport benefit from sustained and rapid growth. Commercially the Dube Tradeport will serve as a catalyst for economic development which will see KZN emerge as a major SA business node, serving Sub-Saharan Africa and the Far East in particular.
Experience has shown that property prices, both residential and commercial, will benefit from these developments. Commercial demand will come for hotels, engineering and other industries which service the airport, such as food services and import/export companies.”
Schenk says apart from the normal infrastructural development around airports – fuel depots, catering services, maintenance etc. – history the world over has shown that a new airport in particular will bring substantial additional development in peripheral industries such as freight companies, import/export agencies and related activities. “Passenger services and hotels are also attracted to a new airport facility.”
“Thus airports bring in their wake a substantial permanent population, together with a transient population ranging from contract workers to every day tourists.”
The effects of these demographic changes on the property industry are profound, especially in the medium to long term. “The trend for big businesses to move from the CBD into the north has been evident for some years and Umhlanga has been a prime beneficiary of this.”
He says future expected trends arising from the airport area will be a demand for mid-price housing from the blue collar workers, a surge in rental demand for the same reason and an increase in investor demand.
Clive Greene, PGP principal in Ballito, says the King Shaka Airport has created positive sentiment in the market. "Rental enquiries have increased twofold."
He says enquiries on properties for under R1m in the vicinity of the airport have picked up. “Sales on these lower cost properties are selling well. Caledon estates are nearly sold out with over 100 units sold.
In Sheffield Manor Estates there have been over 50 sales in the last five months and Sheffield Manor over 100 sales in the last 10 months. Simbithi Estate continues to sell very well, offering a secure lifestyle for old and young families.
He says commercial development will definitely increase as land has been allocated around the airport for development and Ballito is starting to offer large tracts of land for commercial use. “This, in turn, will increase demand for more residential property. The future for this area in the medium to long term is exceptional.” – Eugene Brink
So says Gerhard Kotzé, CEO of the ERA South Africa property group, who adds that airports and their expansion still generate mixed reactions, but there’s little doubt that the economies of surrounding areas benefit.
“South Africa, under the impetus of the Soccer World Cup and other influences, has extensively upgraded its airport infrastructure recently in terms of both international and regional feeder services.
“Unsurprisingly, the biggest investment of late has come from the Airports Company of South Africa (ACSA), which has now come to the end of a R17bn development programme, including the commissioning of spectacular new terminal buildings at OR Tambo International, Cape Town International and KZN’s King Shaka International airports among others.”
This kind of parastatal development is to be expected, he says, particularly in support of a major sporting event such as the World Cup but it’s interesting to note the private sector development of airports in recent years as well, including the major upgrades of Lanseria and Wonderboom airports.
“And new property development flows in the wake of these projects - in the case of Lanseria International for example, now Gauteng’s second biggest airport, a new R200m industrial estate with further investment of some R7bn over time is in the pipeline which in turn is expected to spark off additional residential development.
“Surrounding Wonderboom, a residential air park is being constructed along the lines of much talked-about developments of this nature in the US elsewhere in the world, while in the Welkom area a R3bn, three-phase development project including residential, entertainment, cultural and sports facilities is reportedly on the cards.”
Similarly, the development of King Shaka International north of Durban has definitely stimulated property markets in La Mercy, Umhlanga, Ballito and other north coast centres while in Mpumalanga, the Kruger Park
Mpumalanga International airport is credited with spurring all manner of economic activity in Nelspruit and beyond, Kotzé notes.
“Clearly there will always be those who avoid acquiring property in airport approach areas, but on balance it would seem the benefits of airport development for the property sector are very positive.”
Elwyn Schenk, Pam Golding Properties (PGP) area principal in Umhlanga, Umdloti and La Mercy areas, says the Umhlanga node north of Durban is firmly entrenched as the area of choice for residents, investors and commercial end users alike.
“Thus prices in the area have remained fairly stable during the difficult economic conditions. Part of the reason for this, we believe, is that the potential for the area has been enhanced by the King Shaka International Airport and the Dube Tradeport.”
Durban's north coast has all the ingredients to develop into a similar, but still different, version of Cape Town's Atlantic Seaboard.
“The mild and sunny climate year round, beautiful beaches – add to this the rapid growth of the Umhlanga node and proximity to Gauteng (one hour's flight) and you have all the ingredients for rapid future growth. While certain areas such as Umhlanga and Umdloti are heavily developed, there is significant coastal land still available for expansion, in particular La Mercy, 5km from King Shaka Airport, offers substantial potential.”
“Global trends have shown that areas in close proximity to an international airport benefit from sustained and rapid growth. Commercially the Dube Tradeport will serve as a catalyst for economic development which will see KZN emerge as a major SA business node, serving Sub-Saharan Africa and the Far East in particular.
Experience has shown that property prices, both residential and commercial, will benefit from these developments. Commercial demand will come for hotels, engineering and other industries which service the airport, such as food services and import/export companies.”
Schenk says apart from the normal infrastructural development around airports – fuel depots, catering services, maintenance etc. – history the world over has shown that a new airport in particular will bring substantial additional development in peripheral industries such as freight companies, import/export agencies and related activities. “Passenger services and hotels are also attracted to a new airport facility.”
“Thus airports bring in their wake a substantial permanent population, together with a transient population ranging from contract workers to every day tourists.”
The effects of these demographic changes on the property industry are profound, especially in the medium to long term. “The trend for big businesses to move from the CBD into the north has been evident for some years and Umhlanga has been a prime beneficiary of this.”
He says future expected trends arising from the airport area will be a demand for mid-price housing from the blue collar workers, a surge in rental demand for the same reason and an increase in investor demand.
Clive Greene, PGP principal in Ballito, says the King Shaka Airport has created positive sentiment in the market. "Rental enquiries have increased twofold."
He says enquiries on properties for under R1m in the vicinity of the airport have picked up. “Sales on these lower cost properties are selling well. Caledon estates are nearly sold out with over 100 units sold.
In Sheffield Manor Estates there have been over 50 sales in the last five months and Sheffield Manor over 100 sales in the last 10 months. Simbithi Estate continues to sell very well, offering a secure lifestyle for old and young families.
He says commercial development will definitely increase as land has been allocated around the airport for development and Ballito is starting to offer large tracts of land for commercial use. “This, in turn, will increase demand for more residential property. The future for this area in the medium to long term is exceptional.” – Eugene Brink
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