Property 24/10 - 155

9 May 2013

Right pricing vital in buyer's market
 The historically low interest rate combined with subdued demand has brought about the ideal buying market conditions.  This is according to Tony Ketcher, managing director of Seeff Randburg, who says while there is an increased willingness to buy, buyers are aware of price and market value.

Despite pockets of excellence in terms of demand, sellers are facing fierce competition. Right pricing from the outset is vital for those who hope to conclude a successful sale. Listing your home at an unrealistic price will see the property sit on the market for an inordinate period of time and you may end up having to cut your price if you need to sell, something that sends the wrong message to buyers.

Unfortunately, uninformed sellers are often swayed by low commission offers and the promise of a high sales price. Despite the fact that there is healthy demand, especially in the sub R2 million price band, Seeff agents are continuously called by desperate sellers whose properties have been sitting on the market without success. Ketcher says this highlights the role of a credible real estate agent that has a strong track record, is active in the market and who knows what is in demand and how much buyers are prepared to pay.

Battling to pay rent? Read this!
Defaulting on rent payments has ‘regrettably’ become more common this year, says Bill Rawson, chairman of the Rawson Property Group. This statement was confirmed recently by figures from TPN, which show that only 72 percent of South African tenants are in good standing with their landlords and 18 percent are now either paying late or defaulting altogether.

When a tenant finds himself struggling to meet his monthly rental payments, says Rawson, all too often he goes into denial on this subject, does not talk to his agent or landlord and ends up in a very tight position where no one benefits.

“The first point to be grasped is that if you have a good or even a reasonably good tenant, it usually pays to hold onto him rather than to risk looking around for a replacement that may not be as reliable or as satisfactory. 

"You have, therefore, to get across to your struggling tenant that, although he may now be in difficulties, disaster is not inevitable provided he plays open cards with you.”

Commercial property fundamentals good
In a staunchly competitive commercial leasing market, helping businesses manage cash flow is a key factor in attracting and retaining tenants for a well-managed property portfolio.  Emira Property Fund chief executive officer James Templeton says the aggressive leasing campaigns witnessed in the commercial property arena are a function of the market.

Templeton reports that Emira is achieving improved leasing metrics with 92.8 percent of its portfolio occupied from 92.2 percent in December 2012 and more than 37 percent of its leases expiring in 2016 and beyond.

In the second half of 2012 alone Emira secured leases with top-notch tenants accounting for some 135 000 square metres of commercial space. These leases have an average period of five years.

“Tightly managed leasing is a priority for listed property entities because leases provide certainty of income and are an indicator of what investors can expect from future investment performance.”

Tips on property investing currently
As recovery in both the housing market and the economy move from strength to strength, real estate is once again becoming a popular investment strategy and this is for a good reason, says Adrian Goslett, chief executive officer of RE/MAX of Southern Africa.  Real estate investment has always provided a long-term vehicle for investors looking for a financially secure investment options that can provide a cornerstone for wealth creation.

Property can often ensure a return on investment that other investment strategies simply can’t, provided that the standard property buying principles are adhered to, he explains.  

Goslett says for those with access to finance, property investment is fairly easy to get into, however, it is advisable for investors to do research and put the time into learning about the property market to help them avoid making unnecessary, and often costly, mistakes.

Goslett offers a few tips to assist with successful property investment: 

Select the right property

The first step to ensuring that you are making a good real estate investment is selecting the right property.

Unpacking the Tax Administration Act
The Tax Administration Act (TAA) was signed into legislation by President Jacob Zuma in December 2012, and its introduction has precipitated the most significant shifts to the tax regime since democracy in South Africa.  This important piece of legislation will be the central focus of the National Tax Conference which takes place on 15 to 17 May at the Sandton Convention Centre in Johannesburg.

 Hosted by the South African Institute of Tax Practitioners (SAIT), the conference will present delegates with an overview of the entire TAA and its far reaching implications for the tax professional and payer alike.

“The 22 strong speaker panel comprises a cast of the brightest minds, assembled from leading auditing companies, the law profession, academia and big industry,” remarks Stiaan Klue, chief executive of SAIT.

Delegates will enjoy over 20 hours of high quality content and unique opportunities to network with tax practitioners, lawyers, accountants, advisors and managers from throughout South Africa.

Positive indicators for rental market
Tentative signs of recovery in the rental market during the fourth quarter of 2012 are vindicated by a first quarter of largely positive indicators in 2013.  This is according to Louw Liebenberg, CEO of PayProp, the largest processor of rental payments for the residential letting industry, who says currently the national weighted average rental stands at R5 473 per month - up from a high of R5 384 in the previous quarter. Better yet, he says this figure was above R5 400 in all three months of Q1, solidifying the gains made after a worrying decline in the latter half of 2012. 

The results also show significant growth in the Northern Cape rental market. “The three month average increase of 13% in the Northern Cape is an extremely positive development and can be attributed to the increasing industrial development in the region, which in turn is creating a demand for accommodation in areas where rental stock is usually limited.”  

The Index indicates that Gauteng rental growth remains flat and the Eastern Cape decline that has been evident over the past year continues. 

The PayProp quarterly Rental Index uses the actual transactional data of 55 000 active rental properties. Other trends the Index has revealed in the first quarter of 2013 include an unexpected development showing a 9% increase in body corporate levies over the past year. “This is not only the highest auxiliary cost, currently averaging R764 per property, but also the fastest growing area,”  says Liebenberg. Also evident was the steady increase in the cost of water and electricity, rose by 10% over the past 12 months. 

Cape Town integrated zoning scheme
The City of Cape Town’s new integrated zoning scheme came into effect on 1 March 2013.  From this date, a single and common zoning scheme for the entire metropolitan area will replace the 27 zoning schemes applicable in various parts of the metropole up until this date, says Cheri Hughes, senior consultant at Pam Golding Lodges & Guesthouses.

She says from their experience, there has always been an element of uncertainty when it came to land use rights and it is the goal of this article to provide some clarity to guesthouse and bed and breakfast (B&B) owners with regards to the rules set out by the new zoning scheme.

For the purpose of this article we will only focus on guesthouses and B&B’s.

In our day-to-day conversations, the words guesthouse and B&B are often used interchangeable.

There is however, a significant difference between the two and knowing and understanding this difference is a key to understanding the rest of the zoning scheme and its applicability to your establishment, explains Hughes.

Financial security key in sect. title
Financial insecurity in sectional title schemes can be caused by various factors.  This is according to Johann le Roux, executive director of Propell, who says that once these factors have been identified, they should be dealt with swiftly to avoid problems.

The causes are usually in the budgeting and planning within the scheme, cash flow mismatches where the levies aren't high enough and the bills amount to more than what is coming in, unforeseen repairs to items such as lifts or roof repairs which can lead to high bills or levy arrears.

Le Roux says that all of the above have solutions and if the managing agent or the trustees have contingency plans in place, the sectional title scheme should not have any financial difficulties.

The different options are to have a reserve fund in place, to raise a special levy or apply for credit.

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