Property 24/10 - 172

South Africa's land reform challenges
Land reform in South Africa needs to be addressed, but it shouldn’t come at the cost of food security or by breaking up economically efficient enterprises. So says the South African Property Owners Association (Sapoa), whose members comprise 90 percent of the commercial property sector in South Africa.

Neil Gopal Sapoa chief executive officer says South Africa needs a robust and balanced debate around land reform.

The fact that only 13 percent of land in South Africa is owned by black people must be addressed, he points out.

Gopal says only visionary policies and laws will effectively address the societal, economic and political effects of the 1913 Natives Land Act.

But, changing land ownership rights in South Africa also impacts the need to ensure food security.

“South Africa must adopt a process to increase land ownership by the formerly disenfranchised that continues to support food security with effective agricultural structures,” says Gopal.

Investment seminars in CT and Joburg
SA Real Estate Investor Magazine will be hosting Donald Trump Jnr. star of the Apprentice as keynote speaker via live streaming in their upcoming Wealth MasterClass investment seminars in Cape Town on 5 September and 10 September in Johannesburg.

Here's your chance to be inspired and network with some of SA’s and the world’s wealthiest and most successful property investors, businessman and celebrities, says Neale Petersen, CEO and Publisher at Real Estate Media and of the Real Estate Investor.

Speakers also include international property investment guru Dr. Dolf de Roos, world scenario strategist Clem Sunter, world’s no.1 real estate coach JT Foxx, SA Billionaire businessman Jannie Mouton, Billionaire property fund tycoon Sisa Ngebulana, plus Lewis Pugh’s personal coach David Becker among others.

Buying into a gated community
Gated communities have become the accepted and often desired form of homeownership, with buyers increasingly prepared to pay the premiums associated with living behind guarded security or access-controlled gates.

Consequently, gated residential communities and garden apartments are the types of developments that are most likely to come onto the market. While composite South African figures are not as easily at hand, US statistics show that these types of properties have grown from only 2 000 in the 1970s to more than 50 000 by the new millennium. That equates to around six percent of the country's households living behind walls or fences with about half of them in communities where access is controlled by gates, entry codes, key cards or security guards.

In essence, gated communities have several common elements. Gates and fences provide the perception of security, safety and privacy, however, in affluent neighbourhoods; privacy means exclusivity and thus higher property values. Adding weight to the argument is the fact that an automatic gate system or private security access boosts the property value regardless of whether or not it actually impacts on crime in that area.

The duties of a property manager
As the buy-to-let market starts to pick up so does the debate of whether to self-manage or pay a managing agent to ensure a steady income stream.

The debate is particularly relevant in harder economic times, where some owners are reluctant to pay a monthly fee for management.

However, many new owners underestimate the time and effort it takes to ensure a good return from a property and the skills required, says Cassandra Hailstone, Business Development Executive at Trafalgar Property Management.

She says the key to a successful property investment is proactive management, which goes further than just collecting the rent.

It centres on the quality of the tenant and the standard of the unit being marketed. Potential tenants scrutinise the unit as well as the building itself before signing an offer to lease. So if you want to make a good income from your property, Hailstone says it has to be well maintained.

Traffic changes and property value
With the densification that the City of Cape Town is working towards in the greater Cape Town area, and the likely increase in traffic flow that will come about as a result - is there likely to be a negative impact on property values or the lifestyle in certain areas?

"The infrastructure of the roads in many areas in Cape Town is relatively small and often roads are quite narrow, so it makes sense in some cases to redirect traffic flows and change roads to one-way traffic to alleviate the drastic increase, " says Lanice Steward, managing director of Knight Frank Anne Porter.

But would this impact on the value of property negatively or positively?

Steward says the initial perception would possibly be negative but the reality is that it is likely to have a positive impact, as in cases where homes which are in cul de sacs, with little or no traffic, are often more in demand than those on open roads.

How to keep a good tenant
Most landlords agree that although it is vital to be super-careful when selecting a tenant, it is just as important to do what is necessary to keep a good tenant who pays on time and takes good care of your property.

Berry Everitt, MD of the Chas Everitt International property group says the best way to do that is to keep the rent at the correct level as market conditions and rental property demand patterns change.

He says frequent tenant changes are time-consuming and costly in terms of advertising, cleaning and painting expenses, and perhaps vacancy time, but for tenants to stay, they have to be satisfied that they are getting a fair deal.

“Obviously, the income or budget of the tenant will be the primary driver of the decision about where and what to rent. Most tenants have limited funds and, depending on their different life stages, they will also have different needs to meet with those funds.”

House prices overpriced by 20 percent
While some estate agents report house price increase in some areas, others are of the opinion that residential property in South Africa is 20 percent overvalued.

According to property economist, Erwin Rode, home prices are overpriced by 20 percent because in real terms, house prices haven’t been growing either.

Last year, Rode said house prices are 25 percent overvalued with no vigorous growth expected. You can also read Are SA house prices really overvalued? and House price growth in South Africa.

He says houses are more sensitive to interest rates than commercial and industrial properties. Looking at the medium-term prospects for house prices, Rode says growth over the next five years will be below inflation because of various reasons.

Firstly, he says in real terms, house prices are very high, townhouse property developers are active once again (as high prices still make new developments viable) and consumers are still under financial stress.

Buyers beware asbestos roofs
When buying a home today, it is essential to be aware of houses that have asbestos roofs.

There is now conclusive evidence that asbestos roofs and partitions can deteriorate, especially if they have not been regularly painted. They then release microscopic fibres into the atmosphere which can cause lung damage, especially if homeowners are already ill. For this reason, Bill Rawson, Chairman of the Rawson Property Group, says it is highly likely that within five to ten years, buyers will simply refuse to buy any house with an asbestos roof.

He says the remedy, of course, is to replace the roof with one made-up of environmentally safe material such as tiles, thatch or IVR sheeting. The fact that this will almost certainly be necessary might be used to negotiate a more favourable sales price, he says.

“While it is generally acknowledged that the phase out of asbestos is a good move and is long overdue, it also has to be accepted that asbestos removal can only be done by a trained and qualified contractor whose labourers have been clothed in special protective suits, which not only enclose the body but the entire face as well.”

Avoid being exploited by builders
Fraud and misrepresentation is rife among ‘bakkie builders’ operating in the South African home extension and renovation industry.

This is according to John Graham, CEO of HouseCheck, who says seldom does one hear of a home alteration being finalised without an unpleasant and often costly fight between the homeowner and the builder.

Many home buyers want to alter, extend or renovate their new homes and that is where expensive mistakes, stress and conflict can easily occur. Graham says usually, both the builder and the homeowner are jointly to blame for this unsatisfactory state of affairs.

He says more often than not, the deal was concluded with a brief one-page quote from the contractor and a handshake. There is no properly drawn, detailed and legally binding written contract, schedule of works or bill of quantities.

The homeowner who has a tight budget wants to get everything done as cheaply as possible and the builder who is desperate for the work becomes quite creative in his vague promises and undertakings.

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