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Property 24/10 - 193

20 February 2014

Construction confidence at 5 year high
After increasing by 6 index points in 3Q2013, the FNB/BER construction confidence index rose a further 15 points to 66 in Q4 2013. This marks the highest level of the index since September 2008.

The current level of the index means that close to 7 out of 10 respondents were satisfied with prevailing business conditions during the fourth quarter.

All of the underlying indicators improved during the quarter. This is a clear sign that conditions in the construction sector are indeed getting better and most encouraging, however, was the rise in construction activity.

Construction work likely came from the following sources during the fourth quarter of 2013:

1. Capital expenditure (Capex) by the general government remains supportive of the construction industry. Provincial capex likely continued to increase, albeit at a modest pace.
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Sapoa supports urban development
The South African Property Owners’ Association (Sapoa) and the South African Cities Network (SACN) have signed a ground-breaking Memorandum of Understanding (MOU) to collaborate on issues of urban development and the promotion of good governance and city management.

Sapoa is the voice of the commercial and industrial property industry in SA and its members own and control approximately 90 percent of all commercial, retail, office and industrial property in South Africa making them some of the largest rates contributors to various municipalities in the country.

The SA Cities Network is a knowledge generation and dissemination member based organisation comprised of nine of South Africa's largest and most urbanised municipalities, and the South African Local Government Association.

In addition, the following national government departments that are primarily responsible for and impact directly on the built environment function are key strategic partners and members of the Governing Board of the SA Cities Network, these are the Departments of Co-operative Governance (COGTA), Human Settlements, Transport, and the Environmental Affairs.
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New property measurement standard
In January 2014, the International Property Measurement Standards Coalition (IPMSC) launched a public consultation on the new International Property Measurement Standard (IPMS) for office buildings.

The three month consultation, closing on 4 April 2014, is calling for real estate (office) sector practitioners and stakeholders to contribute to the new international standard.

The new standard, produced by the IPMSC Standards Setting Committee, is the first of its kind and will provide a common language for measuring offices across international markets, benefiting real estate practitioners including investors, lenders, agents, valuers and occupiers.

The international standard will ensure that property assets are measured in a consistent way, creating a more transparent marketplace, greater public trust, consistency in the reporting of property size, stronger investor confidence and increased market stability.
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SA and online property auctions
Online auctioning, which started surfacing in the US around 10 years ago, is slowly making its way across the shores to the African continent. This mode of selling goods and properties online in a live format allows live interaction and participation.

Joff van Reenen, Director and Lead Auctioneer of High Street Auctions, says take eBay as an example, this online auctioning site concludes more than 25 million auctions per day. He says South Africa is on-trend but we are still a few years away from this becoming a mainstream trend locally. One of the major reasons for this being South Africa’s infrastructure is still developing, so lines sometimes just aren’t fast enough for uninterrupted communication, he says.

According to the 2013 State of Broadband Report (released by the UN Broadband Commission), 41 percent of South Africans use the internet; this is slightly above the world average of 35.7 percent. However, internet access doesn’t necessarily translate to using the internet as a buying tool, especially if the item being sold is a big-ticket item such as property.
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Fixing rates on affordable property
Fixing interest rates is one way of creating a more stable monthly cash flow and can particularly benefit the affordable housing market.

“Fixing rates is ideal for people entering into the market for the first time and for those buying in the affordable housing range, which is up to R600 000,” says Marius Marais, chief executive officer of FNB Housing Finance.

Marais points out that 96 percent of their market comprise of first-time homeowners.

“Due to affordability issues, these customers generally gear their loan to the maximum in order to purchase an entry level house, which makes them the most vulnerable to changes in the interest rate.”

The recent prime rate of 8.5 percent has been the lowest interest rates have reached in the last 20 years. The highest was 25.5 percent, which was in 1996.
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Debt doesn't mean the end of the road
Debt is a scary four letter word, although the reality is that many have debt, good or bad.

Like losing weight which often is most people’s New Year resolutions, financial fitness should be top priority and the secret of getting ahead, says Lezanne Human, chief executive officer of FNB Savings and Investments, is finding the right balance.

She explains that incurring debt does not mean that you are financially unfit as many financial portfolios may include some level of debt at various stages.

“It is near impossible for the majority of South Africans to save up to buy a home or car without having to incur some form of debt,” says Human.
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