Budget 2014 not property-friendly
Finance Minister Pravin Gordhan was walking an "election tightrope"' when he presented the Budget yesterday and has done well to keep his balance, says Lew Geffen, chairman of Sotheby’s International Realty in SA.
“Particularly welcome, from the macro-economic point of view, was his decision not to raise the tax rate for the country’s highest earners from 40 to the 42 percent or even 45 percent that some commentators had predicted.”
Geffen says this type of wealth tax, similar to that recently imposed in the UK and some European countries, is of course an easy answer for governments that urgently need to raise revenues to please poor voters who are clamouring for service delivery.
However, the notes the Minister has realised that it is also a trap, because it generally offers only a very short-term advantage, followed by a long and often permanent drop in revenues.
Property challenges and opportunities
In 2014, as was the case in 2013, the fortunes of the South African property markets will once again be inextricably linked with the country’s economy and other markets which means in the interim, local property will not enjoy the same uptick that’s becoming apparent in some global property sectors.
While the current Rand weakness could have translated into massive opportunities for SA’s economy to benefit from export, the ongoing production challenges faced by a number of industries means that the country remains largely unable to leverage those opportunities to sustainably improve its economic position.
On the positive side, however, despite a very challenging 2013, Nedbank Corporate Property Finance (CPF) enjoyed a consistently strong performance characterised by a number of excellent financing opportunities – and 2014 should offer similar opportunities.
Understanding CPI inflation & rates
The calculation of CPI inflation is of crucial importance for South Africans, as it determines the outcome of inflation and so the decision to change interest rates at the Reserve Bank.
CPI inflation, or consumer price inflation, is the measure targeted by the South African Reserve Bank, and as such it is the survey method, choice of items included and weighting of the prices consumers face at the tills that count.
Administered price inflation, or state controlled inflation, has seen a heady increase of 64.6 percent since the start of 2009 compared to the 29.5 percent increase in the overall CPI inflation rate in the same period.
Sapoa welcomes Public Works decision
The South African Property Owners Association (Sapoa) has expressed its support for the Department of Public Works' decision to seize misappropriated state properties.
Sapoa chief executive officer Neil Gopal says the department’s decision to take a tougher stance on misappropriated land is a positive move that will work to the benefit of all stakeholders and the country’s commercial property sector in general.
“It sends a strong message that South Africa takes property ownership rights seriously,” says Gopal.
The move comes on the back of the second phase of the state’s immovable asset audit, in which government aim to identify the occupiers of missing state land.
Deputy Minister of Public Works, Jeremy Cronin, has said that some of the missing land includes state assets that were illegally transferred to individuals and state officials for private gain.
Estate agency auctioneers in SA
The South African auction world picked up a ‘regrettable’ image in 2011 as a result of bogus cover bids and too close, often corruption relationships between liquidators, attorneys and others handling distressed sales.
This is according to Tony Clarke, Managing Director of the Rawson Property Group who says since then the auctioneers’ governing body has done a great deal to put matters right and there are now disciplines under which auctioneers operate, which are stricter and well applied.
The arrival on the scene of estate agency auction companies has also definitely helped to improve the sector’s image, he says.
The traditional forms of auction, says Clarke, i.e. those run by an independent auction house, have tended to concentrate on deceased estates, commercial and repossessed properties and the perception that the ordinary seller had, therefore, was that they had little to offer him.
How to find the right tenant
When it comes to finding the right tenant, there are some important considerations to take into account when deciding on the type of mandate to give your rental agent.
Michelle Dickens, managing director of Tenant Profile Network (TPN), explains that there are some serious shortcomings to consider when issuing an open mandate, as opposed to a sole mandate.
Many property owners and landlords choose to approach a variety of different agencies with their request to place a suitable tenant in their property. This is known as an open mandate. she says landlords assume that normally this method will be beneficial because it creates healthy competition between agents, and the landlord would then be able to take their pick from a set of highly considered options.
However, she says the high demand for rental stock right now means that it doesn’t take long to rent a property – there are a plethora of prospective tenants on the market. The result being that most agents only earn a commission on placements they secure, she explains.
HOA VAT registration changes welcomed
When it comes to VAT registration and liability, up until now bodies corporate have been exempt from VAT and HOAs have had to register for VAT if the threshold was exceeded.
The background and logic to this was that, in sectional title schemes, which are run by bodies corporate, the aggregated rates, electricity and water accounts were paid on behalf of the owners and then recovered from the owners via their levy payments.
Imposing VAT on a body corporate, therefore, would effectively mean that a double layer for these amounts was created, says Michael Bauer, general manager of the property management company IHFM.
HOAs had no historical need to pay municipal accounts on behalf of the owners, because all the owners are billed directly and so were never exempt from VAT.