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6 February 2014

Policy on Joburg suburban booms approved
IolProperty - South Africa
Joburg motorists visiting suburbs with boomed off areas can no longer be forced to sign in or identify themselves before entering public roads.

A new policy for road closures was approved by the City of Joburg last week. The policy becomes effective within 30 days. Residents of suburbs, particularly in wealthy areas, began closing off public roads with boom gates in 2001 following increasing incidents of crime.

An initial policy was formulated in 2003 but was never approved. Instead, the Johannesburg Roads Agency (JRA) dealt with applications on a case-bycase basis. According to the new policy: No electronic devices such as remote controls may be used.
IolProperty

TPN statistics support the logic of buy-to-let investments
Rawson - South Africa
Recent reports from TPN (Tenant Profile Network) on the residential rental market help to explain why buy-to-let purchases have increased so significantly over the last year, says Bill Rawson, Chairman of the Rawson Property Group.

“Summing up the TPN data,” said Rawson, “one fact becomes clear: investing in property for renting is not high risk. The typical South African tenant is a fairly reliable payer – and the risk is minimised by good tenant selection.”

The TPN report shows that in mid-2013 71% of South Africa’s tenants paid on time, 4% paid within the usual extra time allowed and 8% paid late. Another 11% paid, but not in full – and 6% did not pay at all, at least until coerced by legal or other action and/or the threat of eviction.

Reviewing these figures, Absa’s home loans division in their 2013 fourth quarter report, said Rawson, also mention that residential rental inflation did not rise significantly over 2013: it, in fact, averaged only 4,2% year-on-year for homes and 5,4% year-on-year for townhouses and flats — but, said Rawson, shrewd investors are achieving far better returns.
Rawson

Overzealous office development activity in Sandton a cause for concern
Rode - South Africa
Stalled by low levels of business confidence and weak growth in employment, strong growth in the demand for office space to rent has in recent years not been forthcoming. The result of this has been office vacancy rates that were unable to decline and market rentals that showed meagre growth. Despite this, committed new office developments have on a national decentralized basis showed growth of about 17% p.a. over the past three years. The sideways and slightly upward trend in decentralized office vacancy rates since 2010 — see first chart — was therefore not only attributable to a lack of demand but also to the strong upward trend in committed new supply.

The cause for concern comes from the fact that more space is expected to come on stream in the near future. For all the office nodes surveyed by SAPOA, committed new developments amounted to 752.000 m² in the fourth quarter of 2013. Of this, about 54% of the space was still unlet at the time. A look at Sandton — the country’s largest decentralized office node — shows that it might soon also be awash with new office space. Besides Sandton being the country’s financial hub, another explanation for its popularity among developers is its Gautrain station. According to SAPOA, roughly180.000 m² of new space — of which roughly 76% was, during fourth quarter of 2013, still unlet — is in the pipeline for Sandton. When considering this together with the fact that vacancy rates for existing buildings in Sandton are on the rise — see second chart — then a red flag has to be raised as to whether the new space will be absorbed easily. As the chart shows, vacancy rates for existing office buildings in Sandton have been edging north since the fourth quarter of 2012.
Rode

Property Barometer - January 2014
FNB - South Africa
January 2014 House Price Index grew slightly slower than December, but that has nothing to do with January’s surprise interest rate hike yet.
We do not attach much significance to the slight slower in the January year-on-year house price growth rate yet, in the sense that we do not believe that the market was yet weakening in January. Rather, we were of the opinion at that stage that the market was still gathering broad momentum, and that 2014 would possibly see a further mild acceleration in house price inflation.

Indeed, if we were to look to growth in transfer duty revenues as an up to date indicator of property market activity, the 42.46% year-on-year growth rate for December does point to a very strong end to 2013. Couple to this reports of mounting residential supply constraints, as reported in both our FNB Estate Agent and FNB Valuer Surveys, and one appeared to have the recipe for stronger house price growth to come in 2014, in spite of an economy whose growth has been pedestrian at best in recent times. However, our expectations for further mild improvement in 2014 were based on the all-important assumption that interest rates would not rise until early-2015, or perhaps at earliest very late in 2014.
Property Barometer - Jan 2014

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