Property 24/10 - 11

Buying property: There are 4 ways
There are four main ways that you can buy and own property in South Africa, and the decision on the appropriate entity for the acquisition of immovable property is not a decision to be taken lightly.

So says Peter Gilmour, chairman of RE/MAX of Southern Africa, who adds that South African law recognises two different types of "persons" - natural persons and juristic persons. "Natural persons are people who act and conduct business in their own name. Juristic persons are legal entities, such as close corporations (CCs), companies and trusts."

Andrew Heiberg, a director and joint regional head of the real estate practice at the law firm, DLA Cliffe Dekker Hofmeyr in Cape Town, says there are different tax and legal implications that apply, depending on the investment structure that you use when buying property, and as such, it is highly advisable to consult with an attorney to find out which option is best for your particular needs.

Mixed fortunes for commercial property
Although commercial property have weathered the recessionary storm quite well, it has had mixed fortunes over the last year.

The South African Property Owners Association's (SAPOA) South African Property Market Trends Report 2010 showed South African commercial property returns have declined for the second consecutive year, but that it produced a marginally positive capital growth in a market with weakened fundamentals.

But compared to other markets, SA may emerge from the global downturn slightly battered but fairly unscathed due to a nascent turnaround in economic conditions and business confidence.

Fixing rate can't 'beat the market'
Fixed rates on home loans should not be seen as a way to "beat the market".

So says John Loos, property economist at FNB, who sheds further light on the fixing debate. He says they should be seen as a service provided by banks which enables the client to, for a certain period, shift the cash-flow risk involved with fluctuating rates onto the bank.

"The bank assumes and manages the interest rate risk, and the client obtains certainty over interest rate payment cash flows. In return for this benefit, the customer can expect to pay some price. Should average floating rates over the period in question never rise to the level of the fixed interest rate for the period, then the client may have been better off leaving his/her interest rate to float. This is with hindsight of course, and ignoring the fact that uncertainty can cause stress.

"Conversely, if the SARB shocks us with sharp interest rate hiking, and the average floating rate over the period is significantly higher than the average fixed rate, then the client will thank his lucky stars should he have fixed his interest rate at the beginning of the period.

WC building industry changing
The demographics of the Western Cape building industry are shifting with the definite growth of an emerging sector.

Not only is the industry growing its number of smaller traders, but the building industry is also seeing a significant growth in the previously disadvantage areas, in particular the predominantly "black" zones.

The Bargaining Council for the Building Industry (BIBC) has released figures showing that new registrations within the Black and PDI areas is up to over 32% of overall registrations within the industry. "2009 showed the biggest percentage of new black employers registration ever at over 32%, a significant jump compared to just 13% in 2006," says Henry Strydom, secretary for Building Industry Bargaining Council (Cape of Good Hope).

Buyers often mum on affordability
With buyers rarely keen to disclose their financial positions, one of the biggest challenges for agents in property deals is to probe exactly how much a prospective buyer can afford to buy for.

"It can take years of experience to learn to recognise the three types of buyers - those who may go higher than their declared upper limit, those who will have to go lower and, of course, those who have made up their minds to spend a certain amount and no more - despite the fact that they can afford to," said Anton du Plessis, CEO of Vineyard Estates.

One of the golden rules in these matters, he said, is not to ask the buyer what he can afford when he is within earshot of other people: for example, at a show house.

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