Property 24/10 - 168

To show or not to show your property
In today’s fast moving, tech-savvy property market, many real estate professionals feel that show days are just not as effective as they once were, says Dieter Harck, broker/owner of RE/MAX One Hundred, in Fourways Johannesburg.

He notes that while the topic is rather controversial with some agents adamant that show days are still the number one way to successfully market a property, others feel that the success rate of show days has been marginal and the security risks are just too great.

“There are definitely positive and negative aspects to having a show day,” says Harck.

Some advantages to having a show day are visibility and accessibility. Show days can also save both the agent and seller time as a number of potential buyers can view the property within the same day, he explains.

The fact is that irrespective of the brand or advertising, many buyers will visit a show house in order to see for themselves what it has to offer.

A show day also offers buyers the chance to interact with the agent and perhaps be put onto their database or make appointments to see other homes within their portfolio of stock.

The risks of unapproved building plans
Estate agents and home buyers should be aware of the perils of buying a property where alterations and additions have not been approved by the local municipality.

This is according to Bill Rawson of the Rawson Property Group who says private once-off sellers are not governed by the Consumer Protection Act (CPA) and are therefore entitled to sell their properties voetstoots, which effectively passes the risk of unapproved plans from the seller to the buyer on transfer.

The buyer of a voetstoots property would have to resort to expensive court action if the buyer wanted to claim damages from the seller.

However, Rawson says the situation is much trickier for estate agents who are governed by the CPA because they facilitate the sale of the property in the course of their normal business. He says agents could be held accountable for not educating and informing the seller and purchaser of the potential liability of not ensuring municipal building compliance.

Buying a second residential property
Historically, no-one can dispute the statistics that property values increase over the long term and outperform many other forms of investments, says Craig Hutchison, chief executive officer of Engel & Völkers Southern Africa.

According to Sandy Reddy, head of origination at Engel & Völkers Financial Services, due to the current financial situation globally getting a second bond is challenging, but not impossible.

Reddy explains that second-property buyers must have at least a 10 percent deposit and when applying for this bond, will need to prove that their expenses do not exceed the legislated amount of the bond monthly repayment.

The buy-to-let market is growing significantly as many young South Africans require housing and cannot afford to buy it themselves, says Reddy.

“Buy-to-let investors are more sophisticated today and they focus on buying an asset that produces a solid income stream rather than hoping just for property price appreciations,” points out Hutchison.

Selling property and wooing the market
There can be few people who doubt the residential property market currently favours buyers and that sellers, faced with extensive competition from alternative options, must do everything possible to present their homes in the most appealing fashion.

A sound way of determining if your house is market-ready is to ask yourself: would you buy your own home? It is a question requiring honesty, best answered through an objective analysis of its best and worst features.

If being objective is difficult, get input from someone else who will be honest, since honesty is how to determine a realistic selling date and achievable price. Sellers generally do not see their homes with the same eyes as prospective buyers - broken windows, peeling paintwork, missing roof tiles, sagging gates and mould in the shower tend to become common place.

Yet, they are detractors that will stand out a mile to buyers who will either be put off the property completely or use those issues to justify a low offer.

Ekurhuleni to minimise court cases
The Ekurhuleni Metropolitan Municipality is forging closer relations with the legal fraternity in a move to pursue the route of dispute resolution options instead of court cases.

The Executive Mayor of Ekurhuleni Clr Mondli Gungubele recently met with the legal practitioners from different organisations, including the Public Protector, Socio-Economic Right Institute of South Africa (SERI), Human Rights Commission; Wits School of law, among others to explore cost effective ways of settling legal battles.

“We have come to appreciate that we are not enemies with offices such the Public Protector as we share the common objective of the betterment of the community.

“When you got to court, it takes resources and we are here to say on issues of common interest, let’s sit down and talk,” said Gungubele.

Central to the issue concerning the municipality and the legal fraternity is the evictions, issuing of title deeds in terms of succession and execution of the estate of the deceased, among others.

These disputes which often escalate into court cases can in many incidences be prevented by ensuring a healthy relationship between the municipality and legal fraternity exist.

Listed funds investors beware of REITS
Much has been said about the benefits of the new Real Estate Investment Trust (REIT) structure which has become available to the South African property sector.

Aimed at aligning the South African listed property sector with our international counterparts, REITs may create a more attractive investment structure, significantly enhancing international interest, while at the same time bringing about much-needed tax and regulatory changes that local property structures could certainly benefit from in the long term.

Grant Alexander, director of Private Client Holdings, warns that REITs might not offer investors as much as hoped and advises that real estate as an asset class holds several pitfalls which South African investors must be aware of.

The arguments in favour of listed property include diversification with strong, predictable returns when equities are weak, good yields compared to cash, benefits afforded in a low interest rate environment and being a good inflation hedge.

However, there are many arguments against listed property, says Alexander.

Credit records, home loans and rates
The Reserve Bank of South Africa left the repo rate unchanged at 5 percent with prime interest rates at 8.5 percent.

Adrian Goslett, chief executive officer of RE/MAX of Southern Africa notes that the interest rate was cut by 50 basis points from 9 percent to 8.5 percent in July 2012.

For many consumers, a low interest rate environment is an opportunity to pay off debt and get financially fit to deal with the ever-increasing cost of living.

“While homeowners with fixed interest rates will be less affected by the fluctuation of the rates over the term of their loan, those without fixed rates have experienced a decrease in their monthly repayments since the property boom.”

He says ideally, homeowners who have experienced a cut in their repayments should take advantage of the current rates and pay the extra money into their bond.

“An increased payment will reduce the term of the loan and pay it off faster, without affecting a homeowner’s monthly budget too severely,” says Goslett.

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