Property 24/10 - 228

Inflation expected to drop below 6%
South African consumers can breathe a sigh of relief as the cost of living is likely to drop to moderate levels. Finance Minister Nhlanhla Nene has projected the Consumer Price Index (CPI) to drop to 5.8% in 2015, which is within the 3-6% target band. But the forecast inflation could change negatively should the rand depreciate any further.

The Minister made the announcement when he tabled the National Treasury’s Medium Term Budget Policy Statement (MTBPS) in the National Assembly on Wednesday afternoon. “Over the period ahead, food inflation is expected to recede from current levels thanks to buoyant global and domestic production.

Signboards an effective marketing tool
A lot has changed in the property market over the last decade in terms of the way in which business is concluded - especially with more and more buyers gaining access to the internet. The internet has become one of the main advertising tools for real estate, due to it being a fast and effective way to reach a number of buyers in a short time period.

This is according to Adrian Goslett, CEO of RE/MAX of Southern Africa, who says for many potential buyers the internet provides easy access to a great volume of information with little effort. “There is also the fact that many buyers resist spending time driving around looking for properties when they could search for properties on the internet from the comfort of their current home or office instead.

Positive growth in property prices
Statistics for the third quarter of 2014 released by ooba, South Africa’s largest bond originator, show continued year-on-year growth in property prices. The quarterly oobarometer is compiled every three months, using data sourced from all home loan applications processed by ooba nationally.

The Average Purchase Price recorded by ooba in Q3 2014 was R967 009, which is an increase of 7.3% on Q3 2013 and is also up by 1.7% on Q2 2014. “Despite sluggish economic conditions and the upward pressure on interest rates and inflation, the property market remains resilient with consistent property price growth recorded in the past 18 months,” says Rhys Dyer, ooba CEO.

Average house prices in the first-time buyer segment for Q3 2014 have risen to R746 627, an increase of 8.2% on Q3 2013 and an increase of 1.2% on Q2 2014. “First-time buyers are a key driver of the property market with 53.7% of all our applications received in Q3 2014 coming from this segment, compared to 52.7% in Q3 2013 and 53.3% in Q2 2014,” says Dyer.

Challenges in affordable housing
While there has been an increase in the volume of land coming on stream for affordable housing developments over the last few years, there are a number of challenges that need to be overcome in order to sustain this trend.

According to Rocco De Kock, director of Valumax Group, one of these challenges relates to the often protracted procurement processes involved in obtaining government owned land, making it vital to identify and deploy mechanisms to assist in accelerating the sale of land.

“Such mechanisms need to consider streamlining supply chain requirements as the existing system can make it difficult for officials to award projects or tenders. Key to improving this is simplifying tender or decision making processes.”

He says another challenge is that privately owned land that is made available for affordable housing developments is becoming more difficult to obtain, as the price of land continues to increase. “As a result, developers have to resort to structured deals which are not always attractive for landowners.”

New SA retail property certifications
Thanks to a collaboration agreement with the International Council of Shopping Centres (ICSC), the South African Council of Shopping Centres (SACSC) is promoting and facilitating the ICSC’s internationally recognised certifications to South African professionals.

“The landmark agreement opens up a whole new world of opportunity for our members. Through our partnership with the ICSC, we’ve been able to explore our full education offering, identify certifications that will add real value to our members and make them available locally,” says Amanda Stops, CEO of the SACSC.

She points out that ICSC is active in over 100 countries, making its internationally accredited education programmes truly global qualifications.

Founded in 1957, ICSC is the premier global trade association of the shopping centre industry. Its more than 63 000 members in over 100 countries include shopping centre owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. As the global industry trade association, ICSC links with more than 25 national and regional shopping centre councils throughout the world, including the SACSC.

Maximise your property investment
Property is a tangible, well-respected asset class, but as is the case with all investments, the key to maximising profits is buying well and then ensuring that you sell well.

This is according to Carol Reynolds, Pam Golding Properties area principal in Durban, Durban North and La Lucia, who says some investors maintain the philosophy that you simply shouldn’t sell property, and their method of operation is to collect and build an asset base without having to offload.

“This is however, ultimately a luxury that only the wealthy can enjoy. For the most part, the average investor will have a dynamic property portfolio involving both buying and selling, with the ultimate goal of generating wealth.

“As a starting point, investors should ensure they buy well, make a sound acquisition achieving good value in a good area, so that at any given time, if they need to offload they will be able to do so at a profit. To this end, area is critical and it is better to find a property that has not yet reached its full potential.

Loans for sectional title schemes
The recent announcement by the City of Johannesburg that it intends charging retrospective security deposits for electricity and water supply equating to about two months’ usage per meter has once again highlighted the issue of how sectional title schemes are supposed to deal with sudden large demands on their financial resources.

Andrew Schaefer, MD of Trafalgar, says in this instance, they foresee that many sectional title schemes will have problems in trying to collect the backdated deposits from owners and pay them over to the council in time to avoid the disconnection of services.

He says there are few sectional title schemes that have the reserve funds to cope with a really large unexpected expense, and if that expense relates to an urgent repair, for example, or a sudden demand for payment, there may not be time to raise and collect a special levy without incurring penalties or inflation-related cost increases.

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