Property 24/10 - 244

Unlisted property could enjoy REIT status
South Africa’s commercial real estate sector welcomed the announcement by Minister of Finance, Nhlanhla Nene, in his budget speech that National Treasury is supporting and working towards extending South Africa’s REIT (Real Estate Investment Trust) dispensation to unlisted property-owning companies.

This is according to Estienne de Klerk, the South African REIT Association’s Taxation and Regulation Committee Chairman, who says impacting every man in the street through their pension savings, there are billions of rands of property investments in South Africa’s unlisted property vehicles that could be impacted by the REIT dispensation which, if extended to the unlisted property sector, will prevent tax leakage from pension and savings vehicles.

GBCSA calls for greater energy efficiency
Greater energy efficiency is now crucial for both business and ordinary citizens according to Brian Wilkinson, Chief Executive of the Green Building Council of South Africa (GBCSA), who says this is necessary in the face of further electricity hikes which have been proposed in the 2015 Budget.

He says in his Budget Speech, Finance Minister Nhlanhla Nene not only announced an increase in the electricity levy, but more importantly, indicated that in order to stabilise its financial position, Eskom will apply to NERSA for adjustments towards cost-reflective tariffs.

“We all know that with the increased dependency on the peaking plants to handle the pressures on the grid, Eskom’s cost of generation has skyrocketed. The minister’s indication is, we believe, a clear sign that we will shortly see a significant increase in the cost of electricity.”

Investing in student accommodation
As long as higher learning institutions and universities exist, there will be a need for student accommodation, making it a feasible investment opportunity for those with the available capital according to James Bowling, CEO of Monarch & Co, who says with a consistent annual influx of student tenants flocking to areas surrounding tertiary institutions, and on-campus accommodation filling up almost immediately, the need for privately owned off-campus student housing has grown massively over the past few years.

While local student accommodation investment opportunities do still exist in South Africa, many investors have already bought the majority of the accommodation within proximity to universities.

However, Bowling says countries such as the United States and the United Kingdom have made it possible for foreign investors to take advantage of their recovering housing markets through the purchase of student accommodation.

Can trustees cut my electricity supply?
In many sectional title schemes there is an ongoing problem of short payment or non-payment of levies, and it sometimes happens that the trustees decide to take matters into their own hands by disconnecting the electricity supply to the unit inhabited by the non-payer. This, however, is illegal if they have done so without a court order authorising this, says Michael Bauer, general manager of the property management company IHFM.

In South Africa, legislation is clear in that shutting off services such as electricity without a statutory right to do so is an offence.

The supply of electricity is governed by the Electricity Regulation Act 4 of 2006 and section 22 deals with the powers of the licensee. Only the holder of the licence which is granted by the Regulator is allowed to disconnect the electricity supply to a unit, and this must be for non-payment of the electricity, not for any other outstanding amounts, says Bauer.

Should you sell your property privately?
Your property should be one of your biggest assets, and some people may want to explore the route of selling their homes privately, as opposed to using an estate agent. However, selling a house isn't a simple process, and you need to make sure that you do your homework thoroughly according to Calvin Ndlovu, Head of Operations at FNB Home Loans, who says when it comes to selling your home, the most common course would be to assign an estate agent.

He says it is possible to sell your home privately, but you need to be careful to ensure that you don’t lose money in the long run.

Ndlovu shares the main issues to keep in mind when selling your own property:

Beware buying abroad for tax benefits
There are many benefits to investing in a residency or citizenship by investment programme: lifestyle, financial, investment, more business opportunities and freedom of travel with fewer if any visa requirements. However, a change in tax domicile is not always a benefit according to James Bowling, CEO of Monarch&Co, who says it only benefits an investor if they have moved their tax residence to the new country of residency, provided that the new tax jurisdiction is more beneficial by offering a lower rate of taxation than their current jurisdiction.

So just how does a residency or citizenship programme benefit the investor in terms of them being within a new tax jurisdiction?

Why buyers must have home insurance
When you buy a new home, the bank will usually insist that you obtain a homeowners’ insurance (HOC) policy to provide for the replacement of a property that has been damaged or destroyed by fire, flood, high wind, earthquake or other disaster according to Shaun Rademeyer, CEO of BetterBond Home Loans, who says such policies often also provide insurance against less serious damage resulting from burst geysers, falling trees and collapsing garden walls.

They are most useful for giving you peace of mind, as a borrower, that you will not end up having to pay off a home loan on a property that has been destroyed while also trying to pay for your home to be rebuilt.

Rademeyer says, however, most lenders will be less insistent that you take out life insurance to cover the outstanding balance of your home loan and pay it off in the event of your death. Also known as bond insurance, this can make all the difference to your family at that time by enabling them to stay on in a home that is fully paid off, and you should thus consider it very seriously.

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