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Property Barometer - Reasons for selling homes
FNB - South Africa
An analysis of the various reasons for selling appears to confirm that we are still currently at a relatively strong stage of the property cycle, despite the 3rd Quarter Estate Agent Survey pointing to a slight decline in overall residential market activity levels.

This conclusion is drawn from grouping the various reasons for selling into what we perceive to be “Pro-Cyclical Reasons”, i.e. those categories that tend to increase in significance as the economic/property gathers momentum and vice versa in slowdowns , “Counter-Cyclical Reasons”, i.e. those categories that diminish in significance in better economic and market times and increase in prominence in weaker times, and “Non-Cyclical Reasons”, which have no obvious correlation with the economic/market cycle.

Using smoothed trendlines, we continue to see a broad rising trend in the Pro-Cyclical reasons for selling, which include Selling in order to downscale due to life stage, selling in order to upgrade, relocating within South Africa, and Selling in order to move closer to work or other amenities. Conversely, the Counter Cyclical component, which is solely selling in order to downscale due to financial pressure, remains on a broad declining trend.
Property Barometer Reasons for Selling Nov 2013

Property Barometer - House Price Index
FNB - South Africa
In conclusion. In a well balanced residential market propped up by a very unbalanced economy, “Fireworks” would be inappropriate

Very fragile economic pillars currently support South Africa’s residential property market. We do not believe that they can continue to do so indefinitely, and thus remain of the opinion that further real house price decline is “required” during the process in which the economy restores its big imbalances, and prior to the next major property super-cycle upswing.

There has been some talk of housing market bubbles forming in countries such as The US of late. As previously mentioned, it’s always tough to determine for sure whether “bubbles” are forming or whether markets are “overvalued” given economic fundamentals.

But as house price growth accelerates once more in South Africa, we should be on the look-out for any reemergence of “over-exuberant” behavior on a large scale, because such behavior can “end in tears” when slowdowns ultimately come. Domestic house prices remain high in real terms ever since last decade’s boom. Therefore, sharp price growth from current levels would arguably be inappropriate, and could be “misaligned” with what is a very weak domestic economy and a highly-indebted household sector.
Property Barometer October 2013 House Price Index

As many as 5% of signed Sales Agreements cancelled due to buyers or sellers finding loopholes
Rawson - South Africa
Any experienced property professional well versed in the Alienation of Land Act (which governs all South African property transactions) can without undue effort help a residential property seller or buyer to get out of 80% of the Agreements of Sale drawn up today by residential property practitioners, says Wayne Albutt, Regional Sales Manager for the Rawson Property Group in the Western Cape. When this happens, he says, it is always a severe blow to the estate agent’s morale and quite possibly to his financial position because he will have spent many hours preparing the property and the sellers for the marketing of their home. He or his agency will also have spent a considerable sum on advertising the property and will have worked hard to get prospective buyers to come for viewings, which often take place after hours. The estate agent will, of course, says Albutt, have been involved in explaining and clarifying the Agreement of Sale to the client in order to conform to current legislation.

The Alienation of Land Act, Albutt said, is by no means ‘reader friendly’ and even the best estate agents are not that familiar with it. Furthermore, since the introduction of the National Credit Act and the Consumer Protection Act, many pre-printed Agreement of Sale clauses have been modified in order to keep up with ever changing legislation.

Property Barometer - Estate Agent Survey by Segment
FNB - South Africa
It still remains a Lower End story when examining our survey results by income area segments

Therefore, when examining the FNB Estate Agent Survey by Income segment, we see the Middle and Lower Income segments’ agents being more upbeat on activity than the 2 segments further up the income/price ladder. After having shown some significant catch up through 2012 by especially the Upper Income segment, 2013 to date appears to have seen the gap in market fundamentals between the Lower and middle Income segments, on the one hand, and the 2 higher priced area segments widening once again, as activity level ratings slowed a little more noticeably in the Upper Income Area segment.

Indeed, not only in terms of activity levels but in terms of other market indicators, too, especially the Lower Income Area segment has shown a noticeable improvement. These improvements include a steady rise in “selling in order to upgrade”, the most impressive decline in “selling in order to downscale due to financial pressure” off a very high base since 2009, and a further decline in the average time on the market.

So, in short, the Lower Income Area segment appears to generally possess the most solid market fundamentals of the 4 income segments, followed closely by Middle Income Areas, although the Middle Income Areas have been rated very slightly better on activity than the Lower Income segment.

One must continue to sound the necessary cautions, however. The Lower Income segment can be more extremely affected by economic and interest rate cycles both in a negative way in bad times and in a positive way in good times. Currently, abnormally low and stable interest rates play more into the hands of the Lower Income Area segment than is the case for the higher income end, and the results have been showing in this segment’s superior performance, it would appear. But the recent solid performance by this segment does not necessarily mean that its superiority is sustainable once the interest rate cycle turns.
Property Barometer_Home Buying by Segment 3rd Q 2013

Electricity, rates and taxes remain top property costs
IolProperty - South Africa
Electricity, rates and taxes remained the biggest contributors to operating costs of property owners in the first half of this year, according to a report from the SA Property Owners Association (Sapoa).

Electricity remained the largest cost as a proportion of total operating costs at 32 percent, despite falling by 2 percent in the first half of the year from a year earlier, followed by rates and taxes, which represented 21 percent of total costs and grew by 2.3 percent year on year.

The third highest operating cost contributor was management costs at 8 percent, despite contracting by 5.9 percent over the period, according to the report compiled by International Property Databank for Sapoa.

Reader Comments:

simon Wilson 08/11/2013:

We are inner city developers and have had at best total apathy from the City in dealing with electricity tariffs. The charges they are making would be appropriate it they took into the equation the operation and the use of the electricity. So often we have just had to walk out of their offices without any progress being made in adopting a tariff that is appropriate to the use. 

John Christie 08/11/2013:

I respond to Wayne Albutt of Rawson Property Group on the so called ''loopholes'' in agreements of sale and which often result in parties to agreements of sale being able ''get out'' of up to 80% of signed agreements. The problem lies not with the Alienation of Land Act, (ALA) but with the incompetence of the so-called ''residential property practitioners'' who draft voidable agreements in the first place. The most elementary requirements of the ALA are simply ignored in the haste to secure the parties signature to the agreement. Other legislation such section 25(14) of the Sectional Titles Act is not even considered, the incorrect parties to the transaction are cited in the agreement and a whole host of other critical issues are not addressed.

Agreements are littered with blank spaces and conflicting provisions, and are presented to conveyancers who must now give effect to these voidable transactions. The solution to these problems and to avoiding these loopholes being used is to have a proper search done of the deeds registry records prior to the agreement being signed, and then for the agreement to be checked, or preferably be drafted by a property professional such as a conveyancer or notary public. There will always be parties to agreements of sale who attempt to extricate themselves from agreements of sale, even those agreements drafted by professionals, but the risks in them succeeding with this are substantially reduced.

One of the major problems with most agreements of course, is precisely the use ''standard form contracts'' where ''one size fits all''. Each agreement should be tailored to the specific requirements of each seller and purchaser, and a professional will do this.

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