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Property Barometer - Residential maintenance
FNB - South Africa
When it comes to protecting the value of the security backing a residential mortgage loan, the levels of home maintenance and value adding upgrades become important from a banking sector point of view. In and around the recession of 2008/9, and in the aftermath, the low levels of maintenance on distressed properties had become problematic for the banking Sector, because it effectively meant that in many cases homes had not held the value required to fully back the value of the mortgage loan. This situation, however, continues to improve, with the FNB 3rd Quarter 2013 Estate Survey seeing further improvement in agent perceptions of the levels of home maintenance.

The agents have perceived a gradual increase in the level of home maintenance since 2009, with the pace of improvement picking up in 2013. Using a 2-quarter moving average to smooth the data mildly, we depict agent perceptions regarding levels of home maintenance below. From 2004, the survey respondents reported a long decline in the percentage of homeowners “investing in their properties with a view to adding value”. This percentage reached a lowly 3% of total homeowners in the areas of these agents by the 1st half of 2013, a far cry from the 43% at the beginning of 2004, but has since jumped a little to 9% in the 3rd quarter survey.

But value adding upgrades aside, things have arguably improved more significantly. The next level “down” is the percentage of homeowners “fully maintaining their property and making some improvements”. This percentage has climbed significantly from a low of 27% in 2008 to 45% in the 3rd quarter of 2013. So too has the next level, namely “percentage of owners not improving but still fully maintaining homes”, having risen from levels between 20% and 30% around the recession of 2008/9 to 39% of total by the 3rd quarter of 2013.
Residential Maintenance and Upgrades Nov 2013

2014 will be a good year for residential property
Rawson - South Africa
Repeated statements by the Rawson Property Group’s management to the effect that now is the right time to buy a home were backed up recently by the group’s Chairman, Bill Rawson, when he said that all the indicators now point to 2014 being a good year for residential property and those aware of the market trends should, he said, be buying right now.

“From my viewpoint,” said Rawson, “the Absa prediction of a 9% growth in house prices in the coming year is absolutely spot on.”

The factors working in favour of steady growth in house prices in Rawson’s view are:

The strong likelihood of inflation being contained below 6% and therefore interest rates remaining at low levels for most of 2014.

Property Barometer - Residential building activity
FNB - South Africa
The ongoing mediocrity in residential building activity can perhaps largely be explained by a still-competitively priced existing home market relative to new house prices.

From 2007, existing house price declines in 2008/9, very weak price growth thereafter, and for much of that time building costs rising, meant a significant widening in the replacement cost gap (the percentage by which the average home replacement cost exceeds the average existing home value) up until early-2012. Thereafter, the rising trend more-or-less flattened out at best, but still remains very significant at 22.6%, keeping it a challenge for the new development sector to bring greater quantities of competitively priced newly built stock to the market. In addition, it appears that this gap may not narrow easily in the near term if one examines the Producer Price Index for Building Materials. While this is not the full story when it comes to total building costs, noteworthy is the fact that this index’s year-on-year inflation as at September was 8.04%, slightly ahead of our own estimates of existing house price growth.
Building and Fixed Investment Review Nov 2013

Restrictions on tenants in sectional title schemes
IolProperty - South Africa
An owner of a property does not have absolute right to do as he or she pleases, being subjected to municipal bylaws, neighbourhood and other laws. A tenant will need permission from her landlord if she intends to make certain changes such as installing burglar bars or safety gates to the doors.

In a sectional title scheme, each owner has absolute right of ownership over his or her unit or section, like ownership rights and powers of a person of a house built on a separate piece of land. Each owner has the right of use and enjoyment over his or her unit and mutual rights over common areas. The right of use and enjoyment of the owner's unit is, however, restricted by the rights of the other (co-)owners in terms of common law.

There are other restrictions that come about because of other real rights, restrictive conditions in the sectional plan, existing servitudes and restrictions imposed by the Sectional Titles Act. The owner may be held liable for any violation by her tenant or occupant of the management and conduct rules.

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