EDITORIAL
SOUTH AFRICAN REAL ESTATE INVESTOR
Contents
PRO PERT Y
KNOWL E DGE
W E A LT H
STUDENT HOUSING
PUBLISHER Neale Petersen EDITOR Angelique Redmond
MARCH Cover
CONTRIBUTORS Monique Terrazas, Jonathan Courtwell, Koos du Toit, Angie Redmond, John Roberts, Scott Picken, Iselle McCalman. PHOTOGRAPHY Stock Exchange, Dreamstime TRAFFIC Juanita Heilbron
Become Tomorrow’s Millionaire
Page 30
Student Housing
Page 32
Improving Your Kitchen
Page 44
Spotlight On JHB
Page 10
Master Investor Jonathan Broll
editorial@realemedia.co.za
Become Tomorrow’s Property Millionaire With real-life investment advice
MARCH 2013
write to us:
Page 14
Without breaking the bank
SPOTLIGHT ON JHB
Will crime keep the CBD empty? www.reimag.co.za
DESIGN STUDIO Michelle Alexander, James Clark & Brent Fisher
IMPROVING YOUR KITCHEN
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CIRCULATION
FEATURES 5
INVESTOR TALK We Can Make A Difference
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BOOK REVIEWS Whats New In March
8 INBOX Ask The Property Experts Buy-to-let property 10
MASTER INVESTOR JONATHAN BROLL Be Tenacious And Never Give Up
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COVER STORY Ensure Your Success With lessons from real-life investors
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CASE STUDIES The Good, Bad & Ugly
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LISTED PROPERTY Are You Missing The Fireworks? 7 Deadly Sins Of Property Investment
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SMART MOVES Buy-To-Let Too good to be true?
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GETTING STARTED Student Housing
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MASTER INVESTOR DOLF DE ROOS
JUST PROPERTY MAGAZINE
Autumn 2012
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2012
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The Commercial Property Market Where to this year?
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www.reimag.co.za All rights reserved. No portion of this publication may be reproduced or used in any form without prior written consent and permission from Real Estate Media. The publisher gives no written guarantees or assurances and makes no representation regarding any goods or services written or advertised within this edition. Prospective investors should always consult their attorneys, advisors or accountants. Copyright © Real Estate Media cc
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32 IMPROVING Add Value To Your Kitchen Without breaking the bank 36
SMART MOVES Home Insurance A small price to pay for peace of mind
March 2013 SA Real Estate INVESTOR
1
INDEX
COMMERCIAL 41
COMMERCIAL INVESTOR News And Industry Update Updates and property hear say
42
SMART MOVES Spotlight On JHB Will the CBD regain popularity?
ABC AENGUS PROPERTIES......................................................... 23 AFRISKI.................................................................................... 63 APARTMENT THERAPY....................................................... 69 AMA ARCHITECTS................................................................ 70 AMA ARCHITECTS................................................................ 71 BLACK PEPPER...................................................................... 08 COURTWELL CONSULTING............................................... 49 CYPRIOT.................................................................................. 59 CITIZON................................................................................... 73 COBRA TAPS.......................................................................... 0BC
48 DEVELOPMENTS Town Planning And Environmental Surveys
DEF ENGEL & VOLKERS............................................................... 23 EIGHTY EIGHT POCKETS.................................................... 24 ELEPHANT POINT................................................................. 51 FINANCIAL INTELLEGENCE............................................... 03 FIRESTAY................................................................................. 31 FRASER 4 PR........................................................................... 46
50 LISTED 2013 Will Be An Eventful Year 52 HOSPITALITY Rural Tourism
GHI GRINDROD ASSET............................................................... 58 GLOBAL PROPERTY GUIDE............................................... 62 IHFM......................................................................................... 38 IPS INVEST.............................................................................. 58 GRINDROD ASSET............................................................... 58
OFFSHORE 55
OFFSHORE INVESTOR News And Industry Update Updates and property hear say
56
OFFSHORE INVESTMENT Buying Trips
JKL JUST PROPERTY GROUP.................................................... 34 JUST LETTING........................................................................ 35 JUST PROPERTY GROUP.................................................... 37 JHI PROPERTIES.................................................................... 41 JONES LANG LASALLE....................................................... 55 KNIGHT FRANK ANNE PORTER....................................... 22 KORBITEC................................................................................ 41 LIGHTSTONE.......................................................................... 22 LET & STAY.............................................................................. 31 LIGHTSTONE.......................................................................... 46
60 LONDON London’s Changing Demographics 62 FINANCE Median Property Prices
MNO NATIONWIDE......................................................................... 09 NAPD........................................................................................ 47 NICOR....................................................................................... 75 OOBA....................................................................................... 23 PROPERTY FRONTIER......................................................... 35 OOBA....................................................................................... 23
LIFESTYLE 66
PQR PROPERTY FRONTIER......................................................... 25 P3 POROPERTY GROUP..................................................... 26 P3 INVESTMENT GROUP.................................................... 27 P3 INVESTMENT GROUP.................................................... 28 PRIVATE STUDENT ACCOMODATION............................ 31 PADDOCKS............................................................................. 38 PARAGON LENDING............................................................ 41 PROPWEALTH........................................................................ 55 REMAX..................................................................................... 08 RAWSON................................................................................. 13 RAWSON................................................................................. 23 RAINMAKER MARKETING.................................................. 53
PROPERTY MONITOR Live Like A Princess
68 DECOR Get Colouful 70 DESIGN Architecture - Embracing The World 72
MOTOR TALK 2013 Year Of The Hybrid Hypercar
74
TECH TALK Clash Of The Giants
Contributors Mike Smuts is an author, and property investor, he is the owner and managing director of Smuts and Taylor, a London based investment firm
Jonathan Smith is the Director of Courtwell Consulting and has ex- tensive experience in property and consulting, including educational programs
John Roberts is the CEO of The Just Property Group, a dynamic property company born from the motivation to create a property industry leader
2
March 2013 SA Real Estate Investor
Koos du Toit is the CEO of P3 Investment Group that offers hope and guidance to anyone looking to build a successful investment portfolio.
Angelique Redmond is our talented editor. With a passion for words and music, her pink earphones are a permanent fixture.
Olga Koma is a researcher with FinMark Trust’ Centre for Affordable Housing Finance in Africa. Her interests are urban studies, urban design & African cities discourse.
Monique Terrazas is REIMS 2012 SAPOA award winning property investment writer, she is a treasured REIM contributor for almost five years.
STUVWYZ SMART VILLAGE.................................................................... 21 SED............................................................................................ 07 YDL........................................................................................... 57 STUDENT ACCOMODATION............................................. 31 SHONA LANGA..................................................................... 39 SA COUNCIL OF SHOPPING CENTRES.......................... 41 STANLIB................................................................................... 54 SMUTS AND TAYLOR........................................................... 61 TPN........................................................................................... 04 TPN STATS............................................................................... 29 TRADE & INDUSTRY MINISTER........................................ 55
Rui Marto is the Director of Marto Lafitte & Assoc, a firm specializing in Property Law Commercial Law, Foreclosures, Civil Litigation and Consumer Law.
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FINANCIAL INTELLIGENCE CENTRE ACT
ADVERTORIAL
Is your business assisting in combating financial crime?
C
riminals derive profit through illegal activities, such as the sale of banned drugs, counterfeit goods, the trafficking of women and children, and other illegal activities. Criminals use the country’s financial transaction system to launder their illegal profits through various businesses and so make the profits appear legal. Your business could be used in these types of illegal activities
To prevent this from happening and to help turn your business into a partner in the fight against crime, you should ensure that your business complies with the requirements of the Financial Intelligence Centre Act No. 38 of 2001 (the FIC Act), as amended. Estate agents have been identified as being susceptible to abuse by criminals wishing to launder the proceeds of their criminal activities, often referred to as ‘dirty money’. An example of this is where a drug dealer buys a property for cash. The funds may have been acquired illegally but, if he later resells the property, then the funds he receives on the sale appear to be legal because he has carried out a legal transaction by selling immovable property through legal channels. Compliance with the provisions of the FIC Act can help to ensure that your business does not play any part in the laundering of money or the financing of terrorism. Obligations of estate agents in terms of the FIC Act Estate agents are categorised as accountable institutions in terms of the FIC Act. This means
that your firm accounts to another regulatory body – the Estate Agency Affairs Board (EAAB) – which is responsible for the enforcement of various compliance requirements, including the terms of the FIC Act. The obligations of an accountable institution (in this instance, estate agents) are summarised below: 1 You must register your firm with the FIC. This should be done online via the FIC’s website: www.fic.gov.za A manual process for registering is also available – contact the FIC should you wish to go this route. You will be asked to provide the details of a representative of the business; it is best to list the person who will be responsible for reports you are required to submit to the FIC. (See below for more information about the reports.) 2 You have a duty to identify your clients 3 You have a duty to keep records relating to your clients and to the transactions carried out with them 4 You must provide reports to the FIC in the event of these types of situations occurring: a. Any cash transactions of R25 000 or more b.A suspicious and unusual transaction report
must be submitted if you regard a transaction as in some way suspicious or unusual in comparison with normal business practice. This report is also filed via the FIC website c.A terror property report must be submitted via the FIC website if you hold property on behalf of someone who may have been involved in carrying out terrorist activities. These reports assist the FIC in identifying transactions in which there may have been an attempt to launder the proceeds of crime. 5 You must introduce certain measures in your business to promote compliance with the FIC Act within the business. You can access more information on the FIC Act, relevant Regulations and guidance, including Public Compliance Communication 08 and Public Compliance Communication 10 which relate to matters affecting estate agents, at www.fic.gov.za
For more information on registering your business with the FIC, contact us via e-mail at fic_feedback@fic.gov.za or phone 0860 222 200
INVESTOR TALK
BY ANGIE REDMOND
W
elcome to the first edition of REImag with myself as the editor. With Neale stepping away to focus on the business and to grow the company, I have taken on the mantle of ensuring that the same engaging and informative content you have come to expect continues to be delivered to you every month. However, this year we aim to engage YOU, the reader, we want to hear your stories, your thoughts and your opinions about the property market. So, visit our Facebook or Twitter page and let us know what’s on your mind, or email me at angie@realemedia.co.za and help me shape the magazine YOU want to read. With all the doom and gloom in the news and the constant reports of corruption and fraud, it is hard to remain positive when thinking about investing in South Africa. However, remember that for every horror story, there are three success stories. South Africans are proving that we can and will make a difference. The recent Constitutional Court case regarding the boycotting of municipal rates is just one example. It raises a very relevant question: What options are available to taxpayers who are not receiving the services they are paying for? Should they turn to ‘street justice’ as it’s being called or can they refuse to pay the property rates portion of their municipality account? While judgment was reserved, the case is an important step in raising awareness of service delivery problems in South Africa, problems which demand answers and change. Given the uncertain economic conditions locally and globally, some institutions predict modest growth and others suggest caution. It is time to be innovative when investing. There are many opportunities to invest in property in South Africa and to create wealth, but they may not be obvious – some out-of-the-box thinking is required. In this edition we look at some of these out-of-the-box investment ideas and how you can get involved. Our cover story this edition focuses on you, the investor, highlighting the strategies that have worked for other real life property investors. In every issue, we also provide some great advice to increase the value of your property with smart home improvements. So without further ado, let’s start your investment journey. Angelique Redmond
EDITOR
“Do not worry if you have built your castles in the air. They are where they should be. Now put the foundations under them.” Henry David Thoreau
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March 2013 SA Real Estate INVESTOR
5
BOOK REVIEWS The 10-Step Stress Solution
A Survival Guide For Life
By Neil Shah
By Bear Grylls
A fantastic 10-step plan with simple and practical solutions for reducing your stress levels so you can manage your life and breathe a sigh of relief. Find out how to: • Manage your time – at work and at home. • Regain your balance and lift your mood. • Improve your concentration and motivation. • Get a good night’s sleep and stop worrying.
Bear Gr ylls’ Survival Guide for Life is packed with stories from Bear’s adventures and SAS training that are thrilling, emotional and revealing. By showing the reader how he has dealt with setbacks and seem i ngly i nsu r mou ntable obstacles, Bear helps readers plot a better course towards their dreams. This is not a self-help book in the traditional sense, nor is it a manual.
Churchill in His Own Words
Makers
By Richard M. Langworth
By Chris Anderson
Churchill in His Own Words, which is fully authorised by the Churchill Estate, is a definitive collection of Churchill’s words, thematically arranged. It also highlights the myriad quotations commonly misattributed to Churchill. A rich and valuable portrait of Winston Churchill and his age, in the great man’s own words.
If a country wants to remain economically vibrant, it needs to manufacture things. In recent years, many nations have become obsessed with making money out of selling services, leaving the real business of manufacturing to others. Makers is about how all that is being reversed. It ta kes a look at how manufacturing is increasing it’s participation in everything digital.
The Cubicle Manifesto
A Good African Story
By Mainak Dhar
By Andrew Rugasira
Welcome to THE CUBICLE. The desk space you occupy for hours on end. Where creativity is dead and stress levels are high. Where you feel guilty for leaving, but reluctant to arrive. Where you eat lunch, plan, strategize and phone home to say how late you’ll be tonight. Is this the place you’d really like to be? The Cubicle Manifesto is a business parable for the modern age that will transform the way you work. Join the revolution.
The inspirational story of how an African-owned coffee company became a profitable global brand. Since it was founded in 2003, Good African Coffee has helped thousands of farmers earn a decent living, send their children to school and escape a spiral of debt and dependence. In A Good African Story, Andrew Rugasira argues that trade has achieved what years of aid failed to deliver, and has provided a tantalising glimpse of what Africa could be. www.thebizmall.co.za
BOOKS AVAILABLE AT Knowledge Is Money
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March 2013 SA Real Estate Investor
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ASK THE PROPERTY EXPERTS
Purchase Price In London
Best Area For Capital Growth
Mike Smuts Smuts and Taylor www.smutsandtaylor.com
Q
Debby Young asks:
I want to purchase property in London and I would like to know what costs, apart from the purchase price, I will need to pay.
A
Mike Smuts answers:
Just as when you buy a property in SA, you’ll encounter a number of fees and costs over and above the purchase price when you buy in London. The total fees (also called completion costs) payable when you buy a house in the UK are among the lowest in the world, and total between 3% and 5% for a property below £250 000. Most fees are calculated as a percentage of the cost of a property. So, the more expensive your investment property, the higher the fees you will need to pay. As a South African investor buying a property in London, you will be faced with the following fees, so be sure to include these in your budget: • stamp duty land tax; • solicitor’s or licenced conveyancer’s fees; • local authority search fees; • other search fees and disbursements; • land registry fees; • valuation fees; • survey fees; • mortgage arrangement or acceptance fees; • mortgage broker’s fees; and • buildings insurance fees.
Adrian Goslett, RE/MAX www.remax.co.za
Q
James Carroll asks:
I want to start investing in buy-to-let property, but how do I pick the best area for capital growth? What factors should I consider before I buy?
A
Adrian Goslett replies:
When looking to purchase a rental property, it is important to take your time and do your research to ensure you buy a property that suits your needs perfectly and an experienced estate agent will be able to help you in this regard. It is imperative to gather as much information as possible, because when it comes to buying or renting property. The area in which the property is located will have an influence on the rental income it can generate. For example, neighbourhoods that are close to amenities such as schools and shopping centres will generally fetch a higher price. If you are unfamiliar with a development or neighbourhood, it would help to speak to tenants that are currently renting and living there, as they will be invaluable in providing you with important information on the area. Find out the average rental paid by tenants in the area. This will help you to estimate what you can expect to earn from your rental property each month and whether or not it is a viable option.
Commercial Property
Simon Black Black Pepper Online www.blackpepperonline.co.za
Q
Nicole Heur asks:
If I want to invest in commercial property which t ype of propert y should I look at investing in for a long-term investment? What sector has a demand that an investor would profit from?
A
Simon Black responds:
Firstly, we would need to establish an amount of money available for investment. In most cases commercial property funding loans are issued on a 10 year bond term, which can prove expensive for individual investors. The value of the investment coupled with the investor’s unique appetite to manage these assets will determine which property type is most suitable, whether it be retail, office or industrial. Things to look out for when shopping for property assets are opportunities possessing the following attributes: • The owner’s ability to re-tenant on lease termination, • Where long-term leases are possible or in place, • Where assets are in good condition and / or require low maintenance, • Redevelopment opportunities where improvements lead to increased rental yields, • Good locations or taking a view on up and coming nodes, • Suitability to specific operations / or alternatively generic features for easy use.
Do you have a property question you would like answered by our experts?
If so, post it on ASK THE EXPERTS on www.reimag.co.za or email editorial@reimag.co.za 8
March 2013 SA Real Estate Investor
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sales@nationwidepropetynetwork.co.za
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MASTER INVESTOR
BY NEALE PETERSEN
‘Meeting Other People’s Needs, Ensures Your Own Success’ Be tenacious, competitive and never give up
10
March 2013 SA Real Estate Investor
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FEATURES
J
onathan Broll is the non-executive chairman of Broll Property Group, one of South Africa’s largest independent proper t y ser v ices prov iders. Jonathan prefers to keep the incredible success of his company low key and attributes this success to the people he is surrounded by, the sound relationships he has established and calculated risks taken along the way. He has seen five booms and busts in the property cycle and major political upheavals, yet he has always remained optimistic about South Africa and Africa’s prospects. Jonathan built up his company through steady growth. Today, Broll employs more than 1 000 skilled property practitioners in South Africa and more than 200 people in West Africa, managing a R62 billion property portfolio comprising of some 14 000 leases. Broll has grown significantly from its humble beginnings and has also expanded into a wide spectrum of property services. Broll now offers property and utilities management; shopping centre management; retail, commercial and industrial leasing; investment sales; corporate real estate services and valuations.
But he took immediate action and in the following month, January 1975, he opened the doors of Broll Property Group, starting out in residential property management as a rent collection agency in the lower income areas in Cape Town, such as Brook lyn, Rugby, Ysterplaat and Woodstock, as well as other areas established property management companies avoided. He learnt the hard yards of property management from door knocking and collecting rent. He gradually advanced to take on and manage Broll’s first commercial building and expanded into office leasing. In mid-1976, business came to a virtual standstill for six months in the wake of the Soweto riots. Fortunately, unlike most property companies that focused on the transaction (broking) side of the business, Broll’s focus was on property management. This focus provided a solid, stable foundation and an annuity income. Jonathan believes it was the right decision for the company to follow that route at the time, as Broll grew stronger and stronger month by month.
“Today, Broll employs more than 1 000 skilled property practitioners in South Africa and more than 200 people in West Africa” Jonat ha n is a proud bor n-a nd-bred Capetonian. During this time he studied pa r t-time at UC T and qua l if ied as a Chartered Accountant (CA). Discovering that accounting did not suit his personality and ambitions, Jonathan started working for Camelot, a small property company in Sea Point, which specialised in selling property investments and sectional title blocks of f lats. Soon afterwards he joined Herbert Penny, another property company, for a short stint before taking up his last job in June 1974 with Robert Katz, a large construction company, where he managed their portfolio of properties. When the company collapsed in December of the same year, Jonathan - now 27 and married with one child - found himself unemployed. www.reimag.co.za
Jonathan recalls that when he started the business 38 years ago, there were few systems in place to support them - no computers, no copiers, no fax machines - just an IBM typewriter. Nevertheless, Broll built on a strong base in Cape Town and gradually grew the business into new areas of expertise. In 1983, Alan Wallace joined Jonathan and expanded the business into the transaction business. They took on more institutional clients and placed a strong emphasis on systems, developing customised computer systems which they have been improving continuously for 27 years. Today, Broll’s management systems are ISO certified and four software developers continue to update and fine-tune the systems.
JONATHAN BROLL Personal Statistics Age: 65 Qualifications/Experience: CA (SA) FRICS Marital status: Married to Idia (for 41 years) with 4 children and 9 grandchildren
Close-up Mentors: Jonathan’s early property clients were experienced and very demanding. Learning how to meet their high standards and expectations helped him raise the bar. Yet he remains grounded in terms of his achievements. He has always valued independence, including owning his own business. He likes to interact with strong people who have different opinions and are not scared to voice them, and prides himself on his flexibility and ability to change his mind when presented with a valid argument. Jonathan believes that he has been fortunate in assembling a quality team of people, who combined their efforts to create a strong corporate culture based on integrity and to deliver service excellence. This has been the foundation for the success of the business. Books: Jonathan enjoys reading history and biographies, but the book that had the biggest impact on him is Dr Anton Rupert’s biography, which taught him that we can learn from our mistakes. Motto: Make a mark in your life, take a risk, be courageous!
March 2013 SA Real Estate INVESTOR
11
MASTER INVESTOR National footprint About 26 years ago, one of Broll’s biggest institutional clients, Allan Gray, bought a building in Johannesburg. This motivated Broll to open their first office in Johannesburg, which is now the head office of Broll. Serving some of South Africa’s largest listed property portfolios, Broll now has nine regional offices in South Africa. Broll and CB Richard Ellis entered into an affiliation agreement in 2004 and Broll continues to represent this global giant across sub-Saharan Africa. This association with the world’s largest property services company has enabled unequalled international connections and access to best practice and cutting edge systems in line with global benchmarks. Broll is committed to BEE on the ownership front. A k hona Na lapha Investments, a black women-owned property company, is a significant shareholder of the company, along with Catalyst.
The introduction of Catalyst Broll itself does not invest in property, but established Catalyst as a group company to provide property investment and property development services. Catalyst has built up a significant private property portfolio over the last 14 years. Catalyst Fund Managers, which invests in the listed property sector on behalf of institutional clients. They currently have R9.5 billion in funds under management, as well as a global real estate fund in Guernsey. This global real estate fund has been Morning Star rating agency as the best overall worldwide performance in this sector for the past 3 years.
African growth Today, Broll Property Group’s strategy is to become pan-African. Broll Property Group has fully fledged operations in Ghana, Malawi, Namibia and Nigeria and provides services in a number of other countries, including Angola, Botswana, Kenya and Zambia. Services across Africa include property management, broking and leasing. Broll´s portfolio of property under management outside of South Africa is valued in excess of R6 billion. Future plans include opening offices in Zimbabwe, Rwanda and Mauritius. Jonathan’s experience in Africa has been very positive. He says that Broll has worked 12
March 2013 SA Real Estate Investor
closely with its clients, growing with them into Africa, and also leading the way for a number of retailers to expand into the rest of the continent. He believes this is in part due to the fact that they don’t staff the business with expats, but rather employ local people who are well-educated and have an excellent work ethic. Broll aims to remain the market leader into Africa and believes that in the future, more than half of its business will be derived from Africa beyond South Africa’s borders.
It’s about the people The company’s growth, according to Jonathan, was achieved through commitment to their clients, service excellence and maximising the property potential – abiding by an ethos of managing properties as though it belonged to Broll and its highly trained and experienced team of property specialists. In 2002, with the aim of improving the skills of Broll staff members, the Broll Academy was established - the first of its kind providing in-house training for employees in the commercial, retail and industrial property sectors. Most employees who have completed Academy cou rses a re f rom prev iously disadvantaged backgrounds. The training has helped them improve performance and advance their careers within the Group. Broll has also introduced two new training programmes – internships and learnerships to develop skills within the company and within the industry.
“Jonathan believes that if you train people well and delegate properly, team members often exceed expectations” Jonathan believes that if you train people well and delegate properly, team members often exceed expectations. For this reason, the Broll team consists of specialists who are authorised to run the business and who are trusted by management to make the right decisions, which they invariably do. Now, at age 65, Jonathan believes he can add value by sharing his knowledge and experiences in the business, providing strategic guidance and contributing to new goals and objectives. Looking back at his life, Jonathan is certain that he has no regrets about any of the things that he has done. And he is courageous and bold in his quest to ensure he will never regret things he had not done.
RESOURCES www.broll.co.za www.catalyst.co.za
JONATHAN’S ADVICE FOR PROPERTY INVESTORS
1 2 3 4 5 6 7 8
Property investment is one of the best wealth creation strategies. Rent is the best form of income. Gear Other People’s Money (OPM) to enhance return, but gear prudently, not recklessly. Know the local market and understand value. Be persistent. Buy well and sell well. Choose an area of specialisation, whether residential, office, industrial or retail. Understand the past, know the present, but realise the future is always unknown.
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COVER STORY
BY MONIQUE TERRAZAS
Ensure Your Success With lessons from real-life investors
M
ost people assume that successful property investors are those who were born into wealthy families, have the right connections or simply got lucky. The reality is quite different, judging from the entries we received for the first annual Real Estate Investor of the Year competition. The entrants are all ordinary South Africans, who have built up small, medium and large, but profitable, portfolios of properties with little more than sheer dedication, common sense and hard work. Not only are these real-life investors a source of inspiration, they are also trailblazers who light the way for those of us who have not yet bought that first investment property, or the next one.
Why a Real Estate Investor of the Year competition? It is an unfortunate reality that buy-to-let property investment has yet to be recognised 14
March 2013 SA Real Estate Investor
as the specialised profession that it is. Buyto-let property investors play a crucial role in providing housing to millions of South Africans, who cannot or do not want to buy their own properties, whether that is because they require temporary accommodation or because they cannot obtain bond finance due to the banks’ strict lending requirements. Particularly in a country with a massive housing backlog, such as South Africa, buyto-let property investors are essential to ensure the supply to meet the demand for rental properties. The Real Estate Investor of the Year competition aims to recognise this crucial role that buy-to-let property investors fulfil in the economy and to acknowledge buyto-let property investment as a specialised profession. The competition also aims to promote professionalism in the buy-to-let property investment industry, creating awareness of the fact that successful buy-to-let property
investment is based on solid fundamentals and simple but smart investment principles.
Meet the entrants The entrants into the Real Estate Investor of the Year competition could not be more diverse in terms of demographics, and their property portfolios – in terms of size, types of properties and the strategies employed - could not be more varied. However, a number of striking similarities are also evident, including a strong emphasis on ethics and philanthropy, as well as a general consensus that if they had an opportunity to do it all over again, they would have bought more properties. Ranging in age from their late-thirties to early-fifties, the entrants came from all races, cultures and backgrounds. They are male and female, as well as couples working together. Some have impressive formal qualifications while others have succeeded without any www.reimag.co.za
FEATURES formal education. Some started out as lowwage labourers while others learnt about property investment from their parents. The entrants also work in a range of industries, from medical professionals and estate agents to small business owners and micro-business owners, making a living from selling airtime and chickens.
The property portfolios There is no correlation between any of these demographic variables and the size or success of the property portfolios, which range from five entry-level residential properties to portfolios consisting of 68 properties, including residential, small retail and medium industrial properties, as well as office park units. A striking common factor is the success of the various property portfolios, regardless of size and composition. As just one example, one property portfolio consisting of 30 residential properties is generating an ongoing, inflationlinked passive income of R400 000 a month!
“Not only are these real-life investors a source of inspiration, they are also trailblazers who light the way for those of us who have not yet bought that first investment property, or the next one.” Types of properties While the majority of the entrants invest in residential property, the properties vary widely from one-bed cottages to four-bedroom homes. The most popular properties are one and two-bedroom entry-level units in security complexes which, as one entrant explained: “limits risk because of permanent occupation due to affordability and guarantees return on investment”. Rental properties for lowerincome tenants, catering for the R2 500 per month to R4 500 per month rental bracket, also featured strongly. Some investors focus on multi-income producing properties, by selecting properties www.reimag.co.za
with two, three and even four units, semihouses or garden cottages. The consensus seems to be that residential properties are the easiest to manage, and provide scope to renovate and bring to bear property management expertise to increase potential income, by for example, adding more rooms or a garage. Never theless, a number of investors owned entire blocks of flats and townhouse complexes. Others have already branched out into the commercial property sector, investing in office complexes, small retail properties, industrial stands and workshops. It is interesting that in the portfolios containing commercial properties, the focus was also on the lower end of the market, with rental properties aimed at small and medium-sized owner-operated businesses and industrial properties catering for start-up and small businesses.
Areas Just as diverse as the types of properties and the investors themselves, are the areas in which our investors focus. This confirms that the buy-to-let property investment model works in any area. Most of the entrants focus on a specific area, notably Boksburg, Kempton Park and Benoni on the East Rand. The investors tend to own multiple properties in a specific town or city, noting that they prefer to focus on an area they know, in which they are familiar with property values and conditions, and from where they can keep an eye on their investments. Nevertheless, there are some investors who have por t fol ios t hat a re w idely spread across the country, from Mpumalanga to Gauteng and the Western Cape. While most investors prefer to invest in close proximity to home, all agreed that the most important factor is the location in relation to amenities: medical fac i l it ie s , p ol ice st at ions , schools, shopping centres as well as easy access to main transport routes and public transport.
Property selection criteria The property selection criteria used by our investors differ widely too. Some prefer sectional title units in new developments to avoid paying transfer and other costs outof-pocket, while others avoid complexes, citing poor workmanship and too much rental competition. Some investors look for neglected and even vandalised properties to pick up at a bargain price, renovate and rent out, while other have fixed and f lipped as many as 70 properties allowing them to build up significant investment capital. A number focus solely on properties that are cash flow positive, while yet others are willing to subsidise a shortfall for a few years to obtain a quality property. Most of the investors believe that income generating potential is far more important than capital growth, and that investing for the long-term – benefitting from both passive income and capital growth - is the best approach. Our investors also use a range of strategies to select the right properties. Some like to drive around an area to keep up to date with what’s available, others use the Internet and newspapers, while others have a professional
March 2013 SA Real Estate INVESTOR
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COVER STORY team of estate agents or property investment groups a lways on the lookout for great opportunities. Our investors are very thorough and patient in their search for just the right property, doing thorough due diligence and research. Some study reports like Lightstone and WinDeed to establish the true value of a property. They conduct thorough investigations of the property and check the financial statements of the body corporate and determine the rental, before making an offer. A number of the entrants also highlighted the importance of selecting properties using common sense, not emotion. They apply a business-like approach considering the financial vitality, including a yield above inf lation, the condition of the property to ensure low maintenance, as well as the location in terms of proximity to schools, shopping malls and main transport routes.
Research and knowledge A common trait among our investors is ongoing research and a quest for knowledge. Some have spent years researching personal f inancial management and investment strategies, while others have invested a great deal of time and money to attend seminars, read books, do research and apply their knowledge in practice.
Support structure
It is telling that almost all the entrants have support structures in place, ranging from mentors to full teams of propert y professionals to assist them. These teams, in most cases, include an estate agent, attorney and rental agent, but in some cases also include maintenance teams and auditors.
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March 2013 SA Real Estate Investor
What is clear is that our investors have spent time and effort to find professionals who are honest and trustworthy and have built up solid relationships with them. A number of them continue to rely on the expertise and experience of property investment experts. Names that cropped up repeatedly included Gordon Mackay, P3 Investment Group and IPS.
“A common trait among our investors is ongoing research and a quest for knowledge.” Capital investment Another striking similarity among the entrants is the fact that they have all built their portfolios w ith minima l investment of their ow n capital, obtaining bonds for all their property acquisitions. Most mention that it is only recently, due to the banks’ strict lending criteria, that they are investing their own capital to cover the required deposits. They are, however, all quick to point out that they consider this a sound and worthwhile investment they are absolutely happy to make. A number of entrants reported proudly that they have made the all-important mind shift from being conservative and avoiding any debt, to being smart and using as much “good” debt as possible, without over-gearing. “Good” debt, our entrants agree, is the kind of debt that allows them to acquire assets that will not
only appreciate in value, but will also generate ongoing income.
How our investors started Not a single one of our investors started with anything more than guts, sheer hard work and determination. One of the entrants tells of how he and his wife held five jobs between the two of them in their quest to save up a deposit for their first property. Another explains how he held down multiple jobs while living with his parents, which allowed him to acquire rental properties. He also added rooms to his parents’ house to let out for additional income. Another investor tells us that their first investment was also their main residence, half of which they rented out to pay off the bond in record time. Others started their own businesses and, realising they were paying too much rental for the business premises, began investigating the possibility of becoming landlords. Some simply stumbled upon property investment by chance. For one investor, his property portfolio started with an act of good-heartedness: “I bought my second property – a two-bed flat in Arcadia, Pretoria - because my girlfriend at the time, she is now my wife, was ill-treated by her landlord and needed a place to stay. When I later sold the property and made R100 000 profit, the estate agent asked if I was buying and selling for investment – a question that changed my life. My journey of property investment intensified from there.”
Why property? Many of the entrants are completely and utterly convinced that buy-to-let property investment is the way to create wealth. Many of them have already secured their retirement, bringing them unmatched peace of mind. But they love propert y for many other reasons. “It is the easiest business to start - it does not conf lict with my full-time job and requires little time to manage,” comments one investor. Another adds: “Property investment allows me to use other people’s money and time, making it the easiest and most affordable way to invest.” Others mention perks such as doing something that is fun and that they love to do, the incredible power of passive income, and the ability to leave a legacy through a properly structured property portfolio. It is easy to understand why our investors are www.reimag.co.za
FEATURES so excited about property investment when you read some of the stories. • “I bought our second property for R119 000 and sold it for R720 000 14 years later, during which period we enjoyed living there, paying off the bond in a few years, which allowed us to invest in our first rental property.” • “We bought a two-bedroom townhouse with a double garage in a security complex directly from the developer – with all costs included for R200 000 in 2001. It was recently valuated at R690 000.” • “In 2008, I bought a property in Bezuidenhout Valley, Johannesburg with a R250 000 cash deposit and an agreement to pay the remaining R400 000 of the purchase price of R 650 000 in instalments over five years, which meant no bond was required. However, the owner needed R200 000 urgently, but could not obtain finance. So I took out a personal loan of R100 000 and offered her another R100 000 which I
“Good debt, our entrants agree, is the kind of debt that allows them to acquire assets that will not only appreciate in value, but will also generate ongoing income.” had available in cash. The owner was happy to accept the R200 000 in cash as full and final payment for the property, which meant I acquired a property worth R800 000 for R450 000, while helping someone in dire need. I am collecting R23 000 a month rental from this property every month.” • “We are comfortably on our way to owning 15 properties within the next five years.” • “Today I own 16 sixteen rental properties, of which only two are bonded, as well as a paid up main residence.” • “I bought a vacant stand for R100 000 and sold it a year later for R1.5 million. I also bought a retail complex with flats on the first floor for a minimal amount, fixed it and today it is worth more than R5 million.” www.reimag.co.za
• “The value of our property portfolio is rapidly catching up with the value of our business.”
Other investments Most of the investors focus on their property portfolios, for obvious reasons, considering their experiences detailed above. However, a few are also invested in, for example, listed property on the JSE. The majority of the investors mentioned their disappointment with the performance of other investments. “When we started out at first, I took advice from a financial adviser - not an independent financial planner - who did not have our best interests, but rather his commission earnings, at heart,” noted one of the entrants. “I realised this after 10 years and it cost us about R800 000 to R1 million in lost capital growth. I rectified the situation by taking complete ownership of the situation by conducting our own investments and since then I turned around the losses into excess of what we lost.” This experience is echoed by other entrants, one of which commented: “ We bought insurance annuities and invested in five-year plans, which all had a negative growth. We lost quite some money on insurance.”
Ethics All of the entrants placed emphasis on ethical investment. This ethical approach ranges from paying taxes and complying with legislation in terms of managing tenants to dealing only with legitimate and legally registered organisations and making fair offers on properties, based on due diligence, even if the seller is distressed and desperate. As one entrant put it so succinctly “what goes around will come around”.
Philanthropy Another common trait among the entrants was philanthropy. The majority of entrants are not only supporting their children, but also care for their elderly parents. Many are supporting extended family members as well as their domestic workers and their families. They are also involved in community work, support numerous charities and help other entrepreneurs to establish businesses. They are passionate about teaching their children and others in the community about the power of property investment as a means of creating wealth.
Entrepreneurial flair Many of our investors are entrepreneurs, not only as owners of small businesses, but also, even while working in the corporate environment, as owners of income-generating property portfolios. As one entrant says: “You need to be creative in this game, you always need to come up with ideas as to how you can maximize your income”. This inspiring story illustrates: “I have a semihouse in Johannesburg which I rented out to two families, collecting R3 500 per month from each, which covered the bond of R6 500. Then I did some research and discovered that most people in the area need rooms. So I decided to renovate and created beautiful rooms with bathrooms and arranged alternative accommodation for the existing tenants. Now I am collecting R19 000 a month in rental! By being creative I have managed to accommodate more people, I have employed two full-time caretakers for and provided work opportunities March 2013 SA Real Estate INVESTOR
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COVER STORY for about eight people who also have families to support and, most importantly, I have tripled my income.” Many others have created jobs, notably for handymen and maintenance teams, as well as administrative positions. For some, new business opportunities arose from their property investment, for example, one investor has started his own boutique property management company.
Lessons learnt There seems to be solid consensus among the investors that if they had a chance to change anything in the way they built their property portfolios, it would have been buying more properties sooner. As one entrant so succinctly put it: “Thinking about the enormous capital growth we made on our first properties and the fact that I cannot recall that they ever were without tenants, we definitely should have been more aggressive in our investment by buying more during 2001-2006, buying at least five properties per year. We would definitely have invested more and earlier in fixed property which offers a guaranteed return in the long run and exploit the market trends in our favour to speed up momentum.” “I would have bought more properties faster and would have been less conservative,” added another. But some lessons learnt are even more valuable, as this entrant explained: “Most of us are of the opinion that we are born to be average, above average or exceptional, poor, middle class or wealthy. Since investing in property we have learned to not be blinded by tradition but instead to always reach to the next level. We became aware that opportunities and wealth are for everyone and not only for a selected few. The best part of it all is that it is not even difficult. With the necessary know how, which is easily available in the times we live in, and with some effort and hard work, wealth is within reach of everybody.”
Property investment: changing lives All of the entrants believed that property investment has changed their lives – and for the better. Some of the often quoted chances included more money to help others, more time to spend with their families and doing what they love, for example, travelling. “Before when I was in a cash business, I 18
March 2013 SA Real Estate Investor
worked very hard and had no rest - my wife used to complain that I don’t have time for her, even on Sundays. But now I have time for my family - we have Sunday lunches together - and my future is brighter.” A good number of entrants expressed peace of mind that their retirement funding has been secured. “We love the idea that even if we decide not to buy anymore properties, we will be well taken care of in our golden-oldie retirement years,” says one entrant. “Investing in property has changed my life. I have no stress about my future and my family’s future. I can now retire in ten years and will still be financially free,” added another.
“There is nothing ever better than passive income.” A number of entrants report working less while earning more, and some have been able to quit their jobs. “There is nothing ever better than passive income,” enthuses one entrant. “I have quit my job to invest in property full time, with plenty of spare time for my family.” More personal development has also resulted from the property investment journey. One of the husband and wife teams reported that they have learnt to think outside-the-box, a quantum leap from the “play it safe” mentality they grew up with and that was further entrenched in the corporate world. Another entrant said that he discovered that he has good communication and negotiation skills. Yet another comments: “Property investment has instilled confidence and discipline in me and awakened an appetite for knowledge.”
Starting your own journey All the entrants in our Investor of the Year competition are ordinary men and women who have discovered the power of property to create wealth by taking action. No one can become a property investor without taking the action to acquire that first investment property, and then the next one and the next one. Many others are doing it successfully right now, having started with no capital and no special skills or connections. Don’t wait another day to join this group of inspiring people who are not only securing their financial future, but are also building a legacy of wealth that will bring prosperity to generations to come.
ADVICE FROM REAL LIFE INVESTORS financial freedom through 1 Achieve living modestly and investing wisely. 2 Only buy things if it can generate an income.
3 If you look after the ten cents, the ten rands will look after themselves.
4 Get the knowledge through research, reading and attending seminars, workshops and events.
5 Knowledge is power and gives you confidence to make good decisions.
6 Do thorough research and apply good common sense.
7 Price, location and interested rates are all important but the most important factor is whether the property in a good investment which can generate a positive income within two to four years.
8 Don’t overexpose self, keep reserves for unexpected maintenance, vacancies etc.
9 Always look for long-term value. 10 Don’t sell – buy more! 11 Negotiate!
12 Pay more than the minimum monthly bond instalment to reduce the interest payable and the term.
13 Pay the first bond instalment the moment the bond is granted to make a significant saving on interest.
14 Focus on the protection of your assets by using trusts to acquire and hold investment properties.
15 Build a support structure – a mentor, a team of specialists, or join a professional property investment organisation.
16 Property investment requires patience, but your patience will be well-rewarded.
www.reimag.co.za
CASE STUDIES
BY MONIQUE TERRAZAS
Economic Growth Cannot Withstand More Protests The Good
s Going Up Home Price
Bill Rawson, Chairman of the Rawson Property Group, recently drew attention to an article published in the 12 January 2013 issue of The Economist, which shows that South African home prices performed significantly better in 2012 than those of 85% of the world’s developed countries. South African homes increased in value by 5% year-on-year in 2012. Only Hong Kong (21.8%) and Austria (10.1%) performed better. Nine of the 18 countries listed in the survey saw their homes lose further value in 2012, the worst being Spain (-9.3%), the Netherlands (-6.8%), Ireland (-5.7%) and Italy (-4%). While South African home prices have risen by only 12.2% since the first quarter of 2007, the local property market looks fairly stable in comparison with the USA (-20.5%) and Japan (-14.2%) over the same period. Slow growth (2.5%) has been predicted for 2013, which means, in real terms, that South African homes will lose value in the coming year. But, says Rawson, although this may be true of the market as a whole, in the lower priced brackets increases of up to 10% are still being seen annually. Given that The Economist’s survey shows that South African residential property is still undervalued by 5% on the price to rent ratio index, South African property investors can look forward to further significant rental growth and steady capital growth. The fact that South African rentals are well above average, in relation to the global figures, suggests that capital values must continue to rise.
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March 2013 SA Real Estate Investor
The Bad
A Blow GDP Takes
South Africa’s economic growth is not strong enough to withstand any further damaging events without serious consequences, according to the latest Bankser vAfrica Economic Transaction Index (BETI), the broadest and fastest indicator of broad economic activity in South Africa. Last year’s strikes overshadow any prospects of 2013 being the year of an economic bounceback, says Mike Schüssler, chief economist at economists.co.za. And while the last three months of positive quarterly increases indicate a recession is not on the cards, stagnation in the economy is continuing. The BETI indicates that economic activity at the start of 2013 is much slower than it was at the start of 2012, which is likely to have a big impact on the rest of the year’s GDP growth rate. “A slow start means that the rest of the year has to produce so much more to catch up for lost production in the beginning,” says Schüssler. The BETI is currently only up by 1% relative to January 2012, making it the lowest year-onyear improvement since June 2010 when the economy was recovering from the recession of 2008/09. “Workers feeling the pinch are demanding more cash, while the economy is making increased economic activity difficult,” he adds. “We are, indeed, in a very tight spot.” The January quarter-on-quarter growth figure of 1.6% indicates a slight pick-up in the growth trend, but not enough to halt the declining yearon-year trend. The BETI is currently indicating that GDP growth will still be positive, but low.
The Ugly
Securitising
Loans
While a court ruling in the US has, essentially, declared the practise of securitising home loans illegal, local banks securitise loans worth about R30 billion a month, according to the South African Banking Association’s website. Banks securitise loans by bundling them together using a special purpose vehicle (SPV) and selling them to third party investors, who trade them on the capital markets. According to NewEra, an organisation campaigning for transparency in banking, banks are not upfront on this issue. The reason is that legally, once a bank securitises a loan, it loses all rights to the asset. This means the bank cannot, for example, repossess a property on which a loan has been securitised, because the bank no longer has any rights to the property. The implications of this are staggering: thousands of homes may have been illegally repossessed by banks in South Africa. The issue is already being tested in court. According to a report in Business Report, foreclosure proceedings in the Western Cape High Court against homeowner Melric McEpieuw has been postponed to enable Absa to produce the documents relating to the securitisation of the home loan and to disclose the buyer. Absa apparently f irst claimed that the documents were destroyed in a fire before admitting that the home loan had been securitised. In the meantime, NewEra is encouraging all homeowners to request the National Credit Regulator (NCR) to investigate the practise of securitisation in South Africa, which is clearly an infringement of our rights as credit consumers. Visit www.newera.org.za for more information. www.reimag.co.za
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RESIDENTIAL HOT SPOTS
PROVINCIAL PERFORMERS
Highlighting the top performing suburbs in the major provinces, based on highest rate of annual inflation and indicated for e ach value band. Mid Value : R250k – R700k
High Value : R700k – R1.5mil
Gauteng
Luxury : R1.5mil +
Gauteng
Gauteng
Cosmo City - City of Johannesburg
20.84%
Refilwe - City of Tshwane
18.69%
Fernridge Estate - City of Johannesburg
17.23%
Honeydew - City of Johannesburg
18.42%
Sydenham - City of Johannesburg
17.23%
Victoria - City of Johannesburg
10.98%
Summerville - City of Cape Town
25.00%
Avalon Estate - City of Cape Town
25.77%
Schoneberg Estate - City of Cape Town
21.38%
Lindida - Stellenbosch
18.87%
De Molen - Swartland
15.62%
De Zalze Golf Estate - Stellenbosch
11.54%
Alexandria - Ndlambe
24.94%
Headlands - Buffalo City
11.22%
Bonnie Doon - Buffalo City
Tyutyu North - Buffalo City
22.78%
Rosemount - Buffalo City
11.02%
Vincent - Buffalo City
Western Cape
Western Cape
Eastern Cape
Western Cape
Eastern Cape
Kwazulu Natal
Eastern Cape
Kwazulu Natal
Shakaskraal - Kwadukuza
16.90%
Stanger Manor - Kwadukuza
Shastri Park - Ethekwini
15.53%
St Winifreds - Ethekwini
Free State
10.38% 8.37%
Kwazulu Natal 11.03%
Zinkwazi Beach - Kwadukuza
11.26%
9.93%
Dunkirk Estate - Kwadukuza
8.36%
Free State
Free State
Merriespruit - Matjhabeng
24.74%
Jordania - Moqhaka
13.58%
Woodlands Estate - Mangaung
8.96%
Phuthaditjhaba-A - Maluti A Phofung
19.96%
Panorama - Moqhaka
11.94%
Kwaggafontein - Mangaung
6.06%
FREE STATE
Presenting the Top 5 suburbs per area value band in Free State based on the highest rate of inflation for a 1 and 7 year period. The median represents the current median value for the suburb. #
Suburb
1 year
Median
#
Mid Value : R250k – R700k
Suburb
7 year
Median
Mid Value : R250k – R700k
1
Merriespruit - Matjhabeng
24.74%
R 410 000
1
Phuthaditjhaba-A - Maluti A Phofung
289.43%
R 400 000
2
Phuthaditjhaba-A - Maluti A Phofung
19.96%
R 400 000
2
Petrusburg - Letsemeng
219.77%
R 460 000 R 480 000
3
Welkom Ext 19 - Matjhabeng
18.62%
R 360 000
3
Paul Roux - Dihlabeng
207.20%
4
Marquard - Setsoto
15.63%
R 430 000
4
Welkom Ext 19 - Matjhabeng
198.21%
R 360 000
196.27%
R 380 000
5
Ehrlichpark - Mangaung
14.24%
R 610 000
5
Blomanda - Mangaung
1
Jordania - Moqhaka
13.58%
R 900 000
1
Hospitaal Heuwel - Dihlabeng
121.96%
R 1 050 000
2
Panorama - Moqhaka
3
Universitas Ridge - Mangaung
11.94%
R 980 000
2
Harrismith Central - Maluti A Phofung
115.70%
R 760 000
9.21%
R 1 400 000
3
Sasolburg Ext 4 - Metsimaholo
114.34%
R 840 000
4 5
Hospitaal Heuwel - Dihlabeng
8.76%
R 1 050 000
4
Panorama - Moqhaka
110.02%
R 980 000
Park West - Mangaung
8.69%
R 1 000 000
5
Roodia - Metsimaholo
106.82%
R 740 000
115.73%
R 2 550 000
73.62%
R 1 500 000
High Value : R700k – R1.5mil
High Value : R700k – R1.5mil
Luxury : R1.5mil+
Luxury : R1.5mil+
1
Woodlands Golf Estate - Mangaung
8.96%
R 2 550 000
1
Woodlands Golf Estate - Mangaung
2
Kwaggafontein - Mangaung
6.06%
R 1 700 000
2
Hillsboro - Mangaung
Disclaimer: Lightstone applies advanced statistical methods to a comprehensive property data base - compiled from the Deeds Office, the Surveyor General and other sources - to generate property market data, insights, trends and forecasts. Despite the statistical and actuarial rigour applied, Lightstone cannot guarantee the accuracy and reliability of the data. Furthermore, any information provided does not amount to advice and may not be applicable in some cases. Lightstone does not take responsibility for any losses incurred as a result of any person acting or omitting to act as a result of the publication of this information.
REI Residential
Is Street Justice The Answer?
JHB Gets General Valuation Roll
Rental Golden Rules
During the Constitutional Court hearing on the municipal rates boycott, Chief Justice Mogoeng Mogoeng commented that the court’s decision would have a profound effect on the approach to service provision, the failure to pay for services, and protests related to service delivery. His comment summed up perfectly the depth of the conundrum facing the court, for as pointed out in its report on the matter, two key questions are raised by the dispute: * Should taxpayers be expected to continue paying municipal rates and taxes ‘for ever and ever’, even if they receive poor services? * Could they stop paying, or would you have to ‘turn to the streets’ in protest against poor service delivery?
The 2013 General Valuation Roll is in its final stages and will come into effect on 1 July 2013. The valuation roll allows the City to generate rates on what it calls an equitable basis and property owners will be notified of their new values in their February municipal statements. This is the word according to the City of Johannesburg’s property valuer. This allows the City to generate rates on what it calls an equitable basis and propert y owners will be notified of their new values in their February municipal statements. The City of Johannesburg’s website sites the latest General Valuation Roll as the basis for market value of all properties as of 2 July 2012 as an indication of the most likely price a property would realise on the open market by willing parties.
So you’re looking to rent a property? Michelle Dickens, Managing Director of TPN, points out that by following a few golden rules, renting is a happier process for landlords and tenants alike. Dickens says that the majority of tenants have a proven track record indicating a history of Good Standing tenant behaviour. Landlords of a house or flat should always carry out a thorough tenant check before signing a lease agreement. “Successful landlords match quality tenants with their carefully selected rental stock. Tenants require good value, good location, and neatly maintained properties,” she continues. “The dynamic of the tenant / landlord relationship is often fraught with frustration but following these steps will help to ensure the tenant understands his rights as well as his obligations.”
Valuable Input
Cristina Rosa, Property Specialist, Engels & Volkers
Richard Rubin, CEO, Aengus Properties
“The younger you are when you buy the quicker you can pay your property off and the more debt free you can be. With less debt comes more credit, should you want to invest in more properties later in life.”
“Key to our success has been understanding that students are not that different to any other type of residential tenant. They’re looking for safe, well managed accommodation in a convenient location.”
www.reimag.co.za
Kay Geldenhuys, Manager, Ooba
Lanice Steward, MD, Knight Frank Anne Porter
Bill Rawson, Chairman, Rawson Property Group
“When you start planning to buy a house, the most important thing to do is get your financial affairs in order early, a good credit rating can’t be achieved overnight, you should do what you can to score well right away.”
“When looking to buy, the financial health of a sectional title scheme should be assessed carefully. Ask the agent for copies of the financial statements and check whether the levies are being put to good use.”
“South African homes increased in value by 5% year-on-year in 2012. Only Hong Kong (with a 21.8% growth rate) and Austria (with 10.1% growth) performed better.”
March 2013 SA Real Estate INVESTOR
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SMART MOVES
BY DR MARNUS WESTSTRATE
As My Properties Live And Breathe Long term projections
M
y proper t y por t fol io is a l ive, constantly changing and growing month by month. True, it is a slow growth, but there is constant movement nonetheless. This slow movement is one of the things that makes property investing so appealing. You can buy a few properties, have letting agents manage them, and then sit back while your cash f low grows to break-even, earning a steady income through capital growth in the mean time. But, every so often it becomes necessary to delve into the details. In last month’s article on property software I wrote about projecting future performance and how the right software can help with comparisons when buying a new property. I now raise another question: What about managing your existing portfolio? Among other things effective portfolio management has two requirements: being notif ied of important events or when problems occur so action can be taken, and keeping track of changes to your portfolio as they occur. Take maintenance for example, planned or unplanned – while not time consuming when managed by an agent – it does boil down to a negative effect on your cash f low. Vacancies can also be sudden killers of income, and that aside, interest rate changes are certainly the number one contributing factor in sudden cash f low changes affecting your return on investment. Keeping track of these events can be cumbersome, and so can tracking property valuations or even remembering to value your properties from time to time which is essential for knowing when to refinance. I believe good 24
March 2013 SA Real Estate Investor
Property Software not only helps you do good projections, but adds even more value by explicitly tracking the performance of your portfolio over time and assisting with the management thereof. If I come back to a projection I did for a property six months or a year later much would have changed: there should have been some capital growth, a rental increase and perhaps interest rate changes. Effectively “Year 0” has moved forward, and so the values must be updated while incorporating the last year’s performance in the new projection. If the initial values are now lost I’m not really gaining, but keeping track of them as past performance will have considerable benef it for making assumptions about the future. Detailed tracking is important when it’s needed. Interest rate changes or unexpected maintenance such as a burst geyser is seldom considerate in the sense of conveniently occurring at the start of a f inancial year. Tracking them requires a fine grained monthly view of your portfolio, while the relatively slow growth of a property portfolio necessitates a long-term yearly history and projection of your investments. Good property software should provide you with both, and make switching between such monthly and yearly views simple and intuitive. W hen it comes to reminders I see t wo significant needs: firstly, being reminded of expiring leases so you can organise a timely renewal. Experience has taught that not all letting agencies are as on top of this as they should be; yet, when necessary, replacing a
tenant in time is essential for avoiding costly vacancies. The second is receiving notifications when you haven’t received your rent on time or are forgetting an outgoing payment that’s due. Getting email reminders for these routine tasks is a simple feature with far-reaching benefits. Track ing the past gives a much better ind icat ion of t he f ut u re, a nd ac t ively managing your portfolio can help keep that future rosy. With the right property software you can know where you stand, maintain peace of mind, and enjoy the sense of achievement that goes with it.
PROPERTY SOFTWARE Property Software can assist in effective portfolio management by:
1
Tracking changes such as new valuations, rental increases and interest rate changes as they occur.
2
Keeping track of past performance which should be the basis for future decision making.
3
Sending you reminders to check rent received and outgoing payments that needs to made.
4
Notifying you of expiring leases so you can organize a timely renewal. RESOURCES 88 Pockets www.reimag.co.za
The All-in-One Property Investing Software
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Rental Tracking
STRATEGIES
BY KOOS DU TOIT
Property Investment Avoid a short-term perspective
O
ne of t he bi g g e s t pit f a l l s i n propert y investment is a shortterm perspective, which obscures the reality of the property market, reduces the quality of investment decision-making and overlooks opportunities to build true wealth based on inf lation-liked passive income and capital growth that can accrue for generations.
Obscuring the reality Year-on-year and month-on-month data are published regularly in the media on a range of topics - from inflation to house price growth. Because the data - and its interpretation - is focussed on the short term, the longer-term picture is often obscured. All markets - including the stock market and, to a lesser extent, the property market - move erratically over the short term. But over the long term - 20 years - the short-term volatility evens out and the curves of the graphs smooth out, revealing the real long-term movements. In the case of propert y prices in South Africa, short-term data indicates that house price growth is currently slow if not stagnant. But if the long-term data is considered, there is no doubt that house prices in South Africa have continued to rise, steadily but surely, even when the data is adjusted for the effects of inflation. The longer-term picture also clearly reveals the cycles in the property market. In South Africa, the property cycles usually stretch between 5 to 7 years, while the macro property cycles tend to play out over 20 years or so. 26
March 2013 SA Real Estate Investor
Quality of investment decisions
Given the reality that a short-term perspective obscures the long-term trends and the market cycles, it is easy to understand how a short-term perspective can seriously impair the quality of investment decision-making. Many investment advisors and experts warn investors not to over-react to short-term volatility and to stick to their long-term plans, because over the long-term, the short-term volatility is smoothed out and the long-term trends begin to yield results. Unfortunately, many investors disregard this advice and react to short-term volatility by selling at a loss and then missing the recovery which would have seen them recoup their losses. This is also clearly evident in the property investment market when over-eager property investors buy overvalued properties at the height of the boom phase of a cycle. When the market falters, they try to sell the properties, but in the down market they cannot sell the property for a profit - and sometimes not even for the price they paid for it. A few years later, when the cycle turns up again and property prices are on the rise, these investors realise that they could have sold the property for much more if they had waited a few years and, in addition, that they will never again be able to buy a similar property for the price they paid a few years ago - even if that price had been overinflated at the time.
was around R400 000 - and patiently held their investment for the long term, will understand the value of a long-term perspective, given that the average house price is now standing at around R900 000. Over 20 years, the average values of properties have doubled, and if the properties were bonded, those bonds are now paid off. So, in addition to massive capital growth and the rental income these investors received over the last 20 years, they now have a bond-free property still producing steady capital growth as well as an ongoing inflationlinked passive income for as long as they hold the property. And the same will happen with properties acquired today and held for the next 20 years.
How long is long? If you a re invest ing in proper t y, you r investment horizon should be no less than the duration of a mini-cycle - at least seven years. If you really want to see great returns, keep your investment property for at least a macrocycle of around 20 years. But if you want to create infinite returns on your property investment, plan to keep it forever. The longer you hold a property, the higher the return on investment, because the longer you hold the property, the more rental income and the more capital growth the property generates - and if you acquire the property in a trust, that could mean for generations beyond your lifetime.
Opportunities to build true wealth Investors who bought property in the 1990’s when the average house price in South Africa
RESOURCES P3 Property Group
www.reimag.co.za
GETTING STARTED
BY KOOS DU TOIT
Buy-To-Let
too good to be true?
C
reating wea lth through the buy-to-let property investment system is so simple that many people believe it’s “too good to be true”. How can ordinary South Africans create a stream of passive income that keeps pace with inflation year after year, and benefit from capital growth at the same time? How do they acquire a portfolio of properties without lump sum investments or large monthly contributions? And how can all this be done without special skills or knowledge, and without much time or effort? It seems just too good to be true. But when you look a little deeper, you find it is “not too good to be true” - it is just a tried-andtested system that has proven over time to be the best, and simplest, way to financial freedom and wealth.
Passive income and capital growth Investing in a buy-to-let property allows you to create a stream of passive income that keeps pace with inflation year after year, because the property is generating a monthly rental income that increases each year with inflation, or the percentage stipulated in the lease agreement. This income is passive, because you receive this income regardless of whether or not you are working and regardless of where you are in the world. At the same time as it is producing this passive income month after month, the property is also appreciating in value year after year. And this capital growth can be accessed without selling the property (and thus losing the monthly passive income) through, for example, refinancing or a second bond. 28
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Acquiring a portfolio of properties For most South Africans, a portfolio of properties seems out of reach, because they do not have a lump sum to invest and they cannot afford huge monthly investment contributions. But you don’t need R500 000 to buy an entry-level property, you merely need a bond. Establishing a trust in which to acquire your investment properties, will not only provide asset protection, but also allow you to obtain multiple bonds for multiple properties. And using the services of a professional bond originator specialising in buy-to-let property finance, such as P3 Bonds, will ensure a higher rate of success in obtaining the right finance. But, of course, the bond needs to be repaid each month and most people cannot afford another bond repayment. But remember, the property is generating a monthly income and, if you have selected the right property in the right area with the right bond finance, the rental income should cover most - if not all - of the monthly property expenses, including the monthly bond repayments. Over time, as the monthly rental income increases and the biggest monthly property expense - the bond repayment - remains fairly static, the property begins to produce a growing monthly profit. This can be used to pay the bond off faster, or to cover the shortfall on your next investment property. And the system can be implemented over and over until you have a portfolio of properties.
Efficient and effective Investors really don’t need any special skills or knowledge, or much time or effort to build
such a portfolio of properties, because they can tap into the expertise of professional property investment groups, such as the P3 Investment Group, by simply implementing their triedand-tested systems. These systems not only provide step-by-step plans tailored to your unique goals and circumstances but also provide the essential services and products to ensure success, such as custom-designed software to ensure the right properties are acquired, and access to approved specialist services such as rental management agents to manage the tenants and rental insurance to provide cover against late or non-payment of rental and the cost of a possible eviction. If investors use these resources available to them, they will f ind that building and managing a buy-to-let property portfolio really requires a minimum of time and effort.
Great, but not too good to be true Using t h is simple but h igh ly ef f icient tried-and-tested system, ordinar y South Africans can acquire a buy-to-let investment proper t ies using bonds to f ina nce t he acquisition and using the rental income to cover the monthly property expenses. In this way, they can build up a portfolio of buy-to-let properties that generates an inf lation-linked passive income for life, while also producing capital growth - and all this without a lump sum investment or hefty monthly investment contributions, and without special skills or a massive investment of time and money.
RESOURCES P3 Investment Group www.reimag.co.za
GETTING STARTED
Student housing
BY CAJ VAN ZYL
Tapping into a Growing Market
W
ith the change in our democracy and our diff icu lt employ ment env ironment, t he h istor ica l ly disadvantaged are now flocking to get educated and gain skills at tertiary level. This all is great news for the student accommodation market. Most universities a re inundated w ith applications from learners. These institutions have not kept track with the growing demand for student accommodation and can only offer limited space on campus to the these learners. As a result of this, the private student accommodation market has grown exponentially. “This is an untapped market, particularly in emerg ing economies,” say s CEO of student accommodation specialists, Aengus Investment Proper ties, R icha rd Rubin. “Whether you’re in Rio de Janeiro or Accra, there is a severe shortage of safe, secure, affordable accommodation for students globally. It’s proving to be an excellent investment opportunity regardless of macroeconomic conditions affecting the property environment.” Historically, accommodation for students has been provided by tertiary institutions themselves, but as operating budgets are slashed and property becomes increasingly expensive to acquire and maintain, many universities are outsourcing the provision and management of student accommodation to independent companies and in many instances partnering with them to do so. The largest component of learners nationally is now on the NSFAS (National Student Financial Aid Scheme), a multi-billion rand government fund put in place to assist students with funding at tertiary level. The scheme provides a “soft” 30
March 2013 SA Real Estate Investor
loan to the student to cover expenses such as accommodation, tuition and pocket money. The loan needs to be paid back once the student gets employment after his/her studies. You would typically find high numbers of NSAFS students enrolling at the tertiary institutions in areas such as Johannesburg, Pretoria, Bloemfontein, Durban and Port Elizabeth. Cape Town, Stellenbosch and Potchefstroom have larger numbers of private students and also much higher asking prices for student accommodation. This demographic prof ile lays the foundation for st udent accommodation investments and hot spots.
Requirements for accommodation The 2011 ministerial report on student housing makes scathing conclusions on the state of student accommodation currently available and the severe shortage of quality accommodation nationally (currently the national shortage is estimated at 200,000+ beds with over 500,000 registered students). As such, a variety of minimum accommodation standards have now entered the equation and various departments such as the Department of Health, local city councils and the institutions themselves are now actively involved in regulating the industry. High incidences of slum lording and anti-social behaviour by the students has been noted nationally and the need for a more formal and regulated approach has become apparent. In Johannesburg you will find the commune policy – a policy enforced by the Johannesburg
Cit y council and a guideline for student accommodation establishments. The policy requires that you apply for consent-use rights on a residential zoned 1 property (up to 10 people on a property, over 10 people rezoning is required) and comply with minimum standards with regards to amount of people on the premises, ablution, parking, minimum room sizes, communal areas, approved building plans and caretakers. Instit utions such as the Universit y of Johannesburg now have accommodation accreditation policies in place. These policies are relevant when housing NSFAS students and restrict the landlord to a standard price point (currently R2500pm for 10 months) with no additional charges allowed.
Challenges for student accommodation landlord Traditionally most students could rent a property on a fully inclusive basis. Electricity and water would be included in the price. This model has suffered severely as a result of the continuing price increases by Eskom and the reputed negative behaviour of students with regards to electricity conservation. Housing NSFAS students requires the landlord to offer fully inclusive monthly rental. This has forced most landlords to consider www.reimag.co.za
RESIDENTIAL Denise Viljoen, GM of Private Student Accommodation, answers some questions on student letting.
greener energy solutions as well as restrictive measures on utilities consumption such as postpaid electricity meters per bedroom. The standard student enters into lease agreements of 11 months (NSFAS 10 months) thus causing a standard vacancy of 1-2 months on the property. It is not often that you will enter into a 12-month lease agreement, thus provision for vacancy needs to be built into your cash flow model. Landlords housing NSFAS students that are located more than 2km from the university, now also need to provide daily transport services, an additional cost that needs to be budgeted for.
Key features that students require in a property
Letting agents
Your hotspot areas would typically be located within a 2km radius around the major national campuses. Western Cape and Potchefstroom properties demand a much higher average rental due to limited supply, specifically in areas such as Stellenbosch. In these areas it is common place for parents to buy a student property whilst their children are still studying. These areas also have a much higher entry price point yielding a lower return when compared to properties in Gauteng, Kwazulu-Natal and Bloemfontein. Factors to consider would be capital appreciation of the property vs income yield.
When investing in student accommodation it is important to employ a reputable and specialist letting agent that understands the student accommodation environment with all of its challenges. There is a big difference in managing a townhouse occupied by a family vs a student commune/residence occupied by multiple students. Regulations with regards to noise control, health and overcrowding and the management thereof become applicable. Properties can be forced to close down if these regulations are not met. The effective management of securit y deposits, compliance with the EAAB, the Rental Housing Act, FIC Act as well as financial and performance reporting are all items to look for in a letting agent. Understanding the local pricing environment and the required accommodation needs are integral qualities of the agent. Some areas have a much larger need for shared accommodation and other areas require more upmarket and private accommodation. Post graduate candidates and visiting lecturers come with their own requirements. www.reimag.co.za
Most students require a room that is semifurnished (bed, desk, wardrobe, curtains). Communal washing, bathroom and cooking facilities are the order of the day. Typically price points for private accommodation (cottage, flats) will be much higher than communal living. The provision of Internet services on the property has now become a reality. Walking distance to the institution carries a price premium. The provision of transport services is required if the property is more than 2km from the institution.
Hotspots
What do students want in accommodation? First of all safety and security especially in the current climate of crime in SA. Student houses have become a soft target for criminals who know that students tend to be laid back, also that some students have classes at night and have to walk back home. Secondly properties within walking distance to their institution, some students do not have access to their own transport and don’t want to pay extra for public transport. What makes them prefer one place to another? Some key factors are visible security (eg, electric fencing, panic buttons, razor wire, fencing, outside lighting) and walking distance to their institution. Cleanliness and tidiness and good maintainance. What are added extras that students request? DSTV, Internet access, cleaning service, maintenance service, furnished accommodation. Where is there a need for accommodation? Anywhere in SA where there is a study institution, a lot of service providers (accommodation) cater for the larger institutions but tend to forget about the smaller ones (eg, private colleges, IT colleges). What areas are the most popular? Areas adjacent to their institution. What is the average price that investors get when letting to students? Difficult to say as prices vary, depending on the availability of accommodation, area, city, institution ect (eg, for a room in Bloemfontein R2000.00 pm and the same room in Stellenbosch would get you R3000.00 pm). What risks do they carry when letting to students? Student accommodation is a seasonal business, accommodation are mostly let during the months of January and February. Risks will be if the students quit school after the first semester you might sit with an empty room for the remainder of the academic year. Damages, if student groups in communes are not properly controlled. How long do students sign leases? From the day of occupation to the end of December.
RESOURCES Let And Stay Firststay Student Accomodation Private Student Accomodation March 2013 SA Real Estate INVESTOR
31
IMPROVING
BY ANGIE REDMOND
Add Value To Your Kitchen
A
Without breaking the bank
re you planning a kitchen renovation? A well thought-out and detailed plan is a must before you begin remodeling your kitchen. This plan should be designed keeping in view the current good and bad aspects in your kitchen. You also need to decide whether you plan to design the kitchen yourself, use a kitchen or interior designer or work with a reputable kitchen installer or home centre. Here are some tips and ideas on improving and remodeling your kitchen without breaking the bank account.
Use 3D rendering With 3D rendering software, many of which are free, you can now create and edit images of your ideal kitchen. Before spending any money on renovations, experiment with 3D rendering to finalise the ‘look’ for your kitchen.
Decide on colour schemes For a sunny look use warm colours such as red, orange and yellow. Large kitchens that receive a lot of natural light may look better with a cool colour scheme, in leafy green and sky blue. You can also use neutral colours such as white and grey and have one wall painted in a brick finish for a more dramatic look.
Consider the shape The kitchen is no longer just a room meant for cooking. It is now a space for families to eat together and socialise with guests. Reorganise your kitchen into a U or L shape, and keep the sink, cooking range, and refrigerator in a 32
March 2013 SA Real Estate Investor
triangular pattern. This arrangement will turn your kitchen into a pleasant communal area.
Fixtures on a budget With so many f looring options available, consider the advantages and disadvantages of the different options. Ceramic tiles, wooden f loors and eco-friendly materials are good options for good looking and durable flooring, but so are polished concrete and natural stone. How you use your kitchen should determine the most practical flooring within your budget. Kitchen f looring: Hardwood or laminate floors add class to your kitchen. Ceramic tiles that look like marble is also a great idea to be considered. Sink settings: A stainless steel deep inset sink with two or three compartments and a fancy tap fitting for your sink should give your kitchen an instant facelift. Granite top overlays: Opt for the granite overlays that simply go on top of your existing kitchen counter surface. It looks almost as good as the real thing! Cupboard doors: Simply redoing the cabinet doors in bold dramatic colours will infuse new life into your kitchen.
Decorative lighting Using light fixtures strategically can make your kitchen dazzle. Skip fluorescent ceiling fixtures and go for mini chandeliers, dinette pendants, recessed lights and island track lights. Our best recommendation is to get under-cabinet lights. They make your kitchen look ultra-glamorous.
The role of your kitchen The perception surrounding the role of a kitchen in the dynamics of the home has been redirected. With lifestyles becoming busier, faster and more convenience-centred, the kitchen has once again taken the role of the multifunctional heart of the home, where entertainment, work, cooking and
OPTIMUM SPACE Optimum workspace Modern trends show that nowadays couples or nuclear families often cook together and share kitchen chores. Thus workspace in today’s kitchens should be utilised such that more than one person can work efficiently without getting in the other person’s way. You can also create distinct work centres by separating workspaces with sinks, microwave or other appliances. Storage space Modern trends also indicate that nowadays with women working out, very few items are cooked from scratch and storage space for items needs to be increased. Thus cabinets have entered the scene in a big way. One can choose from frameless and framed cabinets and can order from custom or standard designs. Check for rollout, tiltout and other storage features inside the cabinets.
www.reimag.co.za
RESIDENTIAL A BASIC PLAN If you are going to be undertaking a do-it-yourself kitchen remodel, below are some common design mistakes:
relaxing all take place in one space. As this room becomes the veritable central nervous system of the home, people are placing much higher importance on its design, functionality, aesthetics, quality and its longevity But, does an investment of this size have more than just ‘lifestyle and convenience” returns? Does it proportionally increase the value of your home? According to experts, when it comes to selling property that has been developed or renovated, the kitchen can play a significant role in the selling process. Architects, real estate agents and luxury kitchen suppliers all agree, the kitchen is vital in clinching the sale. Although a high-end kitchen may not heavily influence a property’s selling price, it will ensure that the property sells much faster, with less negotiation. Pola Jocum, one of Seeff Properties senior real estate agents, offers her opinion on the issue: “A top-end home in an expensive area is less likely to achieve its greatest potential
www.reimag.co.za
selling price, if it is not accompanied by a topend kitchen brand.”
Kitchen sinks Sinks are an important element in any kitchen. These are available today in a variety of colours, materials, sizes and design options to suit every pocket. You can choose from cast iron, stainless steel, plastic, and top-mount or under-mount models. You can also select from single-bowl, double-bowl, deep and shallow models.
Avoid common design mistakes
The most important consideration for kitchen design is allowing enough clearance for cabinet doors, pullout drawers, dishwasher doors and accessories that extend into the room. Inside corners are a particular problem for clearance. Be sure drawers and doors have enough room to fully extend. Another area where mistakes can occur is where the trim and molding meet cabinets, especially if custom-sized appliance and cabinets are used. If recessed lighting under the cabinet is used, be sure to recess the bottom of the cabinet so the lighting doesn’t show. Make sure all existing electrical outlets are appropriately placed in the new configuration. If the counter has an overhang, make sure the drawers and doors still operate freely. When commercial appliances are used, their heavier weight may require extra flooring support, or they may need to be built up to match counter height.
When working with professionals; they can prepare detailed working drawings for the installation contractor to follow. A certified kitchen designer knows how to organise materials and elements in the space provided. However, this is stil l your k itchen and ultimately the space should be designed around your needs and wants.
March 2013 SA Real Estate INVESTOR
33
STRATEGIES
BY JOHN ROBERTS
What Is The Return? I
On your investment
nvestments have little meaning without a return. Property is no different, whether that property is the primary residence or one of the pillars supporting the portfolio. By def inition, the return on investment (ROI) is a performance measure evaluating the efficiency of an investment or comparing the efficiency of a number of different investments. In calculating ROI, the benefit or return is divided by the investment cost with the result expressed as a percentage or ratio. The versatility and simplicity of this equation means ROI is a popular metric - when the investment has a negative ROI or there are other opportunities with higher ROIs, the investment should not be undertaken. In short, investing R500000 into an account that pays 7,2% interest annually (R36000), means the ROI is 7,2%. Similarly, purchasing a R500000 house and renting it out for R3000 per month, thus R36000 per year, translates into an ROI of 7,2%. Applying ROI to property can become more complex when the investment is refinanced or a second bond taken out. The interest rate on the second or refinanced loan may increase and new fees charged, both of which will reduce the ROI when applied to the equation. The property may also require additional maintenance costs and taxes and an increase in utility rates if these costs are borne by the owner of the residential rental or commercial property. However, these are not insurmountable issues given a small amount of mathematical application. Again taking that R500000 property example, let us assume it was a financed purchase rather than a cash one. In that case, the buyer only covered the costs associated with that purchase, namely the bond, registration and transfer fees and other sundry costs, amounting to R13600. The bond repayments would be R5000 monthly or R60000 in the first year. 34
March 2013 SA Real Estate Investor
Coupled with the initial cost of R13600, the investor has sunk R73600 in the first year. If the monthly rental income was R3000, the R36000 annual rental would be offset against the cash flow. The ROI would show 50% in the first year in this simplistic calculation. Not factored into the equation are the rates and taxes, maintenance costs, body corporate levies if applicable, future capital gains due on the property and the tax incurred against the income. However, what this equation does illustrate is that ROI on property can be quite high when coupled with gearing or leveraged finance. Essentially, it means growing the investment and maximising the ROI by playing with other people’s money - in this case, the bank’s capital - rather than your own. However, a common mistake is confusing ROI with cash flow. In this example, the cash f low is the difference monthly or annually between the income generated by the rentals and the required expenditure that must come from your pocket. The R5000 bond repayment against the R3000 rental means the investor is liable for another R2000 each month to cover the investment. That is also an opportunity cost investors must factor into their decision-making process when purchasing the property, as it raises the question on whether that R24000 annual cost could be better spent on another investment. However, it does mean that while the ROI on the property is 50% against the 7,2% gained
by leaving the capital in the bank, that ROI is not immediately obvious in terms of growth in the bank account. It will only come to fruition many years down the line, underpinning the reality that property is a long-term investment commitment. It is an element of which investors must not lose sight when calculating that opportunity cost. Property is not something for which investors enter and exit the market swiftly to make a quick buck. The associated costs alone prohibit that approach. Where the ROI on property comes into its own is as a retirement income. Purchasing those properties early enough that they have evolved into income-generating investments, rather than ones eating into cash flow, paves the way for a solid monthly rental income. There still remains the reality that those rental properties have an underlying appreciating capital asset that, despite the associated costs including capital gains tax, will offer a bulk cash injection on liquidation. South Africa has a key housing shortage relative to its population and as the middleclass grows exponentially, the demand for housing comes under increasing pressure. The economics of supply and demand mean house prices will continue rising, paving the way for investors to capitalise on ROI.
RESOURCES Just Property Group
www.reimag.co.za
SMART MOVES
BY ANGIE REDMOND
Home Insurance
A
new house brings with it a wealth of new responsibilities. One of these is that you need to consider what will happen to you, your family or your house if your circumstances change. No matter how unlikely this may seem, life is full of surprises, and you need to plan for every eventuality. The best way to make sure that you are covered in a crisis is to have sufficient insurance in place to help you through any difficult times. “There are two main types of insurance that a homeowner should have,” says Craig Young,
A Small Price To Pay For Peace of Mind Managing Executive of Insurance at ooba, South Africa’s biggest bond originator and provider of insurance cover for all property matters. “In some cases your bank will insist on some form of cover; in others it is optional – but in all cases it’s a good idea.”
Buildings insurance Buildings insurance is one of the most important policies you will purchase. It covers the structure of your home as well as all the permanent fixtures and fittings in it, against
damage caused as a result of unexpected events like fire, flood and lightning. Your bank will insist that you have such cover, but they can’t compel you to take their insurance offering. If you wish, you can obtain buildings insurance cover from any accredited insurer, freeing you up to compare costs, coverage, benefits, reputation and service. “Buildings insurance protects your home from costly damage caused by unforeseen circumstances,” says Young. “For instance, if your geyser bursts, the insurance will cover its replacement and any consequential loss up to a certain limit such as the costs of home repairs and painting. “Your home is usually your most expensive asset, but maintaining a home can be expensive, and when unplanned events occur, it’s incredibly beneficial to have this kind of insurance as a lifeline,” says Young. “This is why banks make it compulsory – they are safeguarding your asset.”
Bond protection insurance Of course, when you consider buying a property, you work out whether you can afford the repayments – and if you’ve had your bond approved, obviously your bank thinks so too. But both you and your bank have to count on you remaining employed and in good health. “It is very important to consider what would 36
March 2013 SA Real Estate Investor
www.reimag.co.za
RESIDENTIAL FOR BUILDING INSURANCE: Look at the specified amount or limit for buildings cover protection. How much will it cost to rebuild your home? Not just the resale value as this may differ wildly. Does the policy cover accommodation for you, should your home become uninhabitable? Does it cover outside buildings? If you are in a high-risk flood area, are you covered? In addition to the overall structure of your property, what permanent fixtures and fittings are covered, if any? Do you live in a high crime area? What about the style of your house? Do you have any unusual features? Or is your property a listed building? happen to you and your family if, for some reason, you were unable to pay your bond for any period of time,” says Young. “Bond protection insurance provides comprehensive cover in the event of death, disability, dread disease or retrenchment.” Your bank may not insist that you have this type of cover, but Young advises you consider it, nonetheless. “No one likes to think of bad luck befalling them, but if something bad does happen to you, the best outcome is that you or your family won’t lose your home,” he says.
What it costs
When you’re buying a house, the last thing you want on your plate is an extra expense. Just remember that a small monthly payment now can save you from enormous financial strain later. But of course, you’ll want to know exactly how much it will cost you and whether you’re getting the best deal. “Because insurance cover can be tailor made for your specific circumstances, taking into account your situation as well as the value of your house, it’s not possible to put a single, straightforward cost to bond protection and buildings insurance,” says Young. For buildings insurance, the structure of your house – what the building and the roof are made of – as well as the type of residency – holiday home or permanent residence – all play a role in the risk assessment and therefore, the cost of your premiums. This type of cover will always be subject to exclusions and excesses, but will
“Just remember that a small monthly payment now can save you from enormous financial strain later.”
cover the bulk of your expenses if the loss forms part of an insured event. For bond protec t ion insu ra nce, you r premiums are determined in line with various socio-economic factors which include monthly income, age, gender, smoker status and level of education. However, with a product like ooba’s Bond Protector no medical clearance is required and you can qualify for cover up to R1.25 million (pre-existing conditions may be excluded). ooba’s competitive insurance offering is made up of buildings insurance and bond protection insurance tailor made for your specific needs, from the home loan experts. And ooba offers the convenience of taking out insurance at the time of applying for your bond, saving you time and hassle.
FOR CONTENTS INSURANCE: Look at the specified amount or limit of contents cover protection Have you got everything valued accurately? Are your antiques or valuables covered, or do you need to take out separate cover for these? It may work out cheaper to get them insured separately with a specialist contents insurance provider. Do you have children or animals? It could be worth adding accidental damage to your policy. Do you have any single items that need to be insured? Do you live in a high crime area? How far outside of your home are your items covered for? Does the policy cover your items when you are abroad? Remember, when it comes to finding a buildings or contents policy for your needs, always give accurate and appropriate information. That’s because when it comes to making a claim, honesty is always the best policy. Your claim may be deemed null and void if you give if you give false information, fail to attend to the general maintenance in the policy or fail to carry out repair work on previous claims. RESOURCES Just Property Group
www.reimag.co.za
March 2013 SA Real Estate INVESTOR
37
SECTIONAL TITLE
BY ANGIE REDMOND
Getting To Grips With An AGM Your vote counts
T
he main reasons to attend the AGM in a sectional title complex if you are an owner, is a semblance of control of the financial situation or better knowledge of the complex’s operations, says Michael Bauer, general manager of the property management company, IHFM. Attending the AGM is the sectional title owners’ only real chance of influencing how their scheme is run. The prescribed rules specify a number of very important items that must be considered and decided on by the owners at the AGM. These decisions directly affect owners’ lifestyles and pockets so it’s worth the time and trouble of attending and taking part in those decisions. The root cause of most serious disputes in schemes is money. At the AGM, members have the opportunity to discuss, and have explained to them if necessary, how their money was spent. The logical as well as stipu lated second pa r t of the f inancia l discussion is the approval of the budget for the coming year. This is each owner’s opportunity to make sure that the amounts approved are reasonable but realistic enough to avoid raising the spectre of a special levy. 38
March 2013 SA Real Estate Investor
A very common cause of dissatisfaction among owners is the behaviour of trustees and the chairperson. Every owner is entitled to nominate one or more persons – including him or herself – to serve as a trustee and then, at the AGM, to vote for their election. There is no need to suffer because of incompetent or overzealous trustees. The AGM is the opportunity for owners to vote in people of their choice for this very important function. Once suitable trustees have been voted into office, there is opportunity at the AGM to direct or restrict their activities. Any owner may make such a proposal. Examples could be a limit on spending on a single item without informing the owners beforehand; a direction that a different managing agent be appointed; or any one of the trustees’ tasks. But bear in mind that the owners can’t take away any function or power that is given to the trustees in the Act or rules, such as the raising of a special levy: the owners may only make restrictions on how the trustees go about that function.
And if you can’t make it? What many owners do not realise is that, if they are not capable of attending, they are allowed to appoint a proxy – and this should
be done, because it is a right each owner has and he should use it to ensure a fair outcome. If a sectional title scheme has problems the unit owners should know about them. The Prescribed Management Rules, says Bauer, say that the proxy’s appointment must be in writing and must be handed to the chairman before the meeting (a late posting excuse is not acceptable). Anyone except the managing agent and/or his/her employees can be a proxy. There are two types of proxies and it has to be specified which votes he or she can make. An ‘open’ proxy allows the proxy to vote on anything on the agenda at his or her sole discretion. The ‘directive’ proxy limits the proxy to the directions given by the owner. In South Africa, says Bauer, the Sectional Title Act defines no limit to the number of proxies an owner can hold when attending an Annual General Meeting. It can, he repeats, make a big difference to the wellbeing of a sectional title scheme, if owners attend the Annual General Meeting in person or by proxy.
RESOURCES
Paddocks IHFM www.reimag.co.za
Take advantage of REIM’s NEW, FREE service WANT TO SAVE THOUSANDS ON YOUR DEBT REPAYMENT EVERY MONTH? Real Estate Magazine is offering a new serviceto analyse your debt portfolio and help you save thousands on your repayments. You will be assisted with budget fitness education and mentorship to ensure that you don’t incur bad debt again, and you will be provided with a tool, mobile2budget, to assist you to manage your budget and track every rand you spend. Never again will you have to worry about how to meet your debt commitments. To find out how much you can save every month take our free survey. Just send us an email and you will receive a fast response on how much you could be saving each month and a free credit report.
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1ha (10 000m²) full title stand (serviced with water & electricity) 2000ha Private Game Reserve. Share in ownership of the game reserve and game. Participate in management decisions. Architect designed building packages available or own design. 24-hour security, patrol and emergency assistance. Superb Bushveld climate (Malaria-free) Away from national busy roads. Landing strip for aviation enthusiasts. Large variety of game and bird species roam free. Safe hiking, cycling, horseback and game viewing trials. Stabling facility for horse lovers. Housekeeping services on site. Levies set at R495 per month Deposits from R15 000 will secure your purchase.
www.reimag.co.za
March 2013 SA Real Estate INVESTOR
39
You’ve dreamt of it, now own it!
True African bush living at the only Bush & Aero Estate in the world Life at Zandspruit is one of peace and tranquility - a home cocooned in wild life and bush, offering a tranquil getaway from a demanding world. The exceptional weather all year around gives you ample opportunity to explore your environment with wildlife walks, horse rides or game drives. View this tranquil setting from the comfort of your living room or pool deck.
HOEDSPRUIT - LIMPOPO - SOUTH AFRICA
Contact: +27 15 793 1192 Email: info@zandspruit.co.za
Sunset views are magnificent treats! This is an investment sure to keep your health and living experience a notch above any other.
Web: www.zandspruit.co.za
KEY FEATURES Estate size: 1000 ha game farm 200 full title stands. Sizes range from 4 000 m² to 15 000 m² House designs are in 3 different styles being Farmhouse Pavilion Thatch 650 ha of untouched wildlife reserved exclusively for owners game viewing pleasure Safe environment and close to retailers, doctors and recreational facilities 1 km hard surfaced private runway, for aviation enthusiasts Park and hanger your plane next to your bush home
FARMHOUSE STYLE
M O V E
THATCH STYLE
PAVILION STYLE
T O A B E T T E R P L A C E www.zandspruit.co.za
REI Commercial
Eskom Hikes Will Cripple Repo Rate Remains At 5% Commercial Property Industry
SA Property Sector Worth Trillions
Eskom is desperately seeking a total 16% per year tariff hike over the next five years which may cripple South Africa’s commercial property sectors, already facing increased operating costs. The State-owned supplier of South Africa’s power, has applied for a 16% annual electricity tariff increase for the next f ive years. If approved, the new tariffs come into effect next year and cover the period between April 2014 and March 2018. Business organisations, the City of Cape Town, trade unions and a host of civil society organisations attended Nersa’s hearings on Eskom’s tariff application, to oppose its request for an average annual increase of 16% over five years. During the public hearings, businesses and civil society asked Nersa to scrutinise Eskom’s desired R47 billion equity returns.
The South African property sector is worth a whopping R4.9 trillion according to a new study undertaken to discover the size of the country’s property sector. T his Proper t y Sector Cha r ter Counci l commissioned research is the first study of its kind in South Africa. CEO of the Property Sector Charter Council, Portia Tau-Sekati says: “The research creates a hub of knowledge about the property sector, consolidating information and developing a common and consistent understanding. By determining the size of the South African property sector, we are moving towards a proper baseline measure to assess market size and its components, the scale of different services and activities within the sector and ultimately BEE transformation figures in line with the Property Sector Code scorecard.”
South Africa’s Reserve Bank Monetary Policy Committee (MPC) decided to keep the repo rate at 5%, citing concerns about the weak rand, rising inflation and labour conflicts. R e ser ve Ba n k G over nor Gi l l Ma rc us said the monetary policy stance remains accommodative and appropriate, with the real policy rate remaining slightly negative. Further accommodation at this stage is constrained by the upside risks to the inflation outlook. “The MPC has therefore decided to keep the repurchase rate unchanged at 5%,” Marcus said. There had been no discussion of a rate cut or rise during the meeting of the MPC, noted Marcus. South Africa’s growth was fragile as well as “below potential”, noted the MPC.
Valuable Input
Gary Palmer, CEO, Paragon Lending “High operating costs and the lack of new major industrial developments are the biggest threats to growth in this sector. There is, however, demand for upgraded operational facilities and convenient access to key transport nodes to reduce fuel costs.”
www.reimag.co.za
Amanda Stops, CEO, South African Council of Shopping Centres
Dawie Verryne, CEO, Korbitec
David Reid, Broker, JHI Properties
“Prudent shopping centre development needs sufficient population and income in a local trade area,” explains Stops. “The market must be sustainable with adequate supporting households and enough disposable income.”
“Whilst growth has been unremarkable, the sluggishness of the industry has given key players a chance to rethink their systems and processes – something that is likely to accelerate the market’s growth in years to come.”
“In the long run, if the business location proves over time to be a bad one, sound advice is to rather get out sooner than later – if you are an owner-occupier put the property on the market.”
Peter Collins, Broker, JHI Properties “Gauteng is the economic powerhouse of SA generating more than 40% of the GDP of RSA: Johannesburg is the centre of this and the energy and productivity of this city inspires the rest of Africa.”
March 2013 SA Real Estate INVESTOR
41
SMART MOVES
BY ANGIE REDMOND
Spotlight On JHB
Will the CBD regain popularity or will crime keep it empty?
J
ohannesburg is a centre of mining, ma nu fac t u r ing, a nd f ina nce, a nd produces 16 percent of South Africa’s gross domestic product. In a 2007 survey conducted by Mastercard, Johannesburg ranked 47 out of 50 top cities in the world as a worldwide centre of commerce. M i n i n g w a s t h e fo u n d a t i o n of t h e Witwatersrand’s economy, but its importance has dec l ined w it h dw ind l ing reser ves, and service and manufacturing industries have become more signif icant. The city’s manufacturing industries ranges from textiles to specialty steels, and there is still a reliance on manufacturing for mining. The service and other industries include banking, IT, real estate, transport, broadcast and print media, private health care, transport and a vibrant leisure and consumer retail market. Johannesburg has Africa’s largest stock exchange, the JSE Securities Exchange. Due to its commercial role, the city is the seat of the provincial government and the site of a number of government branch offices, as well as consular offices and other institutions. Unitas House in Marshall Street in the Johannesburg CBD was the centre for the 42
March 2013 SA Real Estate Investor
headquarters of most of the major role players in the South African mining industry, including Anglo American, De Beers, General Mining, Union Corporation etc. Nearby in Hollard Street there was the Stock Exchange and most of the major banks had their head offices in this precinct. The eye-catching Standard Bank building was one example, with the later development of an enormous HO complex at the end of Simmonds Street for the bank, spanning several city blocks. When the Carlton Centre was built in the 1970s, a few of the larger corporates such as AECI moved their offices there, from 40 Fox Street. However the construction of new skyscrapers such as 2 Diagonal Street, which housed some of the country’s leading newspaper groups and the Stock Exchange, continued the trend of building. This also extended beyond the CBD to Braamfontein, where the Schlesinger Building and the new Civic Centre had been built amongst others. Transport to the City was fairly well run in those days with hundreds of thousands of commuters using buses and trains to commute every day. Despite the addition of the N1 north
and south and the Ben Schoeman Highway, along with the upgrading of the network of arterial roads around the City, traff ic was already starting to create a problem. With the inf lux of office workers came the supply chain of restaurants, coffee shops, supermarkets, retail stores etc. Convenience stores spra ng up on e ver y cor ner a nd entrepreneurs f locked to End Street and areas around the bus terminus as well as the train station to sell their wares. However this raised a new issue, crime and grime. Buildings on the periphery of the CBD began a slow decline because of high rentals and undesirable elements moving in. When the Carlton Hotel shut there were rumors that this was the beginning of the end for the CBD. Another good example of an iconic building falling into disrepair was the Ponte Tower block in Hillbrow, which became a haven for gangsters. When Sandton City was built even the developers did not realise the huge impact that it and other major developments in parts of Jo’burg would have on decentralisation and the trend to move offices from the CBD. The location of Sandton and surrounding areas made www.reimag.co.za
SMART MOVES
ABOVE: 1970 - JHB CBD, living in the northern suburbs and working there most attractive for many commuters. It saved time, there was less crime and above all the working environment was more pleasant. First to take up the offer were some of the leading advertising agencies and accounting firms, followed by retailers, restaurants, banks and others. This applied equally to suburbs such as Bedfordview and Randburg, which saw an increase in commercial office space being made available. As the Sandton City hub grew in the 1970s, developers bought up many of the gracious old mansions along West, North, Fifth and Rivonia Roads. These properties were then developed into commercial buildings and the Sandton CBD burgeoned out towards Rivonia and beyond. Midrand was another hub that gained popularity for business in the 1980s. It had access to both Jo’burg and Pretoria via a welldeveloped road network and plenty of accessible land for future development. The CBD, by the end of 2011, had almost a million square metres of space vacant. So why has the CBD become a relative ghost town in JHB, while the suburban areas in JHB have seen the rise of mixed use – developments 44
March 2013 SA Real Estate Investor
and residential properties being converted to business use? Perhaps the crime statistics for March 2011 to March 2012 will reveal the worrying trend of high crime rates. The crime statistics for March 2011 – March 2012 in the CBD are nearly double that of Sandton, commercial crime in the CBD numbered 2546 while in Sandton the number of commercial crimes totalled 1333. Common robbery is another statistic, which shows this difference. In the CBD, robbery sits at 1034, while in Sandton the figure is a mere 95. The crime in the CBD, when compared to a mixed-use area, is shown to be startlingly high. In addition, the average response time for the police to respond to a crime is 25 minutes, ADT is 6 – 10 minutes, Chubb is 10 minutes and CSS is 2 minutes 44 seconds. Crime prevention has become a major priority in the suburbs and private security companies are no longer merely responding to crime, but are actively patrolling areas at night and increasingly preventing crimes from taking place. The SA crime statistics for 2012 – 2013 have not yet been released, but as business continues to grow and expand into suburban areas, and more mixeduse developments emerge, the advantages and reasons for businesses choosing suburban areas over the CBD, are only growing. While there has been a determined effort to lure businesses back to the Jo’burg CBD,
ABOVE: JHB CBD in the 1970’s view down Fox Street www.reimag.co.za
COMMERCIAL
Map of Johannesburg suburbs Sandton/Bryanston Including Morningside, Wendywood, Sandown, Sandhurst, Hyde Park In the last twenty years or so, Sandton has replaced the CBD as Johannesburg’s hub of business and commerce, meaning many corporate headquarters, banks, and large hotels are located there. As a general rule, the closer you get to Sandton, the more expensive housing becomes, so expect to pay a premium in this area. Bryanston along the Northern edge is less expensive, mostly known for its beautiful free standing homes on tree-lined streets exploding in a purple sea of blooming jacarandas in late spring, whereas further to the South in Morningside, Sandown and Hyde Park you will find stately homes as well as apartment complexes. This area also sports a large concentration of renowned private hospitals.
Roodepoort Roodepoort has a growing student population due to the presence of Monash University South Africa and has seen large population growth due to Johannesburg urban sprawl. This is one of the gateways to Johannesburg from Northern areas of South Africa and Botswana and so it has economic and logistical importance. Although Roodepoort has traditionally been regarded as being part of the West Rand, it is was not made part of the West Rand District Municipality, instead being integrated into the City of Johannesburg Metropolitan Municipality, following the post-apartheid reorganisation of local government in the late 1990s.
Midrand Including Waterfall, Kyalami Technically Midrand might not count as a Johannesburg suburb as it is so far removed, but especially in the last few years it has become a popular area to live, offering affordable housing set in wide open spaces and still relatively easy access to the main hubs of business. Midrand also has the advantage of being relatively close to Pretoria.
Joburg CBD Including Bruma, Kensington, Lyndhurst Most people would not dream of moving into Joburg’s city centre, given the bad reputations and crime problems of areas like Hillbrow, Berea, and Yeoville. However, just like in other big cities, this area has lately undergone some urban rejuvenation and many hail Newton and Braamfontein as the next up and coming places to be, especially for professional singles and couples without children. There are plenty of renovated apartments and lofts available with good security, beautiful views, amazing nightlife and shopping within walking distance, and the campus of Wits University just around the corner.
Rosebank/Parktown Including Houghton, Melrose, Saxonwold, Killarney, Westcliff Soweto Soweto is considered a metropolitan municipality of Johannesburg. It has an area of approximately 150 square kilometers. It’s 2010 population rose to 2 million from 1.3 million in 2008. The density in Soweto is 7,666 people for every square kilometer. News on Soweto shows violent crimes against women and children and violence in general.
If you find a home in one of these historic suburbs you will live at one of the city’s best addresses in close proximity to three of its best “old” schools – King Edwards, Parktown High, and St. John’s College. The homes here are sizeable and dignified, set on large properties, and you will be very close to the sprawling Johannesburg Zoo as well as the well-known Rosebank Sunday Rooftop Market that attracts visitors from near and far.
Orange Farm
www.reimag.co.za
Orange Farm is a township located approximately 45 km from Johannesburg. It is one of the youngest informal settlements in South Africa, with the original inhabitants; laid off farm workers, taking up residency in 1988. Support for the population came slowly mostly from people who were tenants at the great township of Soweto. The settlement now includes a modern library, few paved roads, permanent housing for some, electricity in places, a clinic, an information centre with internet access, and a multi-purpose community centre.
March 2013 SA Real Estate INVESTOR
45
SMART MOVES The other option is the Rea Vaya bus transport system, but negotiations are still underway with the taxi associations and while the bus does offer another solution, the main mode of transportation is still a mixture of private vehicles, taxis and buses. More worrying for businesses are the proposed e-tolls, which will see the cost being laid at the feet of the business owner as the e-tolls have a knock on effect on operation costs. According to figures released by SA National Roads Agency toll and traffic manager Alex Van Niekerk, a motorist traveling to work on the N1 from the Johannesburg CBD to Pretoria CBD would pay R6 in each direction, or R12 a day. If the motorist worked five days a week, s/he would pay about R60 a week, adding up to R2880 a year. With the cost of travel becoming a worrying factor for motorists, this could see more people choosing to live closer to where they work or vice versa.
ABOVE: heat map based on the number of households per suburb in JHB ADVANTAGES AND DISADVANTAGES OF THE CBD The CBD has distinctive competitive advantages: • Pivotal location in the city’s centre. • Major public transportation hub: all major arterials, all rail, and all bus services run into the city centre. • Low rentals and property prices for high-quality offices. • Access to a large workforce due to easy access from Soweto. • Under-served markets. • Significant infrastructure. However, the CBD has also posed certain major challenges to city government: • Curbing the high crime rate. • Lack of sufficient capacity to enforce by-laws, particularly relating to informal trading. • Poor condition of certain buildings. • Properties that are in arrears with rates or monthly bills. • Management of taxis.
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many buildings on the periphery have been neglected by landlords and in some cases are beyond repair. However, several large commercial property development companies have invested heavily in CDB properties by upgrading them and offering good medium to long-term rental contracts, in order to reverse the decentralisation trend. The Gautrain and other transportation initiatives may also assist in attracting businesses. “Sandton is still the preferred destination for corporate tenants, however we are seeing the rise of Rosebank and Midrand as competing corporate off ice destinations due to good infrastructure and lifestyle amenities,” says Peter Collins, regional broker manager for JHI Properties in Johannesburg. At terbur y ’s Waterfa l l development in Midrand, with the new Cell C head office, Group 5 and Massmart distribution centre; and the new Standard Bank building in Rosebank has anchored these nodes, both have Gautrain stations and excellent highway access. While the Gautrain has certainly created a fast and effective method of transportation, it is still a costly method for everyday travel.
Another factor to consider when discussing the CBD and whether it will see a revival and renewed commercial interest, are strikes and protest marches, which plague the streets of the CBD. The strikes affect traffic flow and in some cases turn violent, having a negative impact on the productivity of businesses in the CBD. Divisional Head of Renprop Commercial, Mike Walters, says that with the concentration of people living in Johannesburg’s northern suburbs, it makes sense for businesses to establish their off ices in these areas. He explains: “The cost of travelling to and from work continues to rise, with the recent fuel price hike and pending implementation of the e-tolling system, more and more people want to work close to where they live, or live close to where they work.”
RESOURCES Fraser 4 PR Lightstone www.reimag.co.za
ant Installation and Project management serOriginally established in 2002 as aflagship, Corporate vices, the group is best known its Originally established in 2002 as aforCorporate Interiorarm Architectural practice with a focus on and founding NAP Designs. joined Interior Architectural practice withLater a focus onby providing SpaceisPlanning, Interiora Design, TenNAP Investment and NAP Developments, the group fast becoming leading, providing Space Planning, Interior Design, TenInstallation and market, Project designing management independent property specialist in the ant commercial office and serant Installation and Project management services, the group is best known for its flagship, developing workspaces for vices, a variety different clients in bothfortheitsPrivate and theofgroup is best known flagship, and founding arm NAP Designs. Later joined by Public sector. and founding arm NAP Designs. Later joined by NAP Investment and NAP Developments, the group is fast becoming a leading, NAP Investment and NAP Developments, the group is fast becoming a leading, independent property specialist in the commercial office market, designing and independent specialist in the commercial officedelivery market,ofdesigning and Building property on their 10-year track record for on-time quality workdeveloping workspaces for a variety of different clients in both the Private and developing for a&variety of different clientsNAPD in both the Private and spaces,workspaces re-development refurbishment projects, Holdings is focused Public sector. Public onsector. its goal to become a major player in the property industry, and continues on
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Africa, as we strove to establish a wide footprint. Our Team of specialists is
seen the property sector grow and created new challenges and opportunities
as we strove to establish a wide footprint. Our Team of specialists is satisfy a wide Africa, range of client and ways has endeared ussuccessful to clients projects across South constantly sourcing new needs, innovative to deliver to our constantly sourcing new innovative ways to deliver successful projects to our Africa, as we strove to establish a wide footprint. Our Team of specialists is client’s satisfaction. NAPD Holdings is honoured to have served our customers client’s satisfaction. NAPD Holdings is honoured to have served our customers constantly sourcing new innovative ways to deliver successful projects to our over the last andyears we look forward to serving you allyou in years to come. over10 theyears last 10 and we look forward to serving all in years to come. client’s satisfaction. NAPD Holdings is honoured to have served our customers
brought on by the recession and a shift towards efficient space utilisation. In that
time we have evolved by constantly going above and beyond our initial scope
over the last 10 years and we look forward to serving you all in years to come. Here’s to Here’s 10 years of making a success! to 10 years of property making property a success! Here’s to 10 years of making property a success!
to deliver fully integrated property solutions, and the business has grown into a complete property services company
Property Investment Property Investment
Property Development
Property Development Property Investment Property Management PropertyDevelopment Management Property
Architecture & Architecture & Interiors Interiors Property Management & Interiors w wwArchitecture www. . nn aa pp dd .. cc o o .. zz aa T: T: +27 9054 +271111467 4679004 9004..F:F:+27 +27 467 467 9054 w w w . n a p d . c o . z a POPO BOX 700, JOHANNESBURG, 2068 BOX 700, JOHANNESBURG,2068 T: +27 11 467 9004 . F: +27 467 9054 PO BOX 700,JOHANNESBURG,2068
CELEBRATING YEARS BUSINESSSUCCESS SUCCESS IN IN PROPERTY PROPERTY CELEBRATING 1010 YEARS OFOFBUSINESS
DEVELOPMENTS
BY JONATHAN SMITH
Town Planning And Environmental Surveys In new developments
R
eaders of Real Estate Investor Magazine will recall that in last month’s edition, I described the process to be followed in developing new commercial properties. A c r it ic a l consider at ion i n prop er t y development is the tow n planning and environmental survey process that is necessary to most extensive property developments. There are numerous (town planning and environmental) application processes which must run simultaneously (to save time and costs). Prior to commencing these costly applications, however, it is prudent to perform a preliminary analysis or feasibility of your proposed development. During the preliminary investigation into whether the establishment of a township is possible and feasible, the property developer establishes whether: • There are any legal impediments within the title deeds that may restrict any part of the proposed development. • The proposed development complies with the uses of land contained in the existing town planning scheme or the spatial development plan of the relevant local authority • The current zoning of the subject land parcel permits the proposed development or has to be materially amended • There are any land claims upon the subject land parcel • There may be any geotechnical, mining or 48
March 2013 SA Real Estate Investor
soil related impediments to construction upon the subject land parcel • T h e r e m a y b e a n y e n v i r o n m e n t a l impediments to construction upon the subject land parcel • There may be any community objections to the development of and construction upon the subject land parcel • The local authority in whose area the land is situated or will be incorporated is able to provide essential services such as electricity, water, storm water and sewerage • You r appl ic at ion compl ie s w it h t he requirements of the relevant provincial roads department • You r appl ic at ion compl ie s w it h t he requirements of the relevant national, provincial and local legislation pertaining to township and property development • Your application meets environmental control requirements • The proposed development is broadly financially viable. Once you have performed – and passed – the preliminary investigation, it may be feasible to launch the various simultaneous town planning and environmental applications in order to gain the necessary local and provincial consent for your development. The first of these that we shall consider is the Environmental Impact Assessment.
South Africa has one of the most advanced set of legislative controls in respect of env i ronmenta l impac t conta inment by international comparison. T he i mpac t of a ny a nd a l l prop er t y development must be researched and reported upon to the relevant environment protection and controlling bodies before any property development or construction is permitted, unless the need for such an impact study is excused by such relevant bodies. The research report into the anticipated impact upon the environment of a proposed property development – whether it be a new proposed development or the proposed material alteration of an existing building – is termed an environmental impact assessment. The following considerations form the components and content of an environmental impact assessment (referred to, in short, as an ‘EIA’, which term we shall use below): • The project background and objectives as well as the scope, purpose and structure of the resultant report • A physical description of the proposed development as well as a description of the proposed development’s environment, social, economic and institutional setting (including regional and local maps, biophysical setting and socio-economic setting) • The estimated population levels of the development, whether permanent or temporary www.reimag.co.za
COMMERCIAL as well as the estimated traffic f low into and out of the proposed development and the surrounding node • The estimated electricity, water, sanitation, refuse consumption demand and the proposed bulk requirements and bulk supply sources for such supplies • Consideration of the health and safety aspects of the proposed development and requirements to meet the needs for any existing environmental impacts and any potentially threatened habitats • An analysis of the air quality and resources needed to maintain such air quality, the geology of the site, the topography of the site • Various other environmental considerations such as: soil protection and safety, surface and underground water, flora and fauna, pollutants and contaminants, potential litter and waste matter that would be created by the proposed development • An analysis of the impact upon surrounding communities which the proposed development might have as well as the heritage considerations pertinent to the site • A description of the economic impact of the proposed development as well as an analysis of the population indicators that the proposed development might produce • A c o m p r e h e n s i v e s c h e d u l e o f recommendations to mitigate any and all loss and damage that the proposed development might produce • A conclusionary finding An EIA report takes many months to complete and must satisf y the relevant local authority and provincial government department (responsible for environmental affairs) that such proposed development shall be performed to the ultimate benefit of the environment and the community within which such developmentis situated. Certain proposed developments may be exempted from certain components or even all the components of an EIA: the extent to which a property developer needs to research and report on a proposed development’s environmental impact is termed the (EIA’s) scoping. Typically, developers submit an initial, limited report to the provincial department responsible for environmental affairs, indicating the extent of the proposed development. T he rele v a nt prov i nc ia l gover n ment department then provides the property developer with the scope of the required report. This www.reimag.co.za
scoping requirement determines the number of aspects (from the list contained above) that must be investigated and reported upon. A property developer then needs to investigate the possible impact of his or her proposed development upon the environment according to the scope required by the relevant provincial department and convince such department that adequate safeguards shall be implemented to protect the environment and the community from any negative impact which may arise from the proposed development.
The second critical application is the town planning application A series of documents are circulated within the relevant local authority. These documents include an application form, a motivating memorandum, a copy of the deed of transfer, a layout plan, a power of attorney, the bondholder’s consent, consent of the mineral rights holders, title deed(s) report, the cadastrial survey, geotechnical survey, environmental impact study, engineering survey, traff ic analysis and bulk services survey. The process followed within the local authority and in conjunction with the property developer is as follows: • The local authority or council advertises the application in order to invite comment and objections • The application is circulated to the various internal and external municipal departments so as to determine various conditions which must be adhered to during development and the bulk service contributions required for the purposes of the development • If no objections are received, the local authority is permitted to take a decision to permit the development • If objections are received to the proposed new township, the development is referred to a tribunal, which tribunal must decide in respect of each objection and provide a decision • Once any and all objections have been decided upon and the local authority decides to proceed with the new township development, the local authority issues a document entitled conditions of establishment, which document provides the conditions under which the applicant may proceed with the proposed new township development. The facts to the right provides readers with a checklist in order to discern which stage of your development process you have reached.
ACTION STEP NUMBER KEY RESULT STAGE
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Have the preliminary action steps been performed? Have the town planning and associated applications been prepared accurately and comprehensively? Have the town planning and associated applications been submitted? Have the necessary advertisements been placed and hearings held? Have ALL the relevant municipal departments provided their requirements in support of the application? Have the scoping requirements necessary for the environmental impact assessment been received from the provincial environmental (government) department? Have the traffic analysis, application to Eskom, the relevant water board, heritage investigation and survey diagrams been prepared/performed? Have the conditions of establishment been issued by the relevant local authority? Has the record of decision been received from the provincial environmental government department? Have the bulk service agreements been concluded with each relevant municipal department? Have the bulk services been installed? Has the new township register been opened? Have the new surveyor-general diagrams been drafted and approved? Has the zoning plan and use plan been drafted and approved? Have the new title deeds been drafted and approved? Has the bulk service infrastructure been handed over to the local authority? Has the new township been promulgated?
RESOURCES Courtwell Consulting March 2013 SA Real Estate INVESTOR
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LISTED
BY IAN ANDERSON
The Listed Property Sector 2013 will be an eventful year
S
outh Africa’s listed property sector gained 1% during the first month of 2013. The sector was up almost 4% heading into the final week of the month before the significant sell-off occurred – a result of the weaker rand and higher bond yields. A number of investors were also looking to take profits following last year’s rally, which yielded a return of almost 36% for investors. During January, Capital Property Fund reported full year results to 31 December 2012. Total distributions increased by 6.3%, slightly below market expectations, highlighting the diff icult operating environment for off ice land lords. Management has g uided for distribution growth of between 4% and 7% in 2013, despite a signif icant reduction in borrowing costs from 10% to 8.5%. Lower borrowing costs across the sector are expected to make a meaningful contribution to distribution growth in 2013 and 2014 (if interest rates stay lower for longer). The Fountainhead Propert y Fund saga rema i ns on goi n g. B ot h R e def i ne a nd Growthpoint are vying for Fountainhead’s propert y portfolio. Redef ine is currently the owner of Fountainhead’s management company and initiated an offer for the property portfolio last year after acquiring the management company from Standard Bank. Redefine, together with the market, was surprised when its all share offer for Founta in head ’s proper t y por t fol io was countered by a slightly higher all share offer from Growthpoint. It was a long-held view, rightly or wrongly, that a collective investment scheme in property could not be the target of 50
March 2013 SA Real Estate Investor
an offer unless the management company was included in that offer. Growthpoint has not made an offer for the management company and if its offer is successful, this would set a new precedent in South Africa for dealing with collective investment schemes in property. As it stands right now, Fountainhead is dealing exclusively with Redef ine until 22 February 2013. The Financial Services Board (FSB), as the regulator of collective investment schemes in South Africa, may well have the final say. According to the most recent announcements from both Redef ine and Growthpoint, discussions with the FSB are ongoing. Further complicating the issue is the fact that Fountainhead’s major shareholders are also major shareholders of both Redefine and Growthpoint, so the offer that adds the most value from a shareholder perspective (and not necessarily the highest offer) is likely to prevail. While January is usually an extremely quiet month in terms of market-moving news, February is very busy with a number of industry heavyweights set to report results, including Growthpoint, Hyprop and Resilient. After last year’s phenomenal price performance, investors will be looking to February’s results announcements to conf irm the sector’s resilience in a tough economic environment. Management guidance for 2013 will also be closely watched, with most analysts forecasting a modest acceleration in distribution growth rates for the sector as a whole. Although there may be one or two surprises, the various management teams are likely to confirm that conditions in the office market
remain extremely diff icult, particularly in secondary locations and lower grade properties. At the same time, the market should get confirmation that borrowing costs continue to decrease, the retail property market remains buoyant, particularly in higher quality shopping centres that dominate the listed property landscape and that there are opportunities to continue acquiring property portfolios from private investors. Over the past year, the sector has evolved into a two-tier market. The larger, more liquid listed property companies have been targeted by foreign investors and large South African institutional investors. The result is a yield differential of more than 250 basis points (2.5%) between the top five or six companies by market capitalisation and the bottom 10 to 15 companies. Foreign investors became aggressive buyers in the middle of last year following a further interest rate cut and the announcement from National Treasury that Real Estate Investment Trust (REIT) legislation would be introduced in April 2013. REITs are the de facto standard for listed property company structures in most countries and the introduction of REITs legislates the tax status of South Africa’s listed property vehicles. The current forward yield on the listed property sector is 6.8% and distributions are expected to grow at approximately 7% per annum. This remains relatively attractive in a low interest rate environment.
RESOURCES
Grindrod Asset Management
www.reimag.co.za
HOSPITALITY
BY ISELLE MCCALMAN
Rural Tourism
Is The Way Forward
T
ourism is not an industr y in the traditional sense because industries are classified according to the goods and services they produce, while tourism is a consumption-based concept that depends on the status of the consumer. This is the major reason for the difficulty in measuring tourism’s contribution to the economy of any country. With the growing significance of tourism globa l ly a nd t he i nc rea si ng econom ic interdependence bet ween countries, it is becoming vital that South African Tourism conducts surveys of departing foreign tourists to gain an understanding of the travel behaviour, perceptions, buying process, travel patterns and the amount spent on their trip in South Africa. These surveys are the only measure of tourism demand in South Africa. Since 2002, South African Tourism has commissioned a monthly survey of departing foreign visitors 18 years and older exiting through OR Tambo International Airport, Cape Town International Airport and 10 land border posts. The outcome makes for valuable reading and is worth a wider interpretation, rather than just looking at the numbers for the sake of the knowledge. Statistics for the first two quarters in 2012 told us the following: There were 7,0 million domestic tourism trips taken in Q2 2012, an increase of 13% in comparison to the 6,2 52
March 2013 SA Real Estate Investor
million in Q2 2011. However the incidence of domestic travel remained constant at 6.6% in Q1 2012. Similarly, the share of holiday trips decreased from 16% to 14% when comparing Q2 2011 to Q2 2012. On the contrary, business trips as well as religious based trips increased in Q2 2012 in comparison to Q2 2011. T he domestic revenue increased over the period under observation by 9% from R4,6 billion in Q2 2011 to R5.0 billion in Q2 2012. The increase in revenue was a result of the increased average spend per trip, as well as an increase in the number of trips during this period. The most visited provinces in Q2 2012, by domestic tourists, were Limpopo (22%) followed by Gauteng (19%) and KwaZulu-Natal (18%) mostly due to the Easter holiday traffic, but overseas inbound tourists consistently prefer Gauteng and Western Cape.*
“Most enterprises fail because entrepreneurs ignore the reality of the situation.” Although the full year’s results are not available yet, the industry is in agreement
that it was an overall good year for tourism in South Africa. The country recovered quite well from the highs and lows of the 2010 World Cup aftermath, as well as the turmoil in the international economic markets, translating to higher domestic travel. The hospitality industry reported an average growth of 2.2% over the past 5 years, which includes bed nights and length of stay. On the other hand there has been a decline in international leisure travel, mostly due to the unstable and weak European and UK markets, which are traditionally the feeder market for South African inbound tourism. This information begs two questions to be asked: How dependant is South Africa still on European and other international inbound tourists? Can the increase in domestic and regional (Southern African) travel boost the tourism industry and increase the investment potential? H i s tor y show s t h at du r i n g t he pr e 20 08 pea k yea rs of abundant inbound, non-A frican, tra ff ic the South A frican tourism market certainly became complacent in many ways. The world travel led, competition was not that fierce and the local operators and establishments creamed it. There was little innovation, service levels dropped and we offered the world more of the same, relying on the country’s natural resources and scenery to do the work. Adding the increasing crime levels to the mix made the picture look even bleaker. www.reimag.co.za
COMMERCIAL
The industry, of course, nearly came to grinding halt with the global recession. It was a rude wake-up call to the industry. In South Africa there has also been a major shift from European inbound traffic to African inbound, which entirely changed the local requirements. And since Asia was a cheaper market, tourists also started f locking in a different direction. Airlines, tour operators and hospitality outfits were suddenly forced to re-evaluate their products and services and find new ways of enticing their customers back. Although there has been a slight increase in the numbers from traditional European markets, the industry is still too unstable for anything substantial to happen soon. It can be noted that the tourist industry in South Africa is managing the transition better than expected but there are still some dependencies lingering, which is holding back true development. To answer the second question is difficult, as one will have to make some deductions from existing statistics. Domestic and regional
tourism have certainly had an impact on the development of the Bed & Breakfast/Coffee Shop/Crafts Gallery/Farm Stall establishments. There has been a flurry of business registrations over the past three years in many parts of the country, most notably in smaller towns and rural areas. This market segment is aimed solely at the domestic tourist, be it day or weekend visitor, or longer-term holiday makers. Even townships have seen a range of entertainment venues opening - anything from sports taverns to amusement parks. The establishment of “Meanders” is a uniquely South African concept and has had a positive impact on rural communities – creating jobs and keeping local cultures and communities alive. In other areas the idea of incorporating an entire route into a marketing campaign, was taken from the American concept successfully implemented in the now famous Route 66. The local Route 62 from Montague to Oudtshoorn in the Western Cape is a good example of how the towns along this road benefited from the
local – and increasingly international – tourism. Another route that is ready for the taking is the R56 from Kokstad, winding through the most scenic parts of the Eastern Cape, to Middelburg. Towns like Maclear, Eliot, Dordrecht, Molteno and Steynsburg might be foreign names to many South Africans, but it could be the next best tourism thing in 10 years’ time with the right investment and marketing spend. Kokstad is already promoting their annual Route 56 festival and the other towns are there for the taking. Driving through De Rust just outside Oudtshoorn recently, I realised the entire town had been ‘colonised’ in the past year. There used to be only a few quaint art and coffee shops, but it has now been turned into a bustling ‘have to be seen’ town. It is simply packed on weekends. And there are many similar examples to be found around the country. So does that mean that investing in local tourism is a good idea? Well, yes and no. Firstly it is important to understand that going it alone will most probably be a bad idea, unless you are a very well-known personality. Having a big budget is no guarantee for success but it helps. The local success stories have all been about working together as a group or community and the combined effort works best. That’s why variety is the key to a successful investment. One funky coffee shop in town is not going to attract the masses. But a coffee shop, crafts gallery and B&B with restaurant and live evening entertainment will stand a better chance. Lastly, be innovative. Market research is the best investment and suff icient time and resources should be spent on analysing the facts. Most enterprises fail because entrepreneurs ignore the rea l it y of the situation and misread the target market. Make sure you understand why the previous B&B failed or why the three restaurants in the same location had closed doors. It simply might not be the right spot or not interesting enough to entice the end-user. But generally looking at the vast variety of very interesting and innovative establishments around the country I have no doubt that South Africans have loads of talent to show the world and the time is right to invest in rural tourism.
RESOURCES Rainmaker Marketing www.reimag.co.za
March 2013 SA Real Estate INVESTOR
53
STANLIB
ADVERTORIAL
STANLIB Africa Direct Property Fund to be launched W ith the retail sector in Africa growing, its development has opened up oppor tunities for institutional investors who buy into the ‘Africa Growth Story’. Retail developments present an exciting prospect for property developers in Africa, says Amelia Beattie, CIO of STANLIB Direct Proper ty Investments. The investment opportunity lies in formalising a sector that is largely informal – to the tune of 70% of overall spend. Research shows that of every household, an average of 29% is spent on food and 10% on apparel. Converting this spend – from informal to formal – could revolutionise the sector over time. The soon to be launched STANLIB Africa Direct Property Development Fund will invest in core commercial real estate developments in Nigeria and Kenya and offer institutional investors exposure to top quality assets that will be created. Retail developments will be a key focus. The proposed Fund has earmarked up to 8 developments over the next 8 years, depending on their size and feasibility, as both countries have compelling growth potential, says Beattie. No two African countries are identical, and consumer spending habits differ vastly from country to country. Understanding idiosyncrasies, catering to them, and ultimately capitalising on them, is what is needed to unlock value for investors. This is why partnerships are so important. “The Fund will be aligned to partners that are
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February 2013 SA Real Estate INVESTOR
never more than one step removed from the land, which ensures they have actual rights to the land. Our aim is to jointly own the development through the development period so that everyone pulls together to make the project a success. We believe it is our duty to give back to the industry and to the continent by assisting our partners to grow their businesses while we grow ours. This concept of true partnership in Africa is really important.” Partners with in-country capabilities make it easier to adequately deploy resources and maximise return on investment. $50m seed capital has already been committed to the Fund. Ensuring the appropriate deployment of capital is essential and Beattie is confident of this, owing to a robust pipeline of projects. “Some of these are in the final stages of due diligence, some are ready to go into the ground and some are still in the design phase. There are good
schemes that will really make a difference in the communities they will serve”, said Beattie. As with any new development – particularly in Africa – market risks exist. The key for investors is to distinguish between real and perceived market risks, advises Beattie, and have mitigation strategies in place. “Africa remains a very good return play. We are targeting a gross IRR of 25% in dollar terms; that is achievable if you do it right and if you manage the time to market. But the real value proposition of investing in Africa is that it’s such a great opportunity to do responsible investing. As business and as custodians of investments, this is what we want to stand for”, says Beattie.
For more information, contact: Amelia.Beattie@stanlib.com
www.reimag.co.za
REI Offshore
E-commerce saved the USA
Law To Bar Foreign Ownership Of SA Farms
South African’s Look Towards Namibia
Regardless of the destruction it’s causing to the bricks-and-mortar retail industry, e-commerce development helped prevent the downfall of the US industrial market. After rising to the top, in retail store battles, major chains such as Best Buy and Barnes & Noble are still planning to cut hundreds of stores in 2013—but with the help of the e-commerce boom, the supporting industrial market has emerged strong this year with declining vacancy and modest rent growth in most markets. Global e-commerce is expected to double to $1 trillion in three years, with Amazon taking at least a quarter chunk of that ma rket.Demand for new distribution centers today is strongest around the ports, but is also expanding in major population centers such as large cities in California, Texas, and New York.
Foreign nationals will no longer be able to own land in South Africa once government’s land policy is finalised and passed into law, Land Reform Minister Gugile Nkwinti said. “All people who are foreign nationals will not own land, but will lease land on a longterm basis,” he said. Nkwinti was responding to a question during a “dialogue” with farm workers in Paarl. The question had to do with foreign ownership of farms. The minister said government had completed an audit of stateowned land, but was still busy with its audit of public and private land. “Privately-owned land includes land which is owned by foreigners. We are busy auditing all of that land,” he said. When the audits are complete and government’s policy is promulgated into law then “people who are foreign nationals will not own land, but will lease land on a long-term basis,” said Nkwinti.
Historically an appealing destination for South African tourists, Namibia is experiencing increasing interest from South African home buyers, mainly among those seeking to acquire homes in Windhoek and leisure and residential properties in Swakopmund, says Dr Andrew Golding, CE of the Pam Golding Property group. The appeal of the Namibian property market is further aided by the fact that Namibia is part of the Southern African Customs Union (SACU) and the Southern African Development Community, which plays a significant role in facilitating trade between the countries. All indications are that this trend is likely to continue for the foreseeable future. Further positive news is that the Namibian economy is showing resilience in the face of the global economic challenges and shows the potential not only for growth but increased cross-border trade.
Valuable Input
Tom Waite, Associate Director, Jones Lang LaSalle “We clearly see upside potential in 2013, driven in particular by further large portfolio and platform deals. We also expect continued demand for strong income-producing opportunities.”
www.reimag.co.za
Rob Davies, Trade and Industry Minister
Jane Clough, Sales Manager, Pam Golding
Dr Andrew Golding, CE, Pam Golding
“There is an urgent need for Africa to develop industrial policies which will underpin the diversification of production structures, raise competitiveness levels and expand the continent’s export basket.”
“Traditionally, London has proven a popular location for South African buyers, many of whom have family overseas or require a London residence for part-time business or personal use.”
“Due to its proximity, Namibia remains an attractive option for South Africans, including real estate investors looking to diversify their investment portfolios. Many of the South African enquiries are for Swakopmund.”
Craig Illman, CEO, Propwealth “Cash flows versus capital growth? South Africans are starting to realise that cash flow is what is needed from a property.”
March 2013 SA Real Estate Investor
55
OFFSHORE INVESTMENT
BY SCOTT PICKEN
Buying Trips
Make sure you invest in the right property
M
ore than 80% of South Africans who invest overseas actually lose money! This is because they make crisis investments! Either the Rand is falling and they panic or they fly to somewhere like London for a week and expect to find a good investment. I always turn it around and ask how successful a British person would be if they arrived in Johannesburg for a week and expected to find a good investment. Most people who go overseas to buy have accumulated wealth through property in South Africa. They are experienced, have the right partners, have experience and most importantly they have a “gut feel” which has through the years with their experience really helped them make the right decisions. Now they book a trip to London / Sydney / Atlanta, etc for a week, with the expectation of buying a property and using their “gut feel” and it DOESN’T work. Let’s look at some scenarios. When you arrive in
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March 2013 SA Real Estate INVESTOR
the country or city then you look up a few estate agents. They take you out to see properties and tell you everything you want to hear. Bottom line is they know you are from out of town and so it is easier to sell you properties which the locals don’t want. Let me give you some examples:
1. Having lived in London for nine years and invested in a lot of property, I have the “Rule of 10 minutes”. Basically I don’t buy a property unless it is less than a 10 minute walk to a tube station. Trust me when it is raining and cold you don’t want to have to walk too far. If it is more than 10 minutes then people have to catch a bus – which they don’t like to and so you can command a far lower rent, will have more vacancies and basically it will affect your capital growth. Your “gut feel” will never understand this and I can prove this with the hundreds of South Africans who have travelled to London and bought in areas where “we” the people who lived in London, don’t want to live!
2. Another example is in USA. Many South
Africans have been investing in Atlanta. They think the returns look great on paper or because there is a financing (dodgy) option but they are buying in Clayton County. Clayton County has had its education system downgraded and so no one wants to live there – not tenants or home owners. No one in Atlanta wants to invest there, but this is where all the South Africans are buying because the properties are cheap and the returns look good on paper. As my partner in Atlanta said, “You can put lipstick on a pig, it is still a pig!”
3. In all f irst world countries your exact
address determines the school your children can go to. So you can go down the same street and the house on the left you can go to the good school and the house on the right you can’t. You would never know this and trust me the estate agent won’t tell you as she can’t sell the property locally. www.reimag.co.za
Affordable USA Property
YDL
YDL understands its investors’ needs. We’re not ““ipping” properties to you for a proot. Rather, having set-up our business in Atlanta, Georgia, we buy properties directly on your behalf.
• Once in a lifetime opportunity • Buy at 50% of replacement value • From $70,000 - $120,000 • Net yields of 9% to 13% with longer-term capital growth upside • We do it all for you (set-up USA company, open bank account, register you for tax, submit annual returns) • You simply collect your income Some recent YDL investor properties
Total Cost: Net Yield: Discount to replacement cost:
$79, 400 11.6% 50%
Total Cost: Net Yield: Discount to replacement cost:
$102, 000 11% 46%
Total Cost: Net Yield: Discount to replacement cost:
$99, 300 11% 46%
Total Cost: Net Yield: Discount to previous sales price:
$112, 000 12.3% 73%
Join us at our event
Date: Thursday 28 March 2013 Time: 18h00 Venue: FNB Training Centre, Sandton To book, or for a personal consultation, Call: (011) 465-7356 Email: info@ydl.co.za Website: www.ydl.co.za www.reimag.co.za
www.facebook.com/ydlpropertyinvestment wwww.twitter.com/ydlproperty
OFFSHORE INVESTMENT Then you buy the property and the agent earns their commission. I am sorry but you are a no body on the other side of the world. You have no critical influence and so it is very difficult to contact them, you deal with time zones, communication problems and generally it is a nightmare – sitting on the other side of the ocean and sapping, time, energy and money!
you are trying achieve, your thoughts and concerns. The more open you are with them the more they will be able, with their partners on the ground, to help you make sure you achieve all your objectives.
It is not possible to do this on your own or with your brother or a friend who lives there.
6. Read all the recommended research before you go.
I am not saying this because I own an international property company. I am saying this because when I lived in London in 1999 and I was coming back to South Africa to buy properties on my own it was a nightmare. I am South African, but dealing with the agents, developers, law yers, banks, management agents, etc all in a rushed time was fraught with disaster. This is why we started International Property Solutions (IPS) in 2003 to help people negotiate the challenges of investing overseas. We decided to use our experience of investing in international property for 14 years personally and helping over 2000 people invest to a value greater than R1.6 billion, to investigate to international countries and uncover the opportunity by doing two things – getting the right information and right partners.
7. Go on the Internet and see what some of the competitors are offering, and take down all the details.
Based on this I would like to offer advice as to how to invest internationally, achieve wealth creation and preservation, a plan B and peace of mind and achieve a successful buying trip.
Here are the steps: 1. Be strategic – whatever you do, don’t make crisis or emotional decisions. 2. Firstly read the report on the “6 things you need to know and ask before you invest offshore?” Go to w w w.ipsinvest.com to download. 3. Based on this report, find a company who ticks the boxes which are outlined to ensure that you are dealing with the right partner. Someone you can trust and someone who has your best interests at heart. 4. Book an investment consultation with one of their specialist in South Africa many weeks before your planned trip. Outline exactly what 58
March 2013 SA Real Estate INVESTOR
5. Work with the investment specialistto plan the trip.
8. If the above steps are followed then when you arrive overseas you can hit the ground running. 9. I would suggest on the first day you land, you plan a rest day as generally you will be jetlagged and there is nothing worse than looking at property and trying to seem intelligent when you are shattered. 10. Make sure that they take you to see lots of properties which suit your requirements. This all should be pre-planned, based on your discussions with the investment specialistin South Africa, who will coordinate everything. Make sure they have printed documents with everything about the properties so you have the full financial picture on each property.
13. Make sure you meet the entire team – lawyers, inspection agents, management agents. Know who you’re dealing with. 14. While you are there and you are fully focused, if you like a property then work with the partner and the investment specialistin South Africa to secure the property and get the necessary paperwork done before you leave. Once you get home life will hit you in the face and often you lose focus and then all the hard work you have done will be wasted. You can see that everything is based on two things. Getting the right information and dealing with the right partners. I truly believe that with our experience over the years, this is the greatest value we add to our clients as we can quickly achieve these two objectives. I have actually made 35 videos when I was travelling in Australia on an investment trip on everything I do to get the right information and partners. We are about to launch a book which works with Clem Sunter to help people make strategic decisions about which are the best countries to invest in. When we launch the book, we will make these videos available so that we can continue to educate people and they can make the best decisions for them and their family’s future.
11. Ask the partners to take you to the competitor’s product a n d g i v e you feedback. 12. Decide if you trust the partner. Bottom line is I have a saying, “I don’t invest in property I invest in people.” Your gut doesn’t work and it doesn’t matter how much research you do, even in 6 months you will never know the market like someone who has been operating with decades of experience. The only “gut feel” you should have is if you trust the partner. From there listen to them. Don’t try and think what you would like or what works in South Africa. It is irrelevant. Listen to what the partner says works in that country.
RESOURCES IPS Invest
www.reimag.co.za
AD CAPE TOWN Ground floor, Liesbeek House, River Lane, Mowbray PO Box 23644, Claremont, 7735 Tel: +27 21 680 5272 | Fax: +27 86 670 6490
SANDTON 2nd Floor, West Tower, Nelson Mandela Square, Sandton, PO Box 785553, Sandton, 2146 Tel: +27 11 881 5706 | Fax: +27 86 670 6490
Official South African marketing agent for LEPTOS ESTATES www.LeptosEstates.com
Contact: Jenny Ellinas | +27 83 448 8734 | jenny@cypriotrealty.com | www.cypriotrealty.com
LONDON
BY MIKE SMUTS
London’s Changing Demographics
Getting both older and younger
S
ir, when a man is tired of London, he is tired of life; for there is in London all that life can afford” – so goes the famous quote by English author Samuel Johnson. And for decades Johnson was spot on. Young bright faces f locked to the UK’s capital in their thousands from all over the British Isles, Europe and the world - to go to university and work, moving out again when their growing families required more space or when they retired. London imports the young and exports the old, the theory goes—or went. For the UK’s last census reveals a startling demographic change that has drastically slowed Londoners exit from the capital.
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March 2013 SA Real Estate INVESTOR
www.reimag.co.za
OFFSHORE Net outflows to the rest of Britain are half what they were in 2005, partly because more people have drifted into London. Net inf lows from overseas, though declining, remain positive. Since 2002, births in London have soared by 25 per cent each year, contributing to 37 per cent of England’s natural population increase (the surplus of births over deaths) between 2009 and 2010. On current projections London’s population will swell from just over 8 million now to over 9million by 2031, which is roughly the equivalent of adding the entire population of Britain’s second city, Birmingham. The number of London households is set to increase to 4.4 million over the same period. About 80 per cent of this growth in household numbers will be in single-person households. This growth in population is being driven by, among other things, an increase in life expectancy, fertility rates, divorce rates and net migration to the UK’s capital. So London is getting both younger and older—but above all bigger.
The growing demand from London tenants These headline statistics point to continued long-term population growth, which shows no signs of dwindling, and which is increasing the demand for properties in London. Yet, restricted mortgage availability means that entry into the housing market remains difficult for those without the cash for a large deposit. And, according to recent report from the National Housing Federation, things are not going to get any easier for young buyers dreaming of their own home in London. The Federation commissioned Oxford Economics to forecast how long the average 21-year-old would have to wait until he or she could afford a deposit of 20 per cent and to earn enough money to qualify for a mortgage. Their startling research puts the future average age of first-time London buyers at 52 – but only if they’ve not had any children and have saved up a large enough deposit. This is mainly due to the fact that struggling young buyers in London need on average a deposit of £57,175 to get a foothold on the property ladder. www.reimag.co.za
But people still need to live somewhere. So, if they don’t have a large deposit or access to favourable mortgage products, they will rent. In 2009, 49 per cent of under-30s in London were housed by the private rented sector. This pent-up demand from would-be purchasers is consequently buoying the London rental market; it also means that rents rise faster than in other parts of the UK. The latest HomeLet index shows that rents have risen an average of 6 per cent across the capital in the last year, 16 per cent in the last two and 32 per cent since 2009. South West London is the only area to show a decline in rental prices, but it’s still the most expensive area with an average rent of £1,724 a month. Areas which were previously perceived as “cheap” have also seen big increases over the past year as tenants move further afield in search of better value – only to increase demand and push up prices in the process. South East London rents have risen by 7.9 per cent and East London by 9.6 per cent. Average yields in London also currently outstrip all other areas of England, standing at 4.71 per cent while letting agents in London also report the lowest void periods, with 88 per cent renting property within 28 days or fewer. Whereas an Englishman’s home was once his castle, Britain is fast becoming a nation of tenants. House prices rose by 273 per cent in real terms bet ween 1959 and 2009, while the growth in real earnings was only 169 per cent over the same period. So, even when taking into account the so-called housing crash of 2007, it’s clear that average UK houseprice inf lation over the last decade has far outstripped average wage increases. Because of this, the gap between what buyers can afford and the price of good-quality property is now so wide that 70 per cent of firsttime buyers said in a 2010 poll that they have given up hope of ever owning their own homes. However, not all tenants are would-be buyers who are forced to rent. Many actually choose, and prefer, to rent. A 2007 CML survey found that only 50 per cent of people under 25 have any desire to own their own home within two years. Another study concluded that about
12 per cent of all tenants see themselves as ‘permanent lifestyle tenants’; this segment is growing rapidly. Changing social and economic patterns have caused this shift away from the British obsession with home ownership. Firstly, a larger number of people are staying in education for longer, and therefore delay buying property until they are in full-time employment and have had a chance to pay off their student debt. Secondly, due to a growing service sector and a shrinking manufacturing industry, the UK is shifting toward a mobile workforce in which employees do not regularly stay with one company for their entire careers. Employment agencies now estimate that the average stay at a company is only four years. With the population moving that often, many people do not want to incur the cost and hassle of buying and selling properties repeatedly. This substantial increase in the number of Britons unable or unwilling to buy a property of their own has led to a massive increase in the private rented sector. In 2001, there were about 2.4 million households renting their homes; yet, in less than a decade, this swelled by more than 50 per cent to 3.64 million. Some commentators believe this is one reason why UK house prices are overvalued. What they fail to take into account, however, is that the private rental sector in the UK is far smaller than in much of mainland Europe, where renting a property is seen as the norm, and not as the inferior option to home ownership. For example, across the UK, only 14 per cent of accommodation is privately rented – whereas in Germany, this figure is 49 per cent; in France, 21 per cent; and in Greece, 20 per cent. So the UK market has plenty of room for growth. These headline statistics demonstrate a longterm continued population growth – one that shows no signs of abating, and that is increasing the demand for homes throughout the UK, notably in London and the South East. And while people flock to London for all that life can afford – property investors will definitely not grow tired of London bricks and mortar.
RESOURCES Smuts and Taylor
March 2013 SA Real Estate Investor
61
FINANCE
BY COLLEEN MAY
Median Property Prices Global diversification
F
or investors, the race is on to find the best property investment opportunities the world has to offer. Investors generally look to acquire a property portfolio that has a combination of short and long-term opportunities in a variety of different countries therefore diversifying their investments and minimalising their risk. It has been suggested that during a l l stages of the property cycle, diversifying by adding international property to a property investment portfolio can significantly increase returns and decrease risk.
Below are the median property prices for offshore property, which will give you an idea of average property prices.
previous year and 54.4% from its peaks, and if they do not substantiate the claim that Dublin is doing much better, perhaps amend the claim.
New Zealand Property Prices – average
USA
• In Auckland Area, the average sales price soared 7.2% to NZ$575,797 (US$472,073) • In Wellington Area, the average sales price rose 2.3% to NZ$445,679 (US$365,394) • In Main Urban Areas, the average sales price increased 6.1% to NZ$478,404 (US$392,224) • The nationwide average sales price is now NZ$428,308 (US$351,153).
The case for global diversification over the long term is strong. In a boom, a bust, or even in a long period of similar conditions, an investor with global real estate assets would have significant improvements in risk adjusted return and increased returns overall.
Ireland
Globally, the increasing attractiveness of property and greater capital mobility have made cross-border investing more popular. This has also been aided by the increasing accessibilit y to f inance for non-foreign nationals in many countries.
The market in Ireland’s capital, Dublin, is much healthier. Dublin’s average asking price in June 2012 was €214,000, quite close to the average of €217,000 being asked in December 2011.
By taking advantage of lags in timing in the different property and economic cycles, an investor can insulate a portfolio from some of the domestic ups and downs. Many people feel that international property is out of reach. There are also practical challenges to cross border investment for example, culture, currency, tax and legal jurisdictions. As finance becomes more easily available the foreign markets are becoming increasingly accessible to small and medium investors. 62
March 2013 SA Real Estate INVESTOR
The national average asking price for residential properties fell to €172,000 in Q2 2012, 53% below the 2007 peak of €366,000, according to Daft.ie. The asking price index fell by 13.9% during the year to June 2012.
In Dublin City Centre, the average asking price was down by 10.2% to €167,172 during the year to Q2 2012, 59.3% down from the peak. West County Dublin had the sharpest y-o-y fall, with average asking prices down by 19% to €165,598, 56.8% lower than its peak. North County Dublin’s average asking price was €207,850, 14.2% lower than the previous year and 52.9% down from the peak. In South County Dublin, the average asking price was €328,959, 11.3% lower than the
Median home prices rose in three of the four regions in December. The Northwest saw its price rise to $231,600 up from $229,800. The new price was also up 5.3 % from the year before. In the Midwest, the median home price increased to $144,800, up from $141,600, and it rose 12.3 % from December 2011. The South saw prices appreciate to $161,100 in December, up from $156,700 in November. Prices were up 11.0 % from the previous year. In the West, prices fell slightly to $239,900, down from $244,600 in November, but prices were still up 17.3 % from December 2011. Canada Province – Canada province – average house averageDecember house prices December prices 2012 2012 Ave House Price
12 Mnth Change
British Columbia
$498,000
- 3.0 %
Ontario
$369,000
+ 3.6 %
Alberta
$363,000
+ 4.8 %
Quebec
$274,000
+ 3.6 %
Saskatchewan
Province
$284,000
+ 9.6 %
Newfoundland / Labrador $289,000
+ 11.5 %
Manitoba
$250,000
- 3.7 %
Nova Scotia
$205,000
- 8.8 %
Prince Edward Island
$165,000
+ 28.6 %
New Brunswick
$151,000
- 1.4 %
Canadian Average
$353,000
+ 1.6 %
RESOURCES Global Property Guide
www.reimag.co.za
Afriski Advertorial.pdf
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Newly Discovered Colossi Of Amenhotep Iii To Be Restored
Mother City Hosts The Design Indaba
Where Did The Egg And Bunny Come From?
SEXPO Back for 2013
Oz: The Great and Powerful in 3D
Retail World Africa 2013
The Health, Sexuality & Lifestyle Expo is the world’s largest event of its kind focusing on a broad spectrum of adult related topics and spectacular stage performances by local and international adult entertainers. The aim of the exhibition is to educate, inform, entertain and celebrate our sexuality in a fun, exciting and safe atmosphere. 2013 Dates Cape Town 7 - 9 March 2013 Durban 7 - 9 June Johannesburg 26 - 29 September
Directed by Sam Raimi, this take on the classic story of Dorothy and the Wizard of Oz, will have you on the edge of your seats. A not-to be-missed film, due for release on the 8th of March. When Oscar Diggs ( James Franco), a small-time circus magician with dubious ethics, is hurled away from dusty Kansas to the vibrant land of Oz, he thinks he’s hit the jackpot - fame and fortune are his for the taking - that is until he meets three witches, Theodora (Mila Kunis), Evanora (Rachel Weisz), and Glinda (Michelle Williams), who are not convinced he is the great wizard everyone’s been expecting.
Retail World Africa provides a platform where new revenue streams can be explored, key technologies can be evaluated, and businesses can gain valuable insight into implementing successful retail systems.
The mortuary temple of the 18th Dynasty Pharaoh Amenhotep III on Luxor’s west bank was a hive of activity, as workers along with Egyptian and foreign archaeologists have packed a pair of colossal statues of Pharaoh Amenhotep III in an attempt to transport it to an area almost 60 km from the temple for restoration. Amenhotep the Magnificent was the ninth pharaoh of the Eighteenth dynasty. According to different authors, he ruled Egypt from June 1386 to 1349 BC or June 1388 BC to December 1351 BC after his father Thutmose IV died.. Amenhotep III was the son of Thutmose by a minor wife Mutemwiya.
www.reimag.co.za
Design Indaba, the globally acclaimed creative fandango that’s put Cape Town on the world map as an international hotbed of innovation, dishes up yet another year of multifaceted events in 2013. Taking place at the Cape Town International Convention Centre (CTICC) from Wednesday, 27 February to Sunday, 3 March 2013, the much-anticipated multidisciplinary experience – it includes a conference, simulcast, expo and film festival looks to, beyond all else, get the creative juices flowing in the Mother City.
It’s pretty much common knowledge that Easter is a Christian celebration of Christ’s rising, but this holiday also has pagan origins. Where did the colored eggs, cute little bunnies, baby chicks, leg of lamb dinners, and lilies come from? They are all symbols of rebirth and the lamb was a traditional religious sacrifice. The Easter Bunny arose originally as a symbol of fertility, due to the rapid reproduction habits of the hare and rabbit. Later, Christians abstained from eating meat during the Lenten season prior to Easter. Easter was the first chance to enjoy eggs and meat after the long abstinence.
Retail World Africa is a platform where solution providers come together to find new business, generate leads and network with industry players. Sandton convention centre, JHB 11 - 13th of March
March 2013 SA Real Estate Investor
65
PROPERTY MONITOR
BY ANGIE REDMOND
Live Like A Princess H Fairytale homes around the world
ave you ever dreamed of living in a fairytale home or castle? Well, we have scoured the World Wide Web to bring you real fairytale homes, castles and properties right out of the fiction section.
Tiny Fern Forest Tree house, Lincoln, USA The tree house is indeed a cozy little place perched on four maples 30 feet above a blanket of ferns. Access is via a ramp 70 ft. from the main house, where you’ll find a private bathroom with shower. This quiet place in the woods has heat, electricity, and a small refrigerator. The main f loor has a single bed, but if you climb the ladder to the loft there is a queen-sized futon and down comforter. Enjoy the comfy reading rocker or sit on the deck and gaze at Mt. Abraham and the Green Mountain National Forest. The hot tub is a sweet new addition to the place. For those less adventurous, there is a guestroom in the main house with a double bed.
The Cob House, Somerset, England This stunningly beautiful tiny home with sculpted cob walls looks out over the banks of a small stream in Somerset, England where the local dialect still has remnants of the AngloSaxon language. The home is the work of Lisa and Rich who built the house with clay from the stream that runs just out of view in this picture. They collected round wood of Pine and Hawthorne thinned from the local woodlands to build the frame of the home. If you want to build with cob then you must test the quality of your clay. Cob also depends on the coarseness of the sand. This is how to do a snowball test. Combine your clay soil and sand in different proportions: 3:1, 2:1, 3:2, 1:1, 2:3, 1:2 and 1:3. For each, mix the sand and clay thoroughly and add just enough water to make the grains stick together when you squeeze a double handful very tightly.
The HemLoft, Canada
TOP: Tiny Fern Forest Tree House, Lincoln USA MIDDLE: The Cob House, Somerset England BOTTOM: The HemLoft, Canada
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March 2013 SA Real Estate INVESTOR
Described by its creator as “a secret tree house hiding in the woods of Whistler” in the Canadian province of British Columbia, the HemLoft is, unlike many buildings that describe themselves such, a tree house in the truest sense: the entire weight of the egg-shaped structure is supported by the tree around which it is built. Though open to visitors - the right sort of visitors, at least - one first has to find it. www.reimag.co.za
LIFESTYLE And the ongoing story of the HemLoft’s everwidening profile is as compelling as the story of its construction - and it’s a story with an uncertain ending as the land the HemLoft is built on is Crown Land.
The Hobbit House, Wales This is a house Simon Dale built for his family in Wales. It was built by Simon and his fatherin-law with help from passers by and visiting friends. Four months after starting they moved in. Simon estimated it took 1000-1500 man hours and £3000 in materials. Not really so much in house buying terms (roughly £60/sq m excluding labor). The frame is constructed from quite wiggly round oak logs 5”-10” in diameter. All of these were selected and felled from the surrounding woodland as part of an ongoing program of thinning to allow selected trees space to grow on to maturity. A wood burner heats the home, and an ingenious system that pipes cool air in from underground keeps the family refrigerator at an optimum temperature. A skylight fills the small home with natural light, water is sourced from a nearby spring, and solar panels provide all of the electricity the Dales need to power their musical, computing and lighting equipment. This amazing hobbit house puts the dream of living in an earthfriendly home firmly in reach.
& Crafts architecture and features rolled-edge roofs and antique leaded windows. As Curbed NY noted when the listing hit the market in 2009, what lies behind all that stone is pretty much under lock and key, generating folklore about basement bowling alleys and revolving garage doors. A modern twist on the centuriesold Hansel and Gretel fairytale, for sure.
Hello kitty house, Shanghai Obviously meant for the fancy girls who adore the cute cuddly cat, check out this lovely Hello Kitty House (Villa) in Shanghai. Designed in – what else but pink, this cute looking mansion has Hello Kitty themed interiors and a charming exterior that would make a guy blog live from the premises if permission was granted. The famous kitty bow in pink and white is spread all across the walls, the clock, the furniture and (even) the bed.
TOP: Hobbit House, Whales RIGHT: Hello Kitty House, Shanghal BELOW: Nautilus House, Mexico City BOTTOM: Gingerbread House, Brooklyn
Nautilus House, Mexico City Located near Mexico City, this is a unique shell-shaped house designed by Mexican architect Javier Senosiain. The house design is very innovative, unusual and audacious. Javier decided to bring the life aquatic into architecture. This house takes the form of the Nautilus shell and is wonderful to look at and to be in. The interesting feature of this huge shell is a striking entry cut into a wall of colorful stained glass. Inside it casts multi-colored spots of light onto walls. But it’s not the only surprise you will find. Do you want to walk on the stone paths along the amazing grass carpet? Entering the bathroom you will find yourself under the water with the sandy walls, gorgeous blue tiles and the window overhead. This house is worth speaking about for a long time. It is not only beautiful but also earthquake-proof and maintenance-free.
The Gingerbread House, Brooklyn The Gingerbread House, is a James Sarsfield Kennedy-designed six-bedroom home in the far reaches of Brooklyn. Built in 1916 and listed for $12 million, the property embodies typical Arts www.reimag.co.za
March 2013 SA Real Estate Investor
67
DECOR
BY ANGIE REDMOND
Get Colourful Give your home a paint makeover
T
he mad rush of the New Year is over, Valentine’s has come and gone but don’t despair, there are many more projects to keep your hands full. And what better way to start than by sprucing up your house and updating the look with some daring paint jobs? Whether you prefer classic, colourful or something different, we have all the bases covered when it comes to putting a new outfit on your house.
Colour wash Colour washed walls create a mystical soft touch to bold coloured walls and it is the easiest paint technique to master. Colour-washed walls bring movement and drama to a room’s vertical surfaces. The technique is simple to master and you can layer on as many tones as you like; the more layers you add, the more interesting the finish.
In a young girl ’s bedroom, a bold colour blocking technique can be used. You can use simple colours such as matt black and paint a large rectangle behind the bed. This highlights the other colours in the room and can tie the furniture into the design, depending on what colour you use.
Dragging, or strie, is an easy way to add interest to a smooth surface. The technique is created by pulling a dry brush through a coat of wet tinted glaze and it allows a range of looks, including fabric-like weaves. The effect is pronounced when there’s a clear contrast between the base- and glaze-coat colours; tones of similar intensity can yield a subtler look. You can also use strie to create a feature panel.
Tip: Add a graphic butterfly design by buying self-adhesive vinyl in black and white. Cut out the shapes and stick them onto the wall, or buy a stencil and paint them on.
Tip: Create a striking impact on what would otherwise be a bland wall by making the colours in the panel tie in with the colour of the chairs in the room.
Add colour to a neutral room
Stripes not solids
Are your rooms stuck in neutral gear? See how bright, bold blocks of wall colour warm up a formerly all-beige living room.
In a sophisticated tone-on-tone colour scheme or delightfully bright circus-tent colours, stripes add quick interest to plain walls. A steady hand
Graphic designs
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March 2013 SA Real Estate INVESTOR
and the proper brush yield a charming handpainted look. Taping lends the feel of precision, with a crisp line. These stripes are hand-painted along a pencil line to give them a slightly imperfect edge. For a straight line, use painter’s tape to mask off the stripes. For bolder stripes, choose brighter colours or a pair with more contrast.
Paint tiles Give outdated ceramic tile walls a new look by decoratively painting them in colours you love. Enamel craft paint (available at crafts stores) covers well on most tiles.
Five unconventional ways to paint your room Painting the ceiling and one of the walls the same colour, elevates the wall and ceiling into a floating pane of colour. A deep crown mold and a bold painted ceiling make for an interesting mix of the classic and the unexpected. Another take on the idea of painting half the room — this time, a thin, contrasting horizontal stripe in-between the two colours adds a bit of architectural appeal.
www.reimag.co.za
LIFESTYLE
ABOVE: colour wash If you’re very ambitious, you could try this effect, with two different stripes in varying heights. Laser level (and lots of patience) recommended. A floating red square turns a wall into a piece of art; painting the door extends the idea into the next room.
Colour trends for 2013 Start making your holiday wish list now and you’ll get exactly what you need to update your home with 2013 colours and decor. Bookmark home decor images in a toolbar folder. Create a Pinterest wish list. Print out images and post them to an idea board. Spring 2013 home decor colours are cheery and light, and the designs are simple yet meaningful.
It’s geometric G e omet r ic pat ter ns a nd a rc h itec t u r a l structures provide familiar and reassuring shapes to home decor for 2013. Black and white dinner ware pair well with a pastel palette, also trending for spring. The geometric patterns are two-toned, allowing for versatility in the rest of the decor. www.reimag.co.za
ABOVE: graphic design, butterflies
ABOVE: 2013 red colour shift
Owls give way to insects
Moody blues
The simple owl seen on ever ything from paintings in the nurser y on “How I Met Your Mother” to butter dishes at the local Marshall’s are moving aside for some other f lying creatures: insects. Dragonf lies have always held a certain appeal to some people, but in 2013 prints of all types of insects find their way into our homes. From wall prints to throw pillows, be on the look out for enlarged, detailed images of insects in black, on pale backgrounds.
Deep gray blues, smoky peacock greens, and slate greens offer one side of 2013. On the other side of the window find coloured glass and iridescent pastel hues.
More botanicals M a k e ro om for b ot a n ic a l pr i nt s a nd observational drawings, but don’t go overboard. A few select prints go a long way. Create the look by purchasing natural history books with illustrations from a library book sale. * Manipulate the prints by making black and white copies and then mount them on colourful card stock. * You can also make coasters or place mats with the images and some clear laminate. * Line the back of a book case with botanical images.
2013 colour shifts Reds shift to orange reds, and pair well with bright blue, medium grays, or black and white. Browns take a cue from leather, in both colour and texture. Nothing beats warm browns, bluish grays, rustic reds, chamois and bottle green for creating a welcoming living space. Yellows go from bright and sunny to a melted, buttery gold. They work best with soft pastel colours, often used in an Art Deco palette. Think rosy pink, light blue, aloe green and light purple. 2013 home decor greens could be plucked from trees, including olive and pine.
RESOURCES Apartment Therapy Yahoo
March 2013 SA Real Estate Investor
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DESIGN
W
hen prepa r i ng a n a r t ic le for publication the predictable outline of a project as a series of facts and figures of an architectural design is inherently limiting in its understanding of the value of the building and it is out of this comfort zone that I comment on the other aspects of our designs. Most projects are described as the numeric descriptions of bulk, coverage, parking ratios, height zones, materials, and hopefully, the positive returns that a project yields for its investors. However, little time is spent on the important values that we also need to speak about . A huge part of the value chain that we as architects are deeply involved in and promote, is the aspect of design which yields the most sat isf y ing and suppor t ive env ironment for our clients, and which has a powerful compositional poetic. Professionals are the products of social contracts between specialists and society, and it is incumbent that we separate the stylists and brand imitators from those who seek to help society in the quest for betterment. The very best architecture is forged in the mental space of our communities and for us as architects we aspire to design spaces that inspire wonder, as architecture embraces the world as a public art.
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March 2013 SA Real Estate INVESTOR
BY ADRIAN MASEROW
Architecture Embracing the world as art
Boring environments bring little delight and are totally unsatisfactory – economists are beginning to grapple with the understanding of livability as an important aspect of the real value chain. As we discover more about ourselves, our inherited capabilities and the ways in which they unfold in the world, there is a shift in the assumptions underpinning many of the design processes of professionals. T h is a l so goe s be yond t he world of architecture to fashion, design, interior design, product design, industrial design, music, composition and art. A review of recent design has proved to be enormously effective in opening the hidden structures of our spatial design intuition.
Our spatial intelligence, our spatial histories, our mental space and the mental space of our shared communities is embraced in order to value our architecture with some degree of autonomy and our professional advice articulates a spatial intelligence that architects share with society. Over 80% of the communication between humans is passed on through nonverbal clues and body language and the visual world of architecture carries far more importance as a form of communication as our spatial sense becomes ever more tuned in and satisfying.
As architects we communicate through the ‘the drawings that we have lived in’ by realizing these as fine works of architecture. Thus our mental space consciously renders the deep structure of our intuition is accessible to ourselves, and potentially to all through our building. We value the qualities of architecture that are both authentic and enduring as it helps us discriminate between what is actual and illusory, significant and trivial, natural and artificial.
Presence, Signif icance, Materiality and Emptiness are the four components of a richness we look for in our buildings & the balance between them is the poetic we strive for. We are poised between nature, and culture – architecture has always flirted with illusion and artifice, the real and the unreal. And with current technological advances in structure, materiality, lighting, and cladding, we are able to fully indulge in these semantic possibilities. The quest for authenticity is the authority that comes from being real and this is the search is for a poetic of architecture in our buildings We promote efficiency and great design which embraces our full responsibility as architects.
RESOURCES AMA Architects
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MOTOR TALK
BY RUSSELL BENNETT
Year of the Hybrid Hypercar
I
n the ultra-rarefied world of the true-blue hypercar, the breed that emerged when the trad supercar started becoming a bit too tame and just a little passé, new launches don’t come around all that often. What they do tend to do, however, is roll around in groups, as each manufacturer likes to steal some of the thunder of the others since it’s all basically a big game of one-upmanship anyway. This year is going to be one of those tumultuous periods. It’s even more momentous than usual, as most of the new ultra machines also incorporate all-new ideas about personal propulsion. Yes, we’re talking hybrid tech. And it’s in all of them. Here, then, is a brief rundown of the three most monumental of the lot.
McLaren P1 When McLaren released the gob-smackingly rapid MP4-12C, they made it clear from the start that it was to be their middle ground in a product lineup consisting of three tiers. The P1, which will be shown to the world complete for the first time in late February, is the pinnacle.
The F1 replacement. The hypercar It packs a combined power output of over 700kW, the majority of that coming from a development of the 3.8-litre twin-turbo V8 from the 12C and the remainder from an F1-style KERS (Kinetic Energy Regeneration System) setup. The company has managed to keep further 72
March 2013 SA Real Estate INVESTOR
details very close to their hearts since they’re the first to be showing a full-production model, but 0-100km/h of sub-3s is the new standard, and McLaren are sure to have over-engineered the thing to be as light as possible, and as advanced as today’s tech can make it. Which basically means active aero, torque vectoring distributing power to the driven wheels, and a dual-clutch transmission. RWD? We can only hope, but given the background of the company, quite possibly. Finally, to ensure exclusivity, McLaren has already committed to making just 500 P1s. Ever.
Ferrari F70 Yes, the mighty Enzo is finally going to be replaced by an all-new Ferrari f lagship. The F70 has been spotted, heavily disguised, testing all over European race tracks, and Ferrari have released a few teaser images to fuel the hype, but once again details remain sparse. W hat we do k now however pitches it remarkably close to the McLaren P1, which will be unveiled just one month earlier. Well over 700kW from a V12 boosted by KERS, as both camps move to maximise their F1 technology transferral, in a lightweight allcarbon tub and body. The only question is, will the Italian Stallion use some variation of the unique AWD setup applied to the hideous FF in this thoroughbred, or stick with a good old RWD layout?
Even the pricing of both cars is close, at approximately GBP800 000. Which won’t leave you change from R20 million in SA, at least. With the F50 having been limited to 349 units, and the Enzo to 399 (plus one extra built exclusively for a Vatican charity), it could be even more exclusive than the P1.
Porsche 918 Spyder Without the F1 linkup, Porsche was free to go in a slightly different direction, and the 918 is fitted with electric motors on each axle orchestrated along with the petrol output through an advanced torque-vectoring system. All-in the system delivers a combined 614kW, not as much as the other two but still good enough for that sub-3s sprint. More importantly however, is the petrol motor itself. Porsche has gone for a screaming 4.6-litre development of a V8 race motor, which ought to be absolutely awesome. And yet the company claims an average combined fuel consumption of just 3l/100km! As if all of this wasn’t enough, purchasers of the circa R18 million Spyder will have the option of shelling out another few million for a limited-edition 911 Turbo S “Edition 918 Spyder” to complement their new hybrid monster. W hich will also be a limitedproduction model like the one it’s named after, with only, yep, 918 units being built.
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March 2013 SA Real Estate Investor
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TECH TALK
BY RUSSELL BENNETT
Clash of the Giants
Has Apple lost it’s Core?
storage expansion. They also fit more neatly into a PC-dominated desktop ecosystem, and that killer capability of being able to run any Windows program expands their usefulness dramatically. Microsoft’s Surface has hit the market so hard, that even the normally irrepressible open-source option Google has been quieter of late. With Android Jelly Bean still being wellaccepted in the market, the Internet megalith could just be waiting to see how Apple responds before rolling out its own challenge. And why not, Android 4.2 is the fastest and most rock-solid platform we’ve seen so far as well as the most feature-rich. Although 128GB Android pickings are still thin on the ground, this environment has always supported SD-Card expandability. Usually limited to 64GB yes, but then there’s no ruling against having multiple SD-Cards if this proves not to be enough. Apple on the other hand have that gorgeous Retina display, the slickest OS experience, and a requirement for iTunes in order to integrate with desktops. But is it enough to keep the genre-defining product ahead as the competition quickly mounts?
F
ol low ing hot on t he heels of t he somewhat lukewarm reception to the iPhone 5, Apple is making headlines yet again - this time with yet another new iPad which is almost exactly the same as the old iPad. Except now, it has 128GB. Not exactly revolutionary. Is it, however, a sign that the Cupertino Rockstar of computing hardware is faltering. Let’s take a closer look. Although the iPad has become the Hoover of the tablet space, the brand synonymous with the whole market drive, in the world of tech that is not an unassailable position. In fact, it’s a target for all the rest to aim for. And they have, quite successfully at that. It started with Android, which came in and grabbed some major volume sales from the iPad. But the worrying one for Apple has to be the entrance of a major third player 74
March 2013 SA Real Estate INVESTOR
Microsoft no less. These giants have clashed before, and with the release of Windows 8 and Surface devices, another titanic battle is set to ensue. The name behind Windows, the most ubiquitous PC operating system by far, has come in with a bang, with the biggest hardware manufacturers building a healthy range of products from launch. Of course, it isn’t about the hardware anymore in this tablet game, it’s about the apps. Admittedly Windows is starting from an understandably lower base having just entered the fray, but it has one killer feature. Surface Pro devices can run any standard Windows application. And there are quite a few of those around. In addition, coming to the party late has allowed Microsoft to leapfrog the first few generations, avoid their pitfalls, and come out swinging with some pretty premium hardware. The high-end Surface devices all sport 128GB already. As well as supporting USB and SD-card
We’re not sure, but what is certain is that the dynamic has undoubtedly shifted. The latest releases from the company show a more reactive approach to product design than we’ve become accustomed to from the company that made geek gadgets cool. Rather than being out in front leading the way, the most recent reveals are all intended to counter perceived weaknesses exposed by direct competitors. Although this is a perfectly acceptable position for a consumer-technology brand to be in, it doesn’t sit comfortably with Apple’s leadership status. After all, the company didn’t release the iPhone because consumers were clamouring for a next-gen smart phone competitor, they released it to grab a leadership position in a growth market through sheer innovation, and the iPad occupied a similarly rock-solid niche. The iPhone 5 and iPad 128GB are simply not the outright leaders we’ve come to expect. Apple’s enviable position might not be in jeopardy yet, but the commanding grasp it had on the top spot is undoubtedly slipping. www.reimag.co.za