Property Professional - March/April 2013 by Property Professional

REAL ESTATE SHENANIGANS COMPACTING CAPE TOWN WILL DENSIFICATION WORK?

WHY THE JSE PROPERTY INDEX EXCELS

INDUSTRY EDUCATION

IS YOUR SOCIAL MEDIA OR

MARCH/APRIL 2013

Page 3: ED ITO R’S N O TE

EDITOR’S NOTE

As the only trade publication of its kind in the country, Property Professional magazine has changed hands and now forms part of the PA Group Advertising Joint Venture publishing stable. The adage ‘a change is as good as a holiday’ certainly doesn’t apply in this instance as we have been hard at work creating a re-energized version of Property Professional. The magazine, with its fresh, new look, will now also deliver a more balanced spread of content focusing on the broader scope of South African property - from residential and commercial property news to listed property performance, development updates and everything in between. To achieve this, the new Property Professional team has spent the last two months focusing on a number of challenges while in search of the hottest topics that are currently affecting the world of real estate. The challenges haven’t been personal, mind you (although perfecting a new template for the magazine has been all-consuming), but rather those currently facing the South African property industry. We take a look at some of the most prevalent ones, from illegal agents and service delivery woes to industry education shortfalls in the cover stories that look at the stumbling blocks in both the residential and commercial spheres of real estate education. It is encouraging that despite the challenges, many in the residential property arena believe that the new qualification criteria for estate agents has raised the bar and been a positive move forward that is set to improve the industry overall. And while there is the opinion that the provision of skills programmes for industry professionals is sorely lacking on the commercial broker side of property, more and more courses are being developed, some with formal educational institutions, in a bid to adequately furnish commercial property brokers with the necessary skills.

PUBLISHED BY THE PA GROUP ADVERTISING JOINT VENTURE 6 Beach Road, Old Castle Brewery Woodstock 7925 021 447 7130 THE ADVERTISING JOINT VENTURE CEO Shaun Minnie shaun@pamedia.co.za EDITOR Michelle Funke 011 462 8959 michelle@velvetsquare.co.za ADVERTISING SALES Sarah Steadman 082 334 4367 sarah@pamedia.co.za ADVERTISING PRODUCTION & SUBSCRIPTIONS Nikki Barnard nikki@velvetsquare.co.za ACCOUNTS & FINANCE Nicolette Lubbe 011 476 6293 PRINTING Paarl Media

Inside this issue we also find out how the City of Cape Town is planning to cater to the growing demand for residential property close to amenities and transport facilities. South African residential real estate agencies are also ranked on their perceived social media success, and we find out why the JSE Property Index has outstripped other asset classes in recent times. With a strong and dedicated team that is committed to delivering quality publications to its readers, the new publishers are well placed to take Property Professional forward into a new era of real estate business with a renewed focus and fresh energy. We hope that you enjoy the all new Property Professional! I would love to hear your news and views and would like to know what you want to read more about and less about, so please share your thoughts.

MICHELLE FUNKE

michelle@velvetsquare.co.za

Disclaimer: The publisher of this magazine gives no warranties, guarantees or assurances and makes no representation regarding any goods or services advertised within this edition. © Copyright PA Group Advertising Joint Venture. All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from the publisher. The publishers are not responsible for any unsolicited material.

Page 4: C O N TEN TS

CONTENTS 04

INDUSTRY NEWS

WE DON’T NEED NO EDUCATION

QUALITY BROKERS BROADEN INTELLECTUAL PROPERTY OF COMPANIES

THE SHADES OF CENSUS

WHEN THE PUNISHMENT DOESNT FIT THE CRIME

IS DENSIFICATION A GOOD OPTION?

Page 5: C O N TEN TS

SOUTH AFRICA’S REAL ESTATE INDUSTRY ON SOCIAL MEDIA

SERVICE DELIVERY WOES CONTINUE

TPN RESIDENTIAL RENTAL MONITOR: Q4 2012

TPN COMMERCIAL RENTAL MONITOR: Q4 2012

SOLID PERFORMANCE FROM THE JSE PROPERTY INDEX

DEVELOPMENT UPDATE

WORD ON THE STREET

Page 6: IN D U STRY N EWS

INDUSTRY NEWS South African property market still among the leaders According to the annual ‘Home Truths’ article recently published by The Economist, the rate of house price growth in South Africa is currently the third highest in the developed world at an average of 5%, with only Hong Kong (21.8%) and Austria (10.1%) doing better. “This may come as something of a surprise to those who have wondered just how much longer it will be before local property prices return to real-term growth, but The Economist’s figures also show that over the past five years (to end-2012), only six countries have experienced higher house price growth rates than SA,” notes Rudi Botha, CEO of BetterBond. “The countries that are ahead of South Africa are Austria, Canada, China, Hong Kong, Singapore and Switzerland – and several of these, even China, are now on a slower growth track than South Africa.” The Economist points out that in Canada, for example, the annual rate of growth in the fourth quarter of last year was only 3.3%, compared with 7.1% a year earlier. “Meanwhile, although South African prices have only grown by 12.2% over the past five years, the local market still looks pretty good against the US, where prices have shown a 20.5% decline, not to mention Spain (-24.3%) and Ireland, where an utterly depressed market has seen property prices literally halve in the past five years.”

Botha says there is also more good news for the South African market, in the latest Absa and FNB property publications. “The former shows that year-on-year housing price growth is now moving ahead of inflation in several areas (Port Elizabeth, East London and the KwaZulu-Natal south coast, for example) and in specific sectors in other areas, such as mediumsized housing in Mpumalanga, Limpopo and the Tshwane metro, and smaller housing in the North West and Northern Cape. Large homes in the Western Cape are also showing inflation-beating price gains. “And according to FNB’s latest survey of estate agents, the average listing time of properties declined to between 15 and 16 weeks, compared to almost 18 weeks in the first half of 2012. In addition, while 85% of property sellers still have to drop their price in order to sell; this drop has moderated from an average of 13% of asking price in 2011 to 10%.” Best of all, he says, the FNB survey showed that 13% of agents now regard stock constraints as a limiting factor when considering near-term market prospects. “This is double the 6.5% of agents who cited stock constraints in 2011 and indicates a broadly improved balance between supply and demand in the market which should, in turn, underpin continued house price growth.”

Save the date: SAPOA Convention 14-16 May 2013 SAPOA Convention in May marks its 45th convention anniversary The Annual SAPOA Convention and Property Exhibition is the pre-eminent property industry conference of the year. The event features many relevant and thought-provoking local and international speakers and is the ultimate networking event for any property professional – offering unrivalled opportunities to engage with industry leaders. With something for everyone, the 2013 networking events include plenary sessions, workshops, seminars, the Beach Party and Golf Day, which have earned five-star recognition as ‘stand-alone events’ over the years. With flexible registration options on offer, delegates may tailor their attendance in accordance with their interest and availability.

Set to take place from 14-16 May at Sun City, the annual SAPOA International Convention and Property Exhibition brings together the most influential national and international commercial property professionals. For two days every year, attendees have invaluable access to property owners, developers, service providers and thought leaders. The bill of keynote speakers has included an array of celebrities and entrepreneurs from former presidents FW de Klerk and Thabo Mbeki to the Trump baroness, eloquent economists and those who are unafraid to share their big dreams and elaborate visions. Find out more at www.sapoaconvention.co.za.

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Page 8: IN D U STRY N EWS

Online collaboration to revolutionise property transfer process Buying a property is something that most consumers will only go through a few times in their lives. As a result, would-be homeowners have come to grudgingly accept the arduous nature of the property transfer process, taking comfort in the fact that it needn’t be undertaken regularly. For years, this lengthy and admin-intensive process has come to be seen by many as a necessary evil, with a dearth of available options meaning that consumers have simply had to accept the long waiting times and reams of paperwork associated with it. Yet a new breed of customer is slowly beginning to emerge, one that knows their rights and expects better service delivery. The rise of connectivity in South Africa has also led to the growth of a more informed and expectant audience, one that is no longer as willing to accept the status quo. With a view to addressing a lack of customercentric processes in the property industry, Korbitec recently launched GhostConvey 2012. This comprehensive conveyancing package now includes online collaboration tools that have been designed to streamline the property transfer process, mitigating the need for excess paperwork and reducing lengthy waiting times. This new package allows the various role players involved in the property transfer process to interact and share information easily, using the online-based platform both to reduce hassle and to improve turnaround times. “We believe that the take-up of GhostConvey 2012 marks a vital first step in creating more efficient systems and processes within the industry,” explains Dawie Verryne, CEO of Korbitec. “With approximately 16 different stakeholders involved in the execution of a single property transfer, all of whom are scattered across various industries and

professions, the logistics and timings involved have created a real headache for consumers in the past. This software has been designed to bring these various stakeholders together, allowing for easier collaboration and heightened efficiency.” GhostConvey 2012 has been designed to easily integrate with existing systems, reducing the need for additional training and expense. As a result, all parties to a specific transaction, including estate agents, attorneys and banks, can now easily access a secure central database via their existing frameworks, and stay updated on the progress of a transfer. Whilst this will help to ease the administrative hassle for the various stakeholders involved, the ultimate benefit will be derived by the customer, who will be able to enjoy increased transparency and feedback, as well as greatly expedited service. “The electronic processes involved in GhostConvey 2012 will be of huge benefit to the customer, and we expect turnaround times, currently in the region of 80 days, to be reduced by approximately 25%,” says Verryne. “Buyers can also now enjoy increased transparency, and will be able to login to check on the status of their transfer at any time, establishing how and where any bottlenecks might have emerged.” The GhostConvey 2012 system, which relies on electronic security controls, has also been designed to minimise the risk of fraudulent transactions, which sometimes take place as a result of recaptured paperwork. Thus far, the system has already been rolled out to over 2 500 of the country’s top conveyancing firms, with numerous others set to follow suit. “Every month we are coming closer to a fully paperless, electronic conveyancing system,” says Verryne. “With a number of other technology providers now looking into providing similar products, it is up to the country’s top service providers to adopt such a form of technology, or risk being left behind.”

High unemployment rate worsening over-indebtedness levels The high rate of unemployment in South Africa continues to exacerbate already high levels of over-indebtedness in South Africa, says Credit Ombud, Manie van Schalkwyk. He was commenting on the release of Stats SA’s latest Quarterly Labour Force Survey which shows an unemployment rate of 24.9% in the fourth quarter of 2012. Although this is a minor improvement compared to the unemployment rate of 25.5% in the third quarter, it remains worryingly high. The expanded definition of unemployment, which includes people who have stopped looking for work, was at

35.9% in the fourth quarter, from 36.3% previously.“Many people simply can’t find work and this is affecting households’ ability to pay back their debts,” says Van Schalkwyk. “We’re seeing high levels of over-indebtedness across the country.” The ratio of household debt to disposable income amounted to 76.3% in the second quarter of 2012 and in September 2012, the National Credit Regulator (NCR) reported that of the 19.69-million credit-active consumers, more than 9.25 million (47%) had impaired records.

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£2.2 billion spent on central London new-build property in 2012 Knight Frank’s new report, International Residential Investment in London, reveals the size of overseas investment into the London new-build sector. It also examines how the financial crisis has changed the dynamics of the market, looking particularly at the rise in investment by Asian buyers. Finally, it analyses who is buying new-build property and why, before highlighting the potential future overseas markets for London property. HEADLINES: Overseas buyers purchased central London new-build property with a value of £2.2-billion in 2012, up 22% from £1.8-billion in 2011. A total of 52 nationalities bought new-build property in central London last year. The most active overseas buyers (ranked by number of transactions) of central London new homes are from Singapore (23%), Hong Kong (16%), China (5%), Malaysia (4%) and Russia (3%) UK buyers remain the largest nationality group, with a 27% market share. 33% of international investors buying off-plan do so to provide children attending London universities with a base in the city. Knight Frank identifies three major factors that have underpinned the appetite for property in London: First, the capital growth potential and opportunity for investment diversification; secondly, the advantageous currency differential for many nationalities; and thirdly, London’s continuing leadership in top-flight education. The educational opportunities in London are particularly attractive for buyers from Asia,

and their preference for new-build property has had an important impact on London, allowing developers to secure funding and maintain healthier construction levels in central London than in the rest of the UK. Knight Frank expects the core overseas markets to retain their appetite to buy in central London, and also expects domestic share of the market to rise from its current levels. It also forecasts increased investment activity from China, particularly if the restrictions on overseas capital transfer are eased. Turkey will continue to be a key buyer market: Its economy has outperformed crisis hit western Europe and many of its citizens have existing business and family links with the UK. Indonesia is also a country to watch, Knight Frank says. Neil Batty, head of International Project Marketing, Knight Frank, says: “Overseas investors will continue to play a vital role in the acquisition of prime central London new-build homes in 2013. They are attracted to London due to advantageous currency values, the opportunity to invest in a tangible asset with the prospect of long-term strong capital appreciation, and the recognition that London continues to offer worldleading educational and cultural facilities.” Gráinne Gilmore, head of UK residential research, says: “International interest in London property is not a new phenomenon, but the economic and financial changes since 2007 have created a fresh model for overseas investment in new-build property. Agents report that the appetite for London property remains strong, and there is an increasing interest in London property from a widening range of overseas buyers, especially some emerging economies where economic growth has remained robust during the downturn.”

Solid auction sales expected in 2013 Following a record sales year in 2012 and after another highly successful auction event held in February The High St Auction Co is anticipating a chart topping year. With over 20 prime commercial, retail and industrial properties at a hammer price of well-over R50 million, the auction route to market has proven once again to be a very effective and efficient method in trading fixed-assets This is evident in the latest office vacancy survey for the 4th quarter of 2012, as released by SAPOA. The national office vacancy rate declined slightly this quarter, following a period of gradual upward movement since 2010. While this is a positive development, vacancies still remain relatively high. Office space demand remains subdued, although gradual improvement is starting to filter through in some premium nodes.

Although the national vacancy rate for all industrial property showed marginal improvement in the first half of 2012, a number of domestic and global issues have negatively affected forecasts for the remainder of the year, and also for 2013. According to James Dall, Joint Managing Director of The High St Auction Co. this environment positively impacts the auction industry as owners and financial institutions are looking for a fast, reliable, flexible and effective method for trading property stock. With a total of R53-million in sales during the first auction event for the year, The High St Auction Co is looking forward to a positive 2013.

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North Durban emerging as industrial hotspot The northern industrial suburbs, a cluster of Springfield Park, Riverhorse Valley, Briardene and Mount Edgecombe areas are fast emerging as an industrial hotspot in Durban. The area is showing tremendous growth potential in terms of industrial property as most of the South Durban Basin is oversaturated with no new land available for development. North Durban is squarely on the radar for companies looking for warehousing facilities and container yards. The area has natural advantages – a huge labour base in nearby areas of KwaMashu and Phoenix coupled with good connectivity as the R102, N3 and N2 flow through it. Moreover the north industrial suburbs lie within 25km radius of both the King Shaka International Airport and the port and container terminals at Bayhead. Industrial real estate in proximity to transportation hubs generally tends to outperform the broader market. Also the proximity to the national road network makes inland hubs desirable. The confidence in these suburbs is reflected by the asking rents for industrial space, currently at just below R50/m2, except for Riverhorse Valley Business Estate, which commands R58/m2. They are likely to go up further this year as demand continues to outpace supply. Just over five years back Tongaat Hulett sold all the available land at R1 000/m2, the same land now sells at R1 600m2. Despite the 60% premium, the demand continues to remain high with vacancies under 1%. The north is slowly charting its own growth story. Springfield Park, Riverhorse Valley and Briardene have largely been home to industrial and mixed use buildings varying from the older multistorey warehouses along

the North Coast Road to brand new developments like the Mr Price and RTT warehouses. Zenprop recently completed the state-of-the-art Mass Discounters warehouse in the heart of the Riverhorse Valley overlooking the N2 and Stefcon Projects has developed a new facility for Camjet. Despite the tightness of the market, demand for industrial property in Mount Edgecombe has also picked up tremendously. As the airport moved north, the south has shrunk in significance and coupled with scarcity of new land for development, the north is experiencing 100% growth in property values. New developments in the area include the relocation of Altech UEC to the old Trade Centre retail warehouse on the R102. Zenprop recently purchased 44 000m2 of prime land on Marshall Drive and is in talks with a national chain for a 33 000m2 distribution facility. According to Anthon van Weers, senior industrial broker at Broll Property Group: “North Durban is fast emerging as a hub for industrial and warehousing facilities due to its proximity to the port, airport and the national road network. This part of Durban is seeing significant infrastructure development compared to the south where developers are citing several reasons for the lack of quality industrial development mostly attributable to non-availability of large parcels of land.” He further adds: “The north has a huge land bank, so large projects can be put up. We are seeing increased interest in inland warehouses and distribution centres connected to sea and airports. This growing trend will help companies reduce costs and create new opportunities for developers and investors in the industrial real estate sector.”

New online source for property listings South Africans are now able to find less expensive property online more suited to tighter budgets. DailyHomes.co.za, a new South African property portal, offers homes for sale under R1-million and rentals for under R6 000 per month. Initially the site will focus on Gauteng, but is expected to have a national presence in the near future. Darren Blair, CEO of DailyHomes.co.za, explains: “Property owners can list their properties at no charge for a time. Those looking for properties will also benefit from this valuable service. For instance, each year thousands of tertiary students struggle to find somewhere suitable to stay for their studies. They need to network, read the newspaper or trawl many websites to find accommodation. DailyHomes.co.za provides niche properties, such as accommodation appropriate for students, as well as numerous other properties where thousands of homes are available at one web address.” Dailyhomes.co.za also offers a useful service to the property industry. It has been set up so that it is easy for South Africa’s real estate agents and large developers to list entire property portfolios focused on a more targeted market. Property owners will be able to manage their entire portfolio from one dashboard tand web analytics will track interest shown in properties. Private homeowners are also able

to use the site to list their property for sale or rent. “The look and feel of the web and mobile platforms is something the South African public has not seen before. We have differentiated DailyHomes.co.za from the other property sites with a fun, easy-to-use, functional and interactive website. Through technology innovation and focus we aim to help clients list, rent or sell their properties at a much higher conversion rate than what has previously been seen in South Africa,” says Blair.

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AGENTS, REMEMBER YOUR FIC REGISTRATION! Apart from the requirement to register with EAAB for the issue annually of a Fidelity Fund Certificate, it has been a requirement since March 2011 that estate agencies and certain agents must also register with the Financial Intelligence Centre (FIC). This is necessary because FIC considers that estate agents are susceptible to being abused by organised crime for money laundering activities. As such, estate agencies have been listed in the Financial Intelligence Centre Act as ‘accountable institutions’.’ WHO EXACTLY MUST REGISTER WITH FIC? According to the Act, the following agencies/agents must register: • all estate agencies (not the individual agents at the agency); • an estate agent trading in his own name; • the head office of a large agency; • each branch within a large agency; and • each franchise holder of a franchised agency.

Fortunately registration is a simple process and the steps are indicated on FIC’s website at www.fic.gov.za. PENALTIES Remember that the failure by an agent/the agencies listed above to register with FIC can not only result in a liability for penalties, but could render a Fidelity Fund Certificate invalid, which in turn may negatively impact on a possible commission claim. Although there is no need for alarm at this stage, it is recommended that all agents/agencies affected hereby, apply for registration with the FIC without delay. Contact any of our professionals at info@stbb.co.za should you have questions in this regard or require our assistance to guide you through the process.

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Need for sectional title training There is an increasing sense of optimism in the sectional title industry, with beleaguered developers once again making their presence felt, and estate agents renewing their focus on this sector of the property market. This is according to specialist sectional title attorney Marina Constas, a director of BBM Attorneys and co-author of

the bestselling book Demystifying Sectional Title. But with renewed interest and growth in sectional title comes the potential for problems, she cautions, as estate agents and buyers navigate the minefield that is sectional title legislation. “I have said for years that estate agents selling sectional title units should have an additional qualification to be able to do so,” Constas comments. “The agent is the first person who a prospective purchaser has access to, and if the information provided regarding the communal environment legalities is incorrect, the trustees in the complex, together with all the owners making up the body corporate, will bear the brunt of this misinformation.”

Commercial property investors upbeat Property investors and developers are upbeat about the South African commercial property sector in 2013, despite analysts’ and property professionals’ expectations that the market will remain sluggish.

demand for upgraded operational facilities and convenient access to key transport nodes to reduce fuel costs are factors driving growth in this sector.

This is according to Gary Palmer, CEO of Paragon Lending Solutions – a leading second-tier lender, who says that the company has witnessed a surge in clients looking for funding for growth, indicating that they are more positive going into 2013, compared with last year. “Our research has revealed that clients are actively exploring property deals again and are forecasting steady growth in their respective businesses.”

Palmer warns that many industry experts are of the opinion that the office sector isn’t expected to recover any time soon, with a high number of office vacancy rates that need to be filled. “All the funds seem to be competing with each other on high value properties with blue chip tenants and long leases. The office sector is expected to remain flat with vacancies and retaining tenants proving to be a hurdle property owners need to overcome in 2013, so new developments in the sector would be a riskier move.

There has been mixed sentiment by industry experts on the outlook for this year with the general consensus that the commercial property market is only really expected to start picking up in 2014. However, Palmer says that with interest rates remaining unchanged, which is good for raising capital, the current economic climate is providing opportunities for developers and investors, but they need funding to get off the ground. “There was strong demand in 2012 in the retail sector, which experienced low vacancies. There was particular demand in this sector for regional shopping centres, petrol stations and food chains. Although largely dependent on consumer spending and the local economy, the retail property sector is expected to continue to grow with a number of retailers looking to increase their exposure,” Palmer says. He adds that the industrial sector had also performed well and is likely to remain stable, having enjoyed moderate rental growth in 2012. “High operating costs and the lack of new major industrial developments are the biggest threats to growth in this sector. However,

“Despite the property market currently looking flat, people are optimistic as the sector remains an attractive alternative investment. Investors with access to capital and the ability to move quickly on a transaction will be able to purchase excellent value in 2013.” In the listed property market, property analysts expect total returns between 10-16%, and although expectations are lower than the total returns of 35.9% in 2012, the listed property sector should be in for another good year. With continued low interest rates, new listings in the property sector are expected with a number of smaller companies increasing their portfolios by buying from listed funds. Palmer says that investors who want to get into the market need quick financial assistance. “Banks will remain cautious with lending due to low interest rates and turnaround times are slower. Investors should look for alternatives for quick access to short-term funding from second-tier lenders to secure the deal in anticipation of a bank loan,” concludes Palmer.

Page 16: WE D O N ’T N EED N O ED U CATIO N

WE DON’T NEED NO EDUCATION... THE ROOTS OF EDUCATION ARE BITTER, BUT THE FRUIT IS SWEET

By all accounts, the educational standards that have become an integral part of an estate agent’s life have lifted the industry to new heights. Lea Jacobs chats to various real estate bosses to find out what is happening on the ground and inadvertently uncovers some disturbing news Let’s be honest, the news that agents had to literally go back to school, or prove that they had enough experience to sell homes, initially went down like a ton of lead. It didn’t help that there was infighting between the two governing bodies, the Estate Agency Affairs Board (EAAB) and the Services Sector Education and Training Authority (SSETA), as to what needed to be included in the curriculum. To top it all, most, if not all, prospective students assumed that they would automatically be entitled to a bursary, allowing them to attain the right qualification at no cost to themselves. At one stage it seemed as if every Tom, Dick and Harry was jumping on the training bandwagon. There were many who had absolutely no idea of how the real estate industry actually worked. Agents who were promised the earth were given a rude awakening when they realised that the qualifications they had received were literally not worth the paper their certificates were printed on. And it wasn’t plain sailing for some of those who registered with a well-known training provider either. It came as a great shock to everyone when, towards the end of 2012, it was announced by SSETA that the Development Institute and Training Academy of Southern Africa (DITASA) had had its accreditation withdrawn. Many started the training with the promise that the course would be paid for via a bursary, only to find out later that they themselves would be footing the bill as SSETA had withdrawn much of its funding.

Despite the challenges and initial confusion, a large number of agents have now completed, or are in the process of completing, their educational requirements and the feedback from various agencies as to whether the courses have added value to the real estate industry is positive. According to Berry Everitt, MD of Chas Everitt, all industries in which practitioners deal with the public should have at least a minimum qualification standard. “It gives consumers peace of mind that they are dealing with trained service providers – which is especially important when it comes to facilitating the sale of expensive assets such as homes – and in that sense the new qualification requirements are beneficial to our industry.” Although many bemoaned the fact that a significant amount of work was needed to complete the course, Everitt believes that this was necessary. “As things are, there are two qualifying authorities and agents seeking to qualify are required to prove practical competence as well as theoretical knowledge.” He felt that the current system is far better than the previous exam set-up where only theoretical knowledge was tested and the benchmark was not very high. While it is generally accepted that the standards have added to the industry, the amount of work required did take its toll on agents and agencies. Grant Gavin, broker/owner of RE/MAX Panache in KwaZulu-Natal said that the biggest factor that agents had to deal with was balancing time on the job; this when they have no fixed income and had to spend time out of the office preparing for the course. “A six-week to two- to three-

Page 17: WE D O N ’T N EED N O ED U CATIO N

Despite the challenges and initial confusion, a large number of agents have now completed, or are in the process of completing, their educational requirements and the feedback from various agencies as to whether the courses have added value to the real estate industry is positive. month distraction like this can be financially crippling, and not only for the agents, but for the office owners who need to carry the cost of the office while the agents are not selling as much during the course period.” He said early adopters who threw their whole office sales team onto the course found this factor to be particularly difficult to handle, especially since it came during a time when the market was tough enough even without with these sorts of distractions. Despite this, Jan Myburgh, the general manager Operations and Learning with Harcourts, says that the qualifications have boosted agents’ confidence. “When the South African property market exploded between 2004 and 2007, agent numbers doubled along with property prices. It was an easy market to sell in, it was easy to obtain finance and easy for agents to get a deal through. It certainly did not take a lot of technical know-how and skill to put a deal together and this led to low barriers of entry into the industry. The qualifications have certainly raised the level of

skill and knowledge nationally and have created a sense of pride among those who now call themselves qualified.” That said, he also believes that the qualifications now have to be reassessed for relevance and goal achievement. “In my opinion, certain sections in the qualification such as the FIC and FAIS unit standards that count for only five credits and demand inordinate time and effort could be cut down to be relevant only to real estate. The second language proficiency also poses a problem to a great number of already competent agents who are only fluent in their mother tongue.” He also believes that the math unit standards will become a barrier to entry for those who do not have a matric maths qualification. Future problems aside, one aspect that has become a concern is the length of time it is taking SSETA to issue certificates to agents who have completed the required courses. In some instances agents are still waiting to receive their certificates two years after qualifying. This is serious, given that the EAAB is adamant that it will only issue Fidelity Certificates to those who can prove that they have the required qualification under their belt.

E D: Be sure not to miss the May/June issue when we will be tackling this thorny topic by asking SSETA to respond to these allegations and discuss what agents can do to ensure that they have the relevant documentation before the cut-off date.

LEA JACOBS

Page 18: QUAL I T Y BROKERS BR O A D EN IN TELLEC TU A L PRO PERTY O F CO MPA N IES

Page 19: QUAL I T Y BROKERS BR O A D EN IN TELLEC TU A L PRO PERTY O F CO MPA N IES

QUALITY BROKERS BROADEN INTELLECTUAL PROPERTY OF COMPANIES How do successful commercial property brokers enrich the human capital of organisations?

Many of those who hail from the talented, multi-skilled breed of business professionals known as commercial property brokers spent years cutting their teeth in the service industry. They range from those with university qualifications in property related studies, accounting, engineering, marketing or communications, who planned to enter this industry from the outset, to others who may well be degree-less, yet driven by success. Such candidates might possess a wealth of business experience, a flair for entrepreneurship and genuine enthusiasm. To enter this field of employment, professional communications and negotiation skills at top management level are essential. Industry experts say brokers are either headhunted by recruiters to join large companies or opt to retain independent and manage personal portfolios. To achieve success, they need a succinct understanding of the built environment, city and town planning, economics, finance, tax, property law, technology, environmental sustainability and so much more. A number of property associations and corporates are already utilising the training services of educational institutions nationally to adequately furnish brokers with the required skill to operate competently at top level. However, industry members also feel the need to present a broader range of qualifications at different levels, both from a local and global perspective. Dineo Molomo of Henley Real Estate School of Africa says: “Despite South Africa’s real estate sector being worth an estimated R4.9-trillion, and contributing almost 10% to the country’s GDP, the provision of

skills programmes for industry professionals is sorely lacking.” She says the school aims to bridge that gap by being global as well as local in orientation, drawing on the best of international knowledge, research and skills. Molomo says the school intends to provide the highest standards of postgraduate and executive education, thereby spearheading rural and urban infrastructure development locally and in Africa. The success of large commercial property companies reflects strongly in the diverse skills sets and dynamic performances of successful property brokers, unlike some specific areas of operation of their colleagues. The services of brokers extend far and wide, from property owners, management companies, investment funds and asset managers to rental agents, where passing the grade with top level presentations, negotiations as well as after sales service is critical to success. In an ever changing industry to uphold the high bar of educational and operational excellence and, not unlike their counterparts in residential property, higher levels of skills training means staying abreast. It requires constant upskilling, growth within local organisations as well as an awareness of global property issues, such as the newly created Real Estate Investments Trusts (Reits) system, in use elsewhere in the world and shortly to be launched in South Africa, to be available for listed property funds with fiscal years starting on 1 April. Mike Walters, commercial manager at Renprop, says a diverse and dynamic skills set, coupled with relevant qualifications, make for successful brokers. This career attracts two different personas, he says. Some candidates enter the industry immediately after qualifying,

Page 20: C O MMER C IA L B R O K ER TRA IN IN G

CHRIS CLOETE Course Director Professor Chris Cloete, Department of Construction Economics, University of Pretoria

while others aged from 30 to early 40s might seek greater flexibility within an entrepreneurial environment and the ability to determine the size of their pay cheques. He says at least 70% of Renpropâ&#x20AC;&#x2122;s brokers were previously employed in the fields of marketing, advertising and hospitality industries. In addition to quality brokers broadening the intellectual property of companies it enables further training, grooming and extension of their management skills in preparation for senior management.

has proven to be immensely popular, with more than a thousand delegates having registered for the course since its inception in 1997 Course Director Professor Chris Cloete, Department of Construction Economics, University of Pretoria, says that this course, with a content level equal to NQF Level 6, comprises a total of 26 modules, six assignments from February to November, a three day workshop and a four-hour examination. It requires an average pass mark of 50%, with the assignments contributing 40% of the final mark and the examination 60%

The success of large commercial property companies reflects strongly in the diverse skills sets and dynamic performances of successful property brokers.

Another high level course is the Advanced Certificate in Shopping Centre Leadership (ACSCL), offered by the SA Council of Shopping Centres, also in conjunction with the University of Pretoria. The ACSCL is similar in structure to the CCPP, but is aimed at senior management in the shopping centre industry and builds on the very popular Certificate in Shopping Centre Management (CSCM). The CSCM is offered once a year and comprises an intensive 6-day course covering all the essential aspects of shopping centre management. The CSCM has been successfully completed by more than 800 attendees, the majority of whom occupy key positions in the shopping centre industry.

In addition to in-house training for large organisations, industry bodies like the South African Property Owners Association (SAPOA) offer various courses in conjunction with local universities. One prominent example is the comprehensive one year, distance learning Certificate for the Commercial Property Practitioner (CCPP), offered by SAPOA in conjunction with the University of Pretoria. This in-depth course was designed for property practitioners involved in office, retail and industrial management, development, leasing, financing and investment. The CCPP

Other SAPOA short certificate courses include the Introduction to Commercial Property Programme (ICPP) and Essential Commercial Property Programme (ECPP). Certificates of competence are issued to students who completed all modules and examinations at relevant universities. The Institute of Estate Agents (IEASA) is also offering the Certificate of Commercial and Industrial Brokerage (CCIB) this year.

ANNA-MARIE SMITH

BetterBond 2013 Roadshow

Your kaleidoscope of Dreams Wednesday, 6th March JHB North & West MonteCasino Thursday, 7th March JHB South & East Emperors Palace Friday, 8th March Pretoria Utopia Place Wednesday, 13th March KwaZulu-Natal Elangeni

The FNB sponsored BetterBond Roadshow sets off on its countrywide tour to bring inspired forecasting of what the future of real estate holds.

Highlights of the most exciting roadshow of the year: • Gavin Sharples will keep you on the edge of your seat; • exciting BetterRewards competitions with amazing prizes up for grabs; • economic insights & trends highlighted by the FNB financial experts.

Friday, 15th March Western Cape Lord Charles Tuesday, 19th March Free State Ilanga Estate Tuesday, 26th March Eastern Cape Elizabeth Place For more information: Tracy Powell (011) 516 5500

Page 22: SERV IC E D ELIV ERY WO ES C O N TIN U E

SERVICE DELIVERY WOES CONTINUE

There are a growing number of areas that are experiencing service delivery problems. Lea Jacobs takes a look at the situation and asks if agents should do more to help improve the areas in which they operate

area and the desirability of property there and, as a consequence, sales. As such, this is a very important factor to consider for any prospective home buyer.”

The lack of service delivery continues to plague South Africa and it was recently reported that there is a service delivery protest every second day. While most middle and upper class citizens wouldn’t dream of taking to the streets to voice their anger, that doesn’t mean that there aren’t serious problems in some of South Africa’s more affluent suburbs.

With this in mind, is it in an agent’s vested interest to become involved in their local communities and do their bit to ensure that an area remains in tip-top condition?

Many of our suburbs are enveloped in an air of neglect. Potholes line our roads, unkempt verges are infested with weeds, rubbish is not collected on a regular basis... the list goes on and on. Trying to market and sell properties in a suburb that has lost its allure has become more challenging. There is just no way to avoid the topic with potential buyers – the evidence is in plain sight for all to see. It is difficult to tell exactly what effect the lack of service delivery will have on any particular suburb, but it stands to reason that if the situation is left as it is, this will have a serious impact on property prices. No one wants to live in a slum and they certainly aren’t going to pay for the privilege of living in an area that has gone to rack and ruin. “Buyers often have more than one choice of neighbourhood and will opt for that which is better presented,” says Myles Wakefield, CEO of Wakefields Real Estate. “If there are bin bags, whether for household or garden refuse, lying about, verges that have not been cut and roads that are crumbling, it makes the potential buyer wonder what type of neighbourhood he is buying into and whether the municipal services are operating in the area.” Dr Andrew Golding, chief executive of the Pam Golding Property Group, agrees, saying: “There would be a direct correlation between perceived lack of service delivery in a particular

“Our agents do contribute in as much as they are able to. They, as responsible citizens, along with everyone else in the country, should get involved in the upliftment of their local communities,” says Samuel Seeff, chairman of Seeff Properties. “It is everybody’s responsibility to play their part insofar as they are able to.” Golding believes that part of being a professional and competent agent in today’s world is to be integrally involved in the community in which they operate and, generally speaking, live. “Part of being a positively contributing member of that community is to get involved in all issues affecting that particular area. However, I do not believe it is the specific responsibility of the agent, but should rather be part of a community initiative.” Sadly, it would appear that we have become a nation of complainers. While many local municipalities give us plenty of ammunition, sitting back and watching an area go to seed and not doing anything about it is not really an option anymore. The time has come to give back and become involved in efforts to uplift and improve matters in your own backyard.

LEA JACOBS

Page 23: TH E SH A D ES O F CEN SU S FRO M 1996 TO 2011

THE SHADES OF CENSUS FROM 1996 TO 2011 What the recent Census figures mean for property and how they relate to demand and pricing.

The beginning of the nation’s modern age, or more specifically the 1996 census, revealed the nation’s population sitting at a fair 40.5-million. South Africa’s population has since increased by a significant 11.2-million and our biggest economic centre, Gauteng, is now host to the largest piece of the population pie, growing by 30% since 2001, a privilege that previously belonged to KwaZulu-Natal in 1996 and 2001, which in itself, only grew by 7.1% in the last 10 years.

More employed people mean a higher demand for property. Here’s a breakdown of the top suburbs in Gauteng and the Western Cape, based on volume over the past 10 years:

The results, while aimed at assisting government to assess its service distribution and allocation of funding over the next few years, among other valuable purposes, have also proved particularly fruitful to the understanding of how the market has changed. The dramatic increase in Gauteng and Western Cape’s population figures, in spite of improved basic services nationally, promotes the belief that jobs are still a major migrating factor. The fact that Gauteng is the province with second highest employed population, at 45% after Western Cape at 48.5%, does appear to support this point.

Credit: Information supplied by Knowledge Factory www.knowledgefactory.co.za

Page 24: WHEN TH E PU N ISH MEN T D O ESN ’T FIT TH E CR IME

Page 25: WHEN TH E PU N ISH MEN T D O ESN ’T FIT TH E CR IME

WHEN THE PUNISHMENT DOESN’T FIT THE CRIME Does crime pay in South Africa? We look at the recent real estate shenanigans and question the legal system

The fact that white collar crime has hit the real estate sector comes as no surprise, given the large amounts of money involved. What does come as a surprise, though, is the punishment meted out to those who are caught. Are the courts and other tribunals doing enough to punish criminal elements exposed in the industry and, perhaps most importantly, are they sending out the right message to both the general public and those who are considering breaking the law? Wendy Machanik, the former CEO of Wendy Machanik Properties, pleaded guilty to 90 counts of theft involving R27-million. She got off pretty lightly when she received nothing more than a R1.5-million fine and three years’ correctional supervision. The court, determined, it seems, to keep her out of a prison cell, has allowed her to pay the fine in instalments. In the other case that made the headlines, Rael Levitt, the former CEO of Auction Alliance, walked away from a major scandal involving auction rigging simply because the National Consumer Commission, in its haste to make an example of what was then the biggest property auction house in South Africa, messed up. Although the Hawks have subsequently raided the now defunct offices of the auction company, the move is considered by many to be far too little, far too late. So there you have it, two of the biggest real estate stories to hit the headlines in years and what has happened? Well, if truth be told… not much. Yes, it could be argued that both the parties involved have paid for their sins (proven or unproven) on a major scale and it is highly unlikely that either will ever be able to operate - or at least operate successfully - in the real estate industry again. But did the punishment really fit the crime? The short answer is no, of course it did not. We are constantly being told that the powers that be are going to clean up the industry, but what message does the Wendy Machanik judgement send?

By stealing R27-million and only having to pay a fine of R1.5-million, the message is loud and clear - crime actually does pay, and pay well in this country, even after you have been caught. One also has to wonder what the Estate Agency Affairs Board (EAAB) thinks of the whole affair. It already had egg on its face when one of its board members was caught pilfering trust funds. Although no one at the EAAB has publicly stated that they wanted the book thrown at Machanik, you can bet your bottom dollar that at least some wanted her to serve time. Estate agents cannot ‘borrow’ money from their trust accounts and if they are doing so, they are breaking the law. It seems that every time someone is caught (and hasn’t used the money to hightail it to some exotic island somewhere in the Caribbean), this is the first excuse given. “I used the money to pay the staff because I wanted to protect them” doesn’t hold much sway either, because, as was clearly seen by the Machanik incident, her actions affected hundreds of people in her employ and not just a couple of administrative people housed in her offices. Simply put, there is no good reason, regardless of how desperate they think they are, for people to dip into their trust fund account. Commercial crimes have reached staggering proportions in this country and someone, somewhere within the justice system needs to take a stand. It is not just about the money, it is also about innocent people who get caught up in the mess. It is about those who lose commissions because ‘the boss’ chose to act illegally; it is about those who lose their livelihoods because of the illegal dealings of another. But, most of all, it is about running a business ethically.

LEA JACOBS

Page 28: IS D EN SIFICATIO N A G O O D O PTIO N ?

IS DENSIFICATION A GOOD OPTION? The City of Cape Town is considering the impact of the growing demand for residential property.

A view over Cape Townâ&#x20AC;&#x2122;s popular V&A Waterfront Picture: SA Tourism

Page 29: IS D EN SIFICATIO N A G O O D O PTIO N ?

Page 30: IS D EN SIFICATIO N A G O O D O PTIO N ?

A view over the Cape Town CBD with Table Mountain as its backdrop

High growth areas in the city that offer good long term capital returns range from properties located close to transport facilities, and others further out of the city. Many of those located close to educational institutions as well as retail and entertainment facilities in outlying suburban areas are secure lifestyle estates. Large sections of these areas, toward the southern and northern suburbs, and Boland towns of Stellenbosch and Paarl, are not necessarily located close to public transport for commuting purposes to the city, but are instead within close proximity to schools, colleges and universities. An integrated housing strategy to facilitate inclusion into new economic activity forms part of the City of Cape Town‘s policy to encourage densification across the Cape Peninsula suburbs and residential areas, in locations close to major roads, public transport and community amenities. The city’s long term vision and strategy is stated in the 2012 Spatial Development Framework Report: “To, by 2040, turn Cape Town into one of the world’s greatest cities in which to live and learn, work, invest and discover – a place of possibility and innovation, with a diverse urban community and all the opportunities and amenities of city life, within a natural environment that supports economic vibrancy and inspires a sense of belonging in all”.

Cape Town is following the international trend where there is a growing demand for smaller units for students and young professionals willing to rent relatively small flats as opposed to sharing Working closely with the city, government and business, is the Cape Town Partnership. Managing Director Bulelwa Makalima-Ngewana says the city is showing a split housing property market, both financially and geographically, with the Central City and majority of surrounding suburbs containing some of the highest valued real estate in the metro. She says that these properties exist financially in the upper brackets of the housing market, inaccessible to the majority of Cape Town’s citizens, and a key element in the success of a new housing reality lies in clever and mindful design. She counteracts the

Page 31: IS D EN SIFICATIO N A G O O D O PTIO N ?

The city’s long term vision and strategy is stated in the 2012 Spatial Development Framework Report: “To, by 2040, turn Cape Town into one of the world’s greatest cities in which to live and learn, work, invest and discover – a place of possibility and innovation, with a diverse urban community and all the opportunities and amenities of city life, within a natural environment that supports economic vibrancy and inspires a sense of belonging in all”. CAPE TOWN PARTNERSHIP MANAGING DIRECTOR Bulelwa Makalima-Ngewana

misplaced perception that building integrated communities will mean a reduction in property prices or a decrease in safety, saying that: “Sites of new housing development will support the creation of new economic activities that help to build stronger and safer communities by adding the one critical component needed of people.”

says, to differentiate between the segments of the student property market, where the high end probably straddles the professional market.

Professor Francois Viruly, property economist and head of property studies at the University of Cape Town’s study on the social and economic impact of affordable housing developments, commissioned by International Housing Solutions, showed that quality, well located housing can have a profound effect on the access that households have to social amenities and overall welfare.

Also needed, he says, is recognition of specific characteristics of the student segment of the market, such as fewer cars and significantly lower demand for parking facilities. Such developments should provide good access to public transport systems and other social amenities, adding further value to desirable property investments in areas where students introduce a welcome vibrancy into a neighbourhood. And, where no vacant land is readily available, other alternatives and significant opportunities exist, such as the conversion of older buildings into student accommodation, as seen in the inner city of Johannesburg.

Several Cape developers, such as Bellandia Property Development, have shown its commitment to sustainable, integrated, and affordable housing development solutions for socio-economic upliftment. When Chairman Andrew Danford last year announced the 14-phase Annandale Ridge development near Durbanville Hills comprising 1 903 affordable housing units, he said it is a joint venture with Old Mutual’s Development Impact Fund HIFSA – Housing Impact Fund South Africa. “To be followed by Wescape, the future expansion of the City of Cape Town, and Bellandia’s newest joint venture, communiTgrow , a community mega-project model for a fast developing and urbanising Africa.” he said.

Working within the constraints of Cape Town zonings and heritage matters over a number of years is Rawson Developers, specialist in the building and selling of student accommodation, specifically of apartment blocks in Rondebosch and surrounds, and more recently in Stellenbosch. Commenting on densification is Managing Director Paul Henry who says the Cape Town City Council policy of encouraging the densification of certain Cape Peninsula suburbs and residential areas, especially those close to major roads and public transport, should not be seen as retrogressive, insensitive or necessarily harmful to existing residents’ interests.

In addition is the fast growing demand for young professional and student accommodation. University of Cape Town Deputy Vice Chancellor Max Price said recently, that exceptional demand for student housing, arising from growing numbers of out-of-town and foreign students, is necessitating the building of new residences.

Viruly says that as South Africa’s city councils generally promote higher density developments, serving the needs of students and lower income groups, it remains critical for high density developments to reflect such city council objectives. The challenge, he says, lies in delivering housing developments that not only meet the needs of specific market segments, but which also provide appropriate levels of densification and mix of uses.

Viruly says: “The Cape Town property market continues to perform well, showing relatively low yields, but above average capital growth. With the slowdown of the national property market, it is important for investors to carefully consider markets that are able to provide acceptable returns.” He says following the international trend is the growing demand for smaller units for students and young professionals willing to rent relatively small flats as opposed to sharing. It is equally important, he

Increased growth at South Africa’s universities implies increased demand for residential units catering for students, and municipalities in the Western Cape have a responsibility to ensure that processes exist to promote the delivery of such units.

ANNA-MARIE SMITH

Page 32: S OUT H A FRICA’S REA L ESTATE IN D U STRY O N SO C IA L MED IA

SOUTH AFRICA’S REAL ESTATE INDUSTRY ON SOCIAL MEDIA Social networking sites such as Facebook, Twitter, YouTube, LinkedIn, etc. have taken the world by storm and created an entirely new method of communication, which is faster and wider spread than anything the world has seen before

Technology has changed the communication game and given everyone the power and the tools to create and comment upon content. Social media welcomes people to a world where the content is produced by everyone taking part. So what’s the big deal? The very important thing about this revolution is not that you find out that John Smith had jam on his toast this morning. Due to the massive uptake of social networks as a communication tool through which businesses can engage with their customers the world over, social media represents

a very fast and potent way to get your message into the phones, minds, screens and wallets of your customers. It’s where the eyes you are aiming for are looking. Social media tools make it very easy for anyone with a Facebook or Twitter account to visit their wall or page many times a day from phones, laptops, tablets, iPads, etc. And they do. Some statistics show Facebook walls being checked six times more frequently than private email accounts. In other words, this is where your customers’ eyes are more often than anywhere else.

CUS T

CE VI

R SE R ME O

PROPERTY GROUP

EXCELLENCE

Page 34: S OUT H A FRICA’S REA L ESTATE IN D U STRY O N SO C IA L MED IA

Some statistics show Facebook walls being checked six times more frequently than private email accounts. How real estate pros are using social media for real results Despite having gone through a tough economic downturn, real estate veterans have made large strides in moving with the times through the various social media platforms. By making use of photo and video sharing to enhance listings, along with professional networking sites to hone in on their sales skills, real estate agents have truly benefited from all that social media has to offer. The core goal of real estate pros utilising social media is to attract sellers looking to list their homes or buyers looking to purchase homes. The social media starting block for real estate is setting up pages on social networks that fit your company’s content and audience. Because social media enables you to post numerous short, immediate messages to your audience, it presents an ideal opportunity to tell your customer group what you think is important to them in your market or the industry and promotes two-way dialogue and engagement. It is a chance to show that you are not just an old school estate agent, but that you are real people, capable of real world discussion, embracing modern technology and can create real relationships of value. Mix listings in with real advice and commentary, engage with your customers and you will develop a potent marketing weapon. In the real estate world, listings, open houses and tours are the main stepping stones towards making a sale, and the digital world has made those steps so much easier.

Social media must-dos 01 Make sure that your website has the appropriate links to the various social media sites such as Facebook, Twitter, LinkedIn, YouTube, etc. 02 Ensure that you have a dedicated person updating, responding and expanding your social media pages. 03 Pictures! People love looking at pictures, so post/tweet/ load as many photos/pictures/videos as you can. 04

Make sure that all lines of communication are wide open and responses are made as fast as possible. Therefore, if someone writes on you wall or tweets or comments – respond fast!

05 Do some research. The world of social media is so vast that you might miss key aspects that could limit your audience and ultimately your own growth.

South Africa property social media: How do you measure up? South Africa’s residential property companies ranked by number of Twitter followers: 01 02 03 04

Century21 (45 438) Chas Everitt International Property Group (40 239) Property 24 (3 369) RE/MAX South Africa (2 869)

05 06 07 08 09 10 11 12 13 14 15 16 17

Fine and Country (1 971) Private Property (1 907) Pam Golding Properties (1 537) Rawson Properties (1 085) Jawitz Properties (1 038) Seeff Properties (455) Era Properties (274) Lew Geffen Sotheby’s International Realty (270) Harcourts (183) Engel & Volkers (161) Just Property Group (60) RealNet Properties (40) Leapfrog Property Group (5)

South Africa’s residential property companies ranked by Facebook likes : 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Property 24 (33 250) Private Property (17 465) Jawitz Properties (4 643) Pam Golding Properties (3 977) Chas Everitt International Property Group (3 364) Fine and Country (2 842) Rawson Properties (1 529) RE/MAX South Africa (929) Lew Geffen Sotheby’s International Realty (541) Just Property Group (507) Century21 (401) Harcourts (394) RealNet Properties (158) Leapfrog Property Group (56) Era Properties (8) Engel & Volkers (7) Seeff Properties (4)

NIKKI BARNARD

Page 38: TN P R ESID EN TIA L REN TA L MO N ITO R

TPN RESIDENTIAL RENTAL MONITOR: Q4 2012 Overall, tenants in good standing remained unchanged at 83% for the final quarter of 2012. The sub-categories highlighted another slight improvement in the Paid on Time category to 72% (up from 71% the previous quarter and 68%year-on-year). The newly introduced Grace Payment category opened at 2% with Paid Late dropping to 9% (from 12% the previous quarter and 13% year-on-year). Taken within the context of continuing consumer credit deterioration in the broader economy, this begs the question why residential tenant payment behaviour has bucked the trend with improved rent collections. This is probably due to the industryâ&#x20AC;&#x2122;s access to quality rental specific credit information, which enables rental agents and landlords to preselect quality tenants. It therefore follows that the payment trends of better qualified tenants will show improved payment trends.

The data highlights unexpectedly delinquent behaviour of tenants in the above R 25,000 rental bracket. It is alarming to note only 54% of these tenants pay on time, with 5% in the Grace Payment category, 10% Paid Late, 16% Partially Paid and 16% Did Not Pay. The below R3000 rent category also continues to struggle with 16% not paying. However 64% Paid on Time and 2% made Grace Payments, while 9% made a Partial Payment as well as a further 9% who Paid Late. The R 12,000 to R 25,000 rental category is also performing poorly with 10% of tenants not paying, 69% Paid on Time and 3% making a Grace Payment, while 10% Paid Late and 8% made a Partial Payment. The R 3,000 - R 7,000 and R 7,000 - R 12,000 value brackets performed best with the latter just squeaking the top spot. The R3000 - R12000 rental bracket had 75% of tenants Paid on Time, 2% Grace Payments, 10% Paid Late, 7% Partially Paid and only 6% Did Not Pay

National rental performance Regionally, all provinces bar the Eastern Cape improved. Western Cape (with 89% of tenants good standing) has the highest percentage of tenants in the Paid on Time category (80%) and only 5% of tenants not paying at all, while Eastern Cape (with 87% in good standing) deteriorated slightly but still managed 78% of tenants Paid on Time and only 7% not paying. Limpopo (with 86% of tenants in good standing) experienced the slowest payment rate, with 16% in the Paid Late category and 70% Paid on Time. Overall delinquencies were still at a fairly acceptable level of 6%.Mpumalanga also indicated its tenants are 89% in good standing, with 76% Paid on Time and a larger contingent of 2% in the Grace Payment category while 11% Paid Late and only 5% not paying. Gauteng (with 81% in good standing) and Kwa-Zulu Natal (84% in good standing) continued to fare worst, with both provinces indicating only 69% of tenants Paid on Time and 10% - and 9% respectively of tenants not paying.

Provincial rental performance

Tenants in good standing per price bracket Estate agents across the country continue to report rental stock as a constraint. TPNâ&#x20AC;&#x2122;s data indicates 75% of residential rental stock is in the hands of micro investors (1 -10 properties); with fewer buy-to-let transactions taking place causing an imbalance between limited stock and more active tenants, landlords can afford to be a bit more picky about the tenants they contract with. A recent TPN survey indicates tenants are moving to downscale as well as a high number of first time renters. This is supported by TPN data which shows the official age of a tenant starts at 18 and peaks at 30, historically the peak was at 27 but given the current trend of fewer sales and fewer mortgage transactions tenants are finding they are in the rental market for longer.

Page 40: TN P CO MMER C IA L R EN TA L MO N ITO R

TPN COMMERCIAL RENTAL MONITOR: Q4 2012 Rental payment performance by commercial tenants during Quarter 4 of 2012 remained surprisingly steady, despite obvious and frequently documented pressures on the general economy. While the number of commercial tenants in good standing peaked at 84% in Q3 (made up of sub-categories Paid on Time 61% and Paid Late 22%) the numbers softened negligibly to 82% in the final quarter of 2012 (Paid on Time 61% and Paid Late 21%). Delinquencies also remained similar to the previous quarter with 11% Partial Payments and 7% in the Did not Pay category. However, further examination of the data tells an interesting story within the Provincial and Rental Value sub-categories across overall collection trends.

Eastern Cape and Western Cape tenants fared best for rental payment behaviour – a trend that is consistent with their residential counterparts Eastern Cape tenants in good standing (88%) were made up of 66% Paid on Time and 22% Paid Late. Eastern Cape tenants are the least likely to default with at only 3% in the Did not Pay bracket. Western Cape tenants in good standing (87%) included 64% Paid on Time and 23% Paid Late.The Western Cape tenants in the Did not Pay category also trended below the national average of 7% at a healthier 5%.

KwaZulu-Natal and Gauteng commercial tenants are the most difficult from whom to collect rent (similarly to residential payment trends) and generally perform below the national average. Nonetheless, Gauteng moved closer to the national average, with tenants in good standing at 82% (61% Paid on Time and 20% Paid Late); and 7% in the Did not Pay category. KwaZulu-Natal saw the highest number of delinquencies where 9% Did not Pay and 12% making a Partial Payment - and only 79% of tenants in good standing (57% Paid on Time and 22% Paid Late) TPN does not collect rental information by price per square meter, but rather reports on data by basic rental value brackets. There are clear price brackets where the data splits evenly. In other words 29% of commercial

South African tenants pay less than R10 000 per month, 28% of tenants pay R10 000 – R25 000 per month, 20% of tenants pay R25 000 – R50 000 per month and 23% of tenants pay more than R50 000 monthly rent. Tenants in the R50 000 basic rent per month are the most reliable with only 3% in the Did not Pay category. When compared with 10% of tenants who Did not Pay in the less than R10 000 basic rent per month bracket, this indicates that smaller businesses are experiencing tougher conditions.

Page 42: S OL I D PER FO R MA N C E FRO M TH E JSE PRO PERTY IN D EX

SOLID PERFORMANCE FROM THE JSE PROPERTY INDEX The reasons for the JSE property index outperforming all other asset classes over the last five, 10 and 15 years are aplenty.

Holding a total market capitalisation in excess of R210-billion, the JSE Property Index saw average returns of 36% in 2012, the best performance of any overall JSE category, and well ahead of the JSE All Share Index, at 27%. Market analysts and economists differ in their views, from seeing property funds as a prime long-term investment vehicle, to an overpriced commodity best purchased below its current premium levels. From a longer term perspective, Mariette Warner, listed property fund manager at Absa Asset Management, says: “Since listed property has been treated as a distinct asset class, compound annual returns over one, three, five and nine years have never dipped below 15%. I doubt if any other category can say the same.” However, the risk of capital losses on stock investments remains a reality that should be considered. Late last year John Rainier, property analyst at value asset manager RE:CM, in a detailed analysis of

South Africa’s listed property funds, commented on this commodity as “overpriced at current levels, and investors should avoid the industry until prices are reduced to fair value.” He said that the market at the time was trading at about a 45% premium to reported net asset value of underlying property values. Rainer said, “The sector is more expensive than it has been for a number of years, and there is therefore no margin of safety to offer investors protection from a permanent loss of capital.” He also said: “The correct time to start investing in listed property will be when the market has absorbed all the bad news and investors are shying away from the investment.” Illustrating top performances to reflect contributing factors repeated on an on-going basis, is Growthpoint Properties, South Africa’s largest listed property company with a market capitalisation of R29.1-billion, whose distributions grew from 5.8% to 8.1% from June 2010 to June 2011. CEO Norbert Sasse attributed this positive performance to “aggressive property cost management, vigilant control of arrears, fortified portfolio occupancy levels, and the distribution enhancing

ASSET CLASS

MTB

QTD

2012

SA Listed Property1

0.36%

2.75%

35.88%

Equities

3.15%

10.34%

26.68%

Bonds3

2.30%

2.62%

16.02%

Cash

0.43%

1.32%

5.55%

Source: Catalyst Fund Managers, RMB Credit Research Note 1-SA Listed Property Index, 2-All Share Index, 3-All Bond Index,4-Stefi

2012 JSE Performances: property, equities, bonds, cash

Page 43: S OL I D PER FO R MA N C E FRO M TH E JSE PRO PERTY IN D EX

The JSE situated in Gwen Lane, Sandown Picture: SA Tourism

performance of Growthpoint Properties Australia (GOZ) in which Growthpoint has a 61% holding”. Top performer Investec Property Fund’s interim results of September 2012 showed sector weightings by revenue, as a close split between office 43% and industrial 44%, retail at 13%, and its larger geographical proportional spread being 63% in Gauteng, 15% in the Western Cape and 13% in KwaZulu-Natal. The fund showed a total return of 72.77%, at 46% above the index’s average returns of 35%,

PERIOD

VALUE OF R100 INVESTED

ANNUALISED RETURN

1 year

135.88

35.88%

3 year

191.83

24.25%

5 year

209.02

15.89%

Source: Catalyst Calculations Value of R100 invested in the JSE Property Index over one, three and five years

In addition to earning dividends are the long-term benefits to investors derived from selecting well-priced, income-producing properties from the outset

Page 44: S OL I D PER FO R MA N C E FRO M TH E JSE PRO PERTY IN D EX

ASSET CLASS

2008

2009

2010

2011

2012

ANNUALISED

SA Listed Property

-4.50%

14.10%

29.60%

8.93%

35.88%

15.89%

Bonds3

17.00%

-1.00%

14.96%

8.80%

16.02%

10.94%

Equities2

-23.20%

32.10%

19.00%

2.57%

26.68%

9.42%

Cash

11.70%

10.30%

6.90%

5.71%

5.55%

8.00%

Source: Catalyst Calculations

Listed property is a long term investment and over the long term, the total return is driven by income growth in that income. - Paul Duncan, Catalyst Fund Managers also with a 7.1% increase in the interim dividend to 46.83 cents per unit. This, “despite a tough economic and operating environment, through strong focus on tenant retention, renewals of lease expiries, marketing of vacant space and the addition of yield-enhancing properties to the portfolio,” says CEO Sam Leon. In addition to earning dividends are the long-term benefits to investors derived from selecting well-priced, income-producing properties from the outset. Followed by exceptional management ability, in tough economic climates, where good management structures offer tenants extended value for money. However, solid performance is no fluke, according to Warner. “Rental streams from shopping centres, office blocks and industrial premises drive regular distributions that compare well with returns on cash and fixed income. At the same time, the shares of good property companies tend to rise over time.” As a longer term instrument across various income levels, and at different stages of personal investment, it rates highly among retirees. This is due to a prolonged low interest rate environment, usually welcomed by mortgage owners, that continues to bear down on retirees, continually seeing reduced earnings on investments. Warner says, “Listed property has many stalwart supporters among older investors, who like six monthly income

distributions linked to the prospect of long-term capital growth.” She says listed property therefore gives them a cash stream and a chance to combat the erosion of their capital, through inflation, which has consistently topped 5% in recent years. In terms of the local property index attracting more foreign investment, analysts believe the internationally recognised Real Estate Investment Trust (REIT), about to be launched on the JSE on 1 April, will create greater financial uniformity. This process was initiated by the Property Loan Stock Association (PLSA) six years ago through joint efforts between the listed property sector, the JSE and National Treasury. Sasse, who is also PLSA Chairman, says: “Together, we are shaping a solid base for South Africa’s listed property sector to grow with tax certainty.”

ED: Property Professional will take a look at the implementation of the South African REIT (Real Estate Investment Trust) legislation, and what kind of impact it is expected to have on the market in the May/June issue.

REGION

DEC 2012 RETURN % (USD)

DEC 2012 RETURN % (RAND)

YTD 2012 RETURN % (USD)

YTD 2012 RETURN % (RAND)

Global Ivestors Index

2.7 1%

-2.18%

23.70%

29.86%

North America

3.55%

-1.38%

16.87%

22.69%

Europe

2.56%

-2.32%

30.72%

37.23%

Asia ex Australia

0.39%

-4.39%

40.86%

47.88%

Australia

1.91%

-2.94%

32.29%

38.88%

SA Listed Property Index

5.83%

0.36%

29.43%

35.88%

Source: Standard & Poors, USB Securities, I Net Bridge

South African Listed Property Index December 2012 - a global perspective

ANNA-MARIE SMITH

Page 46: D EV ELO PMEN T U PD ATES

DEVELOPMENT UPDATES NEW STAND-ALONE SHOPPING CENTRES MEET DEVELOPING RETAIL TRENDS Retail giant, Pick ‘n Pay, has developed two new stand-alone retail centres situated in Chatsworth, KwaZulu-Natal and in Roodepoort, Johannesburg. Both the Chatsworth and Little Falls centres meet growing consumer demands for easy and quick access to retail centres in both metropolitan and outlying areas. According to Marc Edwards, managing director of Spire Property Management, who handled the tenant leasing for these two new centres, there is an emerging retail trend towards stand-alone centres such as the Chatsworth Centre and Little Falls.

“The reputation of Pick ‘n Pay, being a popular and ethical competitor with a substantial national footprint, made the leasing easier in terms of interest received from other tenants and the procurement of a favourable tenant mix. The thorough market research performed by Pick ‘n Pay in determining the feasibility of the centre allowed for the market demand to be evaluated and targeted accordingly, making the ease of letting that much more pronounced,” concludes Edwards.

CAPE TOWN’S GREEN POINT ATTRACTS RETAILERS AND OFFICE USER

“Our view is that a number of similar shopping centres, where the main food retailer occupies the majority of the space with 8-10 complementary line shops, will grow throughout South Africa. Shopping centres such as these allow consumers easy access to convenience stores with ample parking, allowing for a quick visit or a longer, monthly shop.” The development of these stand-alone centres is in line with Pick ‘n Pay’s strategy to develop new retail channels and sites, thereby growing their national footprint and providing greater convenience for their customers. “For the tenants in these Pick ‘n Pay developed centres there are clear benefits,” says Edwards. “The biggest benefit being the location to the Pick ‘n Pay store and access to the foot traffic generated by Pick ‘n Pay. Another benefit is the tenant exposure, due to the layout of these centres. There are no ‘tucked away’ spaces of ‘dead’ retail areas, which you may find in larger shopping centres.” Little Falls, an 8 800m2 centre that houses a Pick ‘n Pay, Pick ‘n Pay liquor, Pick ‘n Pay Thyme restaurant and Pick ‘n Pay clothing store, along with seven additional line shops and two ATMs, is the second new concept Pick n Pay centre, building on the popularity of the flagship Pick ‘n Pay on Nicol in Hurlingham. These upmarket ‘green’ stores feature exceptional fresh foods, more imported lines than any other Pick ‘n Pay and specialist ranges unique to these flagship stores, with additional features such as a wine boutique and cheese room within the store. The tenant mix for both is based on ‘destination’- and ‘convenience’-type shops to make these small convenience centres an all-in-one shopping experience. The line shops have been chosen to complement the Pick ‘n Pay and affiliated stores without detracting from them.

The view along Somerset Road showing the row of terraced units where number 67 (third terraced unit from left) is available to purchase at R4.5-million through JHI Properties. Interest and activity in prime located commercial property in Cape Town’s vibrant Green Point and De Waterkant areas continue to gather momentum, says Selwyn Sharon, leasing, sales and investment broker for JHI Properties. “Upmarket, trendy space for office and retail accommodation is in demand in prime locations within these areas. This node has become a fashionable and sophisticated, highly desirable ‘lifestyle’-type destination to work in,” says Sharon. Currently, rental rates for upmarket office accommodation in Green Point and the fringe of the city range from around R110 to R180 per square metre. Commenting on the market in general, Sharon says it’s positive to see that the demand for P-Grade offices has been recognised by developers, who are moving forward with projects such as Portside, 22 Bree Street

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Page 48: D EV ELO PMEN T U PD ATES

and the Media Quarter – the latter of which is almost complete. “There has been a pent-up demand for prime office space, particularly when one considers the fact that other than a few buildings, such as The Hudson and the Cape Quarter, very few new buildings have been completed in recent years. Now we are seeing major tenants taking up space – FNB has taken half the office space at Portside, which is to become Cape Town’s tallest building (on the corner of Buitengracht Street and Hans Strijdom Avenue), a large firm of attorneys is to occupy 22 Bree Street, while there is the new Allan Gray building taking shape in the V&A Waterfront. In addition to this, The Atlantic building is being redeveloped in the Foreshore area. Importantly, these new developments, or redevelopments, further enhance the aesthetic appeal of Cape Town’s central area,” Sharon says.

“Because we’re used to the complexities of the South African market, where the political and economic landscape is constantly changing, we’re well-positioned to expand into other emerging markets where there is massive demand for our kind of offering,” says Rubin.

“We are experiencing a demand from international companies and diplomatic offices seeking standalone, commercially zoned houses with grounds for parking. With hotels, the Cape Town Stadium, Green Point Urban Park and V&A Waterfront close at hand, coupled with a buzzing, metropolitan atmosphere, this area is high on their priority list.”

“By the end of 2013 we should have 3 000 student beds outside of South Africa and it seems opportunities for growth are endless,” says Rubin.

AENGUS INVESTMENT PROPERTIES EXPANDS INTERNATIONALLY As education levels improve and millions of students attend universities in the BRICS countries (Brazil, Russia, India, China, South Africa), emerging market student accommodation as a sub-sector of commercial property is attracting the attention of forward-looking investors. “This is an untapped market, particularly in emerging economies,” says CEO of student accommodation specialists, Aengus Investment Properties, Richard 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. In Europe, listed student property funds have been around for quite some time. Publicly quoted players, such as Unite PLC and Opal, are well-known to equity investors; however, a niched emerging market private fund, such as Aengus, is new. The company, which has nearly 10 000 student beds in its international portfolio, has pioneered upmarket student accommodation in South Africa and has now set its sights on expanding into Africa and South America.“The fundamentals of the market remain strong: Insatiable demand, consistent revenue streams and above-average investment returns.

Outside of South Africa, Aengus has set up permanent offices in Rio de Janeiro, Brazil and Accra, Ghana. The company has partnered local players to ensure a low-risk approach to securing new deals. The company’s first Greenfields student accommodation project with 2 000 beds has recently kicked off outside Accra, with plans to build more beds in the region soon. It will open its first student buildings in Brazil this year too.

PEARL VALLEY GOLF ESTATES REACHES END OF BUSINESS RESCUE Award-wining golf and lifestyle destination, Pearl Valley Golf Estates, has announced the conclusion of a recently-implemented business rescue strategy, which coincides with a significant soar in property sales on the estate. Over R100-million in sales took place in 2012, with 2013 already seeing an additional four properties sold. The end of the business rescue process has also resulted in new ownership of the estate, which will allow Pearl Valley to continue with business as usual under the successful leadership of general manager, Gawie Marx. “The business rescue process has facilitated the successful restructuring of the company’s affairs to ensure a sustainable long term existence,” says Marx. Designed by the legendary golfer Jack Nicklaus and opened in 2003, Pearl Valley Golf Estates was named Best New Golf Course of the Year in 2005, Third Best Golf Course in South Africa by Golf Digest in 2011, a five-star experience by Compleat Golfer in 2011 and Best Conditioned Golf Course in the Western Cape by Golf Digest in 2012. Apart from its internationally-renowned golf course, Pearl Valley also offers luxurious self-catering accommodation for long-term rental, holiday travel or stay-over conference accommodation. Befitting its five-star experience, facilities at Pearl Valley include a range of activities beyond the green, including a sanctuary-like spa, a state-of-the-art wellness gym and a scenic pool area with a pool bar.

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Page 50: WO R D O N TH E STREET

WORD ON THE STREET “Inflation is expected to peak at 6.1% in the third quarter of 2013 and then to moderate gradually to 5.1% in the final two quarters of 2014. This deterioration is largely due to higher expected food price inflation, the lagged effects of the depreciation of the rand and higher expected unit labour costs.” South African Reserve Bank Governor Gill Marcus talking about the Monetary Policy Committee’s interest rate decision on 24 January 2013. Picture: theintensivereport

“A fair percentage of consumers are still battling with impaired credit records adversely affecting their access to credit.” Jacques du Toit, Absa Home Loans property analyst (House price growth according to Absa)

“Getting yourself into the position of being able to afford a home requires a solid plan of action and dogged determination.”

“The upside of expected very low price growth in 2013, for future aspirant investors at least, is that we would expect yields on housing to broadly increase further, as they have been doing gradually since after the boom years, slowly improving property’s attractiveness as an asset class.” John Loos, FNB household and consumer sector strategist (Property Barometer – emigration and foreign buying)

The Property Game by Iona Minton and Dave Welmans

“The real estate market is slowly improving. Still a great time to buy. You will thank me in five years.”

“I have said for years that estate agents selling sectional title units should have an additional qualification to be able to do so.” Marina Constas, a director of BBM Attorneys and co-author of the bestselling book, “Demistifying Sectional Title”

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