JAN/FEB 2017
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TAKING THE INDU ST RY ’S TEMPE RAT U RE :
CAN SOUTH AFRICANS FIND VALUE IN THE WORLD’S WEALTHIEST CITIES?
MANAGING THE ETHICS OF BUYING AND SELLING PROPERTY PP JanFeb_Cover 3_kw.indd 1
WHAT COULD TREND OR REACH TIPPING POINT IN 2017
PROPERTY ORGANISATIONS
YOU NEED TO KNOW ABOUT 2016/12/13 12:43 PM
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INDUSTRY NEWS
14 20 30 HAVE YOU JOINED THESE LOCAL PROPERTY ORGANISATIONS?
DEALING WITH INDUSTRY PRACTICES THAT POSE ETHICAL QUESTIONS
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f 2016 caught us on the back foot with fee protests and few-would-have-predicted local and international political developments, there is no reason to think 2017 will lose pace. In our cover story, Anne Schauffer canvases opinions on what the pertinent issues could be. Undisputed is that South African real estate will hold challenges and attract debate, be it migration trends or dominant portal spaces. Moving to the role-players … we know various property organisations exist but how do their functions differ? Turn to page 14. Unscrupulous practices damage reputations and hurt the industry (page 30). In a recent survey, only 16% of home owners said they trusted estate agents when selling their properties. What can agency heads do to build professionalism and improve service delivery and channels of communication? Still on the trust theme, US realtor Ed Hatch’s column reminds us that a proper marketing strategy is relevant when defining 2017 goals, but we should not ignore the value of repeat and referred clients.
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TECH TO STAY MOBILE
Catherine Davis PUBLISHED BY THE CREATIVE GROUP 6 Beach Road, Old Castle Brewery, Woodstock 7925 087 828 0423 facebook.com/PropertyProfessional twitter.com/Property_Prof
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PREDICTIONS ON WHERE 2017 REAL ESTATE IS HEADED
Understanding the issues around bond affordability
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Managing client expectations within the law
THE CREATIVE GROUP MANAGING DIRECTOR Terence Hewitt terence.hewitt@thecreativegroup.info Editor Kim Maxwell Content business manager Catherine Davis Creative director Leah de Jager Copy editor Kirsty Wilkins Group digital editor Lauren Joubert
ADVERTISING Sales and Marketing Manager Michèle Jones michele.jones@thecreativegroup.info 084 246 8105 Advertising, production and subscriptions Jackie Maritz jackie.maritz@thecreativegoup.info Printing Paarl Media | Disclaimer: the publisher of this magazine gives no warranties, guarantees or assurances and makes no representation regarding goods or services advertised within. Information correct at time of printing. © Copyright The Creative Group. All rights reserved. No portion of this publication may be reproduced in any form without prior written consent from the publisher. The publisher is not responsible for unsolicited material.
2016/12/13 12:50 PM
LOCAL NEWS
LOCAL INDUSTRY NEWS DOGON GROUP PROPERTIES OPENED A GAUTENG OFFICE IN NOVEMBER 2016
Although we had initially planned to open an office on our own, the opportunity to take over D&A Properties was ideal, allowing us to tap into Dawn Dorfman’s 40 years of experience in Johannesburg’s northern suburbs. She really is the doyenne of the area Denise Dogon, founder and CEO, Dogon Group
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REALTOR AND AUCTIONEER JOINED FORCES FOR RECORD CLIFTON SALE Some believe that realtors and auctioneers make bad bedfellows, but Lew Geffen Sotheby’s International Realty chairman Lew Geffen says identifying homes that sell best under the hammer can be lucrative. A winning R90m bid on a luxury villa in Clifton’s Nettleton Ridge in November 2016 broke residential auction price records by more than R30m. Lew Geffen Sotheby’s International Realty jointly marketed the home with The High Street Auction Company, achieving the highest successful local auction bid for a residential property. The new owner is South African Clare Wiese. Says Geffen: “Our intense joint marketing drive achieved in just a couple of weeks what the previous owner was unable to do in months – get the house sold. We don’t usually work with auction houses, but on trophy homes or unique properties that are under bank instruction to sell, you can make magic in minutes if you have the marketing reach.” According to Joff van Reenen, director and lead auctioneer for The High Street Auction Company that sold the villa, about 20% of their referrals come from realtors. Says Van Reenen: “This sale demonstrates how well the auction model works for unique homes. We look for the exceptional properties. But perhaps most importantly in terms of sales, auctions quickly separate the men from the boys. If you’re not a serious bidder with cash or a preapproved bond, you won’t be on the auction floor, so our success rate tends to be high.”
PROPERTY PROFESSIONAL
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2016/12/13 1:19 PM
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LOCAL NEWS
Ask the expert: bathroom trends INTERNATIONAL RECOGNITION
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ebra Maddocks started work at Tyson Properties as an agent in 2011. Her role has since transformed into that of a team leader and mentor to intern agents. Maddocks reached a turning point in her career during an overseas trip to a National Association for Realtors conference. There she learnt a different approach to selling real estate: to work as part of a team instead of as an individual agent. It inspired her idea of training intern agents. Says Maddocks: “It turned out that by teaching others I was able to learn more myself.” Maddocks' approach works: she is the winner of three of the most soughtafter titles in the property industry: the International Property Awards 2016-17 Best International Real Estate Agent, Best Real Estate Agent Africa and Best Real Estate Agent South Africa. Maddocks’ tips for intern agents: choose the right company, find a niche within the industry that sparks your passion, differentiate yourself from others, work to your strengths and specialise only in what you do best.
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designer bathroom can have a massive impact on a small space – and it needn’t sink the budget. Flush Bathrooms owner and MD Siobhan Thomas says a great bathroom will help your clients improve the value of their home. She outlines four bathroom trends. BLACK IS THE NEW CHROME
Until now, chrome has been the dominant colour when it comes to taps: upmarket ranges have traditionally included platinum matt, matt chrome, rose gold and black. But they have also been radically more expensive. Now, you can find more affordable black taps on the market with that same quality. Price tags have dropped from about R13,000 to about R4,000.
SEAMLESS SANITARY WARE
The thin seat is taking off with the rimless direct flush creating a more hygienic environment. BASIN AND VANITY IN ONE
Countertop basins are being replaced by ceramic variants with built-in cabinets underneath. Interestingly, in Europe, colour – pinks and lime greens – is in, but this isn’t apparent locally just yet. BIGGER BATHS
South Africa is one of the biggest manufacturers and exporters of resin freestanding baths worldwide, such as those crafted by Victoria + Albert. The no-overflow trend allows home owners to enjoy deeper baths, even with water restrictions.
PROPERTY PROFESSIONAL
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2016/12/13 1:28 PM
The home is where memories are made.
We’ll get your client pre-qualified so that they can house hunt with confidence. Before your client begins house hunting we can get them pre-qualified, so they’ll know what they can afford and where to look. They’ll have confidence when making an offer and the seller will have confidence in accepting it, ensuring your client doesn’t miss out on securing their dream home. Call BetterLife Home Loans and we’ll do the rest, at absolutely no cost to you or your client.
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2016/12/12 4:07 PM
LOCAL NEWS
TWO VREDEHOEK, CAPE TOWN, PENTHOUSES SELLING FOR A RECORD R8.5M AND R9M DURING 2016
The sales are significant in that they are indicative of an emerging, new, ultraluxurious, sectional-title segment in the City Bowl property market, which has seen prices catapult to between R50,000 to R70,000 per m2 Ryan Greeff, director, Greeff Christie’s City Bowl
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ARE BOREHOLES A BIG INVESTMENT? THE COST R1,000 to R1,300 per metre drilled. Typical depths in Cape Town range from 20m to 40m. The expense of pumps, pipes and tanks should also be factored in.
THE SAVING Slightly more than R19,500 if using 1,619kl of borehole water over a three-year period, according to a study in the Journal of the Borehole Water Association of South Africa.
THE OUTCOME A grey-water irrigation system will pay itself off in less than three years, says Alje van Hoorn, co-owner of Aquarista, a grey-water garden irrigation and rainwater harvesting system specialist.
ADD PROPERTY VALUE BY BEING WATER-WISE Water restrictions of varying severity are in place in eight of the country’s nine provinces (bar the Northern Cape) in the face of a severe drought. And savvy sellers are seeing an increase in the marketability of their properties that have these solutions. According to Chas Everitt International’s Constantia Upper area specialists Sally Gracie and Di Forster, one of the first things clients ask for is the existence of a borehole. So sellers whose properties have boreholes and wellpoints or grey-water irrigation and rainwater harvesting systems could be at a decided advantage. Says Chas Everitt International CEO Berry Everitt: “Research shows that a well-maintained garden can add as much as 20% to the value of one’s property.” Online searches for water-wise properties (those without lawns, equipped with boreholes, or with small gardens) have skyrocketed, according to head of Gumtree Property Barrie Swart. Swart says home owners can add value by investing in a rainwater-harvesting system: “Even a small two-bedroom home can collect 23,000 litres of water a year at an initial cost of R40,000. A grey-water system costs about R15,000. These investments can cut your bill by 75% and will drive up the value of your property significantly.” Peter Corlett, sales and marketing manager at Borehole Man, concurs: “Given that up to 46% of the water consumption of households with stands of more than 500m2 is used on garden irrigation, a borehole will certainly decrease the demand on the municipal water supply while significantly reducing water bills. We receive more than 80 enquiries a day.”
PROPERTY PROFESSIONAL
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2016/12/13 1:21 PM
LOCAL NEWS
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New R1bn Umhlanga office and retail development
edbank is investing R1bn into a new mixed-use office and retail development in Umhlanga, KwaZulu-Natal. Currently under construction, the Park Square development is located in the Umhlanga Parkside business node and will become one of Nedbank Group’s flagship campuses. It will have a 4-Star Green Star design. Anand Joseph, Nedbank Corporate and Investment Banking Property Finance divisional executive in KwaZulu-Natal, says the bank’s investment demonstrates its confidence in KwaZulu-Natal as a “vital commercial and retail hub for South Africa”. Park Square will offer 40,000m2 of gross leasable area, with 4,000m2 for retail usage. Of the 36,000m2 designed as commercial space, 18,000m2 will be A-grade offices, about 50% thereof occupied by Nedbank employees. Park Square offers businesses and retailers a choice of leasing or buying via a sectional title agreement. Says Joseph: “Nedbank is making it possible for any business to put down secure roots in a premium business node by owning their Park Square space.” The office component spans five blocks while the retail space is located at ground level surrounding a public piazza. For sales/leasing, contact Nedbank Property Finance relationship manager Samantha Stewart.
10% increased chance of missed home loan repayments in December
of home owners who default on December loan repayments will also miss a January payment
80% Source: Calvin Ndlovu, head of operations, FNB Home Loans
JANUARY/FEBRUARY 2017
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2016/12/13 1:21 PM
LOCAL NEWS
WHAT’S ON
All you need to know to stay plugged in to the property industry in South Africa
JANUARY
19 24
AND CSOS ACTS WHERE Summerstrand Hotel, Port Elizabeth CONTACT bit.ly/2gaA1pv
WHAT LOGBOOK WORKSHOP FOR INTERNS AND PRINCIPALS WHERE MCademy, Centurion CONTACT bit.ly/2gasC9p
FEBRUARY
In the US, there has been a rapid increase in smart security and home automation. Is South Africa heading the same way?
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few years ago, South Africans wouldn’t have expected anything from the US to arrive here timeously. From movies to technology to parcels in the post, we were way behind. Although that has changed, when it comes to security, the US and South Africa are quite different markets in terms of their maturity. The US has cheap cellular networks and a wide range of smart products and service providers. Users are generally more tech savvy. Translation: the take-up of smart security and automation in South Africa has been slow. “The high cost of data and devices, limited selection and a shortage of skills in the industry make smart automation and security accessible mainly to wealthy home owners at this time,” explains Simon Bray, CEO of Private Property. “This will probably start to change as the cost of data and devices drop and more young, tech-savvy home owners enter the market and embrace the technology.” Private Property’s listings show that the most popular enhanced security measures in top-end homes are automated door locks that can be controlled remotely, video surveillance and alarm activation of the property via smartphone. International research suggests that smart features can add between 3% and 7% to the value of a home. Essentially, smart technology adds the “wow” factor to a home and helps to differentiate it from others on the market. Which is never a bad thing.
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WHAT CFO PUBLIC FINANCE EVENT WHERE Pretoria CONTACT bit.ly/2fsdGV2
WHAT IEASA REAL ESTATE INDUCTION COURSE WHERE Unit 10, Howard Studios, Pinelands CONTACT bit.ly/2fIhArp
MARCH
7 8-10
WHAT LOGBOOK WORKSHOP FOR INTERNS AND PRINCIPALS WHERE MCademy, Centurion CONTACT bit.ly/2gasC9p
WHAT IEASA NQF4 FULL TRAINING WHERE Unit 10, Howard Studios, Pinelands CONTACT bit.ly/2gam9eV
IMAGES: SUPPLIED
BRIDGET MCNULTY
PROPERTY TREND: SMART SECURITY AND AUTOMATION
WHAT NAMA SEMINAR: THE NEW STSMA
PROPERTY PROFESSIONAL
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2016/12/13 1:21 PM
REBOSA is calling on all estate agents to
TAKE THE REBOSA EQUALITY PLEDGE TODAY REBOSA has a zero tolerance approach to all forms of discrimination in the real estate industry and in society.
DISCRIMINATION
STOPS WITH ME
Go online to www.rebosa.co.za and show your support by taking the ONLINE PLEDGE and saying “NO” to discrimination.
WWW.REBOSA.CO.ZA REAL ESTATE BUSINESS OWNERS OF SOUTH AFRICA
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2016/02/25 4:14 PM
TOOLS OF THE TRADE
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GOODIES AND GADGETS FOR WHEN YOU’RE ON THE GO RYAN SCOTT
Take charge with the latest tech while staying connected, charged and comfortable on the road
RiCHARGE POCKET CHARGER TAKE CHARGE TOTE AND INNER YOU NEED IT BECAUSE It’s time to upgrade to a stylish and well-thought-out bag, which creates a good impression for your meetings. THE NITTY GRITTY This tote is not too bulky yet it easily accommodates a 13in MacBook (or a similar size notebook) with room to spare. Separate compartments inside stow cables and chargers. It also includes a removable strap for an over-the-shoulder option. X-FACTOR Its best-kept secret? There’s a charger in the inner lining, so if your smartphone or laptop is about to run out of power, your bag comes to the rescue. R946; take-charge.co.za
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YOU NEED IT BECAUSE Being mobile comes with the challenge of keeping your devices powered up. Make sure you pack a charger for your smartphone, tablet, MP3 player, GPS and camera. THE NITTY GRITTY The 6,000mAh power bank translates into a strong, fast charge. The light indicates when your device is full and will protect it from overcharging. To give you an indication, it will charge an iPhone 6 up to three times and has a lifespan of 1,000 phone charges. X-FACTOR It uses lithium polymer batteries, which are lightweight, durable and the safest around. R599; richarge.co.za
PROPERTY PROFESSIONAL
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SAMSUNG ICONX YOU NEED THEM BECAUSE These tiny wireless earbuds measure your heart rate, steps per day, distance travelled and the amount of kilojoules you have burnt. It’s amazing how good it feels to take the stairs when your efforts are being measured and rewarded. THE NITTY GRITTY Sync your buds with your smartphone at the end of the day or after workouts to keep track of your progress via the S Health app. You can also connect to your phone via Bluetooth to take hands-free calls. X-FACTOR They also work as a music player: with 4GB of memory, they can store and play up to 1,000 tracks. R3,499; Samsung Concept Stores
WHAT3WORDS
IMAGES: SUPPLIED
YOU NEED IT BECAUSE Sending your location to a client needs to be as accurate as possible. Too many GPS systems provide an approximate location and place little emphasis on an exact address or specific point on a large development site. THE NITTY GRITTY This app has divided the whole planet into a grid made up of 3m x 3m blocks. Each one has a permanent but randomly assigned combination of three words to demarcate its location. These words are shared via the app to provide the most accurate positional reading possible. X-FACTOR The app is already being used extensively in more than 170 countries. It’s simple to use anywhere in the world without having to download any extra maps or extensions to GPS systems. Free; Google Play and iTunes
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Charity begins at home.
At BetterLife Home Loans, we wish to make a difference. And we believe in giving back. Every time one of our customers gets their home loan approved through us, we give a portion of our earnings to the greater good. Through an initiative that allows our staff to each identify a charity that is close to their heart – from supporting the elderly via contributions to the Association for the Aged, to supporting our youth through donations to the Nelson Mandela Children’s Fund, and many more - we’ve made sure that we lend a helping hand to society’s needy. We also feed, clothe and school over 100 children in the Northern Cape. So when you support BetterLife Home Loans with your OTPs, you not only give your clients the opportunity to get the best deal for their dream home – you also enable the dreams of others! Contact us today. As SA’s number one mortgage originator, we get home loans approved.
0800 007 111
betterlife.co.za/homeloans
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2016/12/12 4:06 PM
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2016/12/13 1:26 PM
SAPOA
IEASA
REBOSA
ANDRÉ FIORE
NPF
?
WHO DOES WHAT IN SOUTH AFRICAN PROPERTY These national organisations assist real estate professionals and clients in property-related matters. Have you signed up?
SAIBPP
EAAB
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SOUTH AFRICAN
THE SOUTH AFRICAN PROPERTY OWNERS ASSOCIATION
SAPOA SINCE 1996 1 WHAT DOES SAPOA DO? All commercial property role-players, SAPOA’s members from an estimated 1,200 corporations control about 90% of the local commercial property field. Members’ combined portfolios are worth more than R500bn. 2
INSTITUTE OF ESTATE AGENTS OF SOUTH AFRICA
IEASA SINCE 1937 1 WHAT DOES IEASA DO? e are a voluntary membership organisation with W about 4,000 members, made up largely of estate agents and practising principals. Members are predominantly from small to medium agencies and need individual training and support on issues they face in their day-today business.
HOW DOES SAPOA SOLVE MEMBER ISSUES?
SAPOA brings together role-players in the
commercial property field and creates a powerful platform for investors. We meet regularly with government, monitor acts of legislation that affect the industry and represent members at government level at Business Unity South Africa and the National Economic Development and Labour Council.
2
HOW DOES IEASA SOLVE MEMBER ISSUES?
We assist members in navigating legislative and regulatory requirements by engaging with stakeholders on their behalf. We offer training on pertinent issues at regional level so members stay upskilled. At our fun platforms (golf days, bowls and
3 WHERE WAS SAPOA’S LOBBYING MOST EFFECTIVE IN 2016? We made significant input into local bylaws, town-planning schemes, rates policies, Bills and Acts. These long-term processes are ongoing.
quiz evenings), agents can also socialise and network with colleagues. We celebrate our 80th anniversary in 2017.
WHAT WILL SAPOA PRIORITISE IN 2017? SAPOA is focusing on skills development, education and transformation. To date, we have placed 55 students
IEASA, with other industry bodies, approached the EAAB (see overleaf) to create an open platform for dialogue on industry matters in 2015. The Multi Stakeholder Group was established and now meets with the EAAB’s executive team on a regular basis. IEASA addressed Continuing Professional Development (CPD) training and CPD cost increases in 2016. IEASA comments on legislation that impacts the property industry – we worked with the Community Scheme Ombud Service and EAAB to eradicate unfair practices against agents operating in home owner associations.
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at various universities (studying courses including property studies, valuations, quantity surveying and town planning) and we aim to place more. We
will continue to engage with various authorities to safeguard industry interests. sapoa.org.za
4
WHERE WAS IEASA’S LOBBYING MOST EFFECTIVE IN 2016?
WHAT WILL IEASA PRIORITISE IN 2017?
While transformation is key, costs and fees are limiting access to the real estate market for many individuals and small organisations. We will look at ways
of working with the EAAB, NPF and IBPP (see overleaf) to curb cost increases and access government grants to facilitate a flow of previously disadvantaged people into the real estate workforce. Many smaller agencies and agents face the challenge of keeping abreast with ever-changing technology and apps. IEASA wants to ensure members are kept up to date through investigating a range of tangible benefits from industry service providers. ieasa.org.za
JANUARY/FEBRUARY 2017
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SOUTH AFRICAN
REAL ESTATE BUSINESS OWNERS OF SOUTH AFRICA
REBOSA SINCE 1996 1
NPF SINCE 2010
WHAT DOES REBOSA DO?
Rebosa is an independent, nonprofit company – an industry body to represent principals and employers. Members include almost all national real estate groupings and their franchisees, regional agencies and more than 500 independent agencies. Rebosa members collectively employ more than 16,000 practising agents. 2
NATIONAL PROPERTY FORUM
HOW DOES REBOSA SOLVE MEMBER ISSUES?
1
WHAT DOES THE NPF DO?
Membership is made up of small, micro and medium agencies across the colour divide. 2
HOW DOES THE NPF SOLVE MEMBER ISSUES?
Our objectives are the facilitation and support of access to land and use of land for housing and infrastructure development to promote land reform and land distribution programmes. The NPF represents members and raises their concerns at the EAAB. The
We primarily safeguard the interests and activities of business owners in areas that have a direct impact on their businesses. Although only
NPF also facilitates training and support for emerging micro-enterprises in real estate to help them grow.
Rebosa directly assists members with difficulties regarding Fidelity Fund Certificates (FFC), education, Continuing Professional Development (CPD), registrations, legal and compliance. Rebosa is represented on many Services Skills Education Training Authorities in South Africa (SSETA) structures including the Real Estate and Related Services Chamber Committee and the Gauteng Skills Development Forum, so we can disseminate information to members and follow up on SSETA certification. Rebosa lobbies government at a national level through the Human Settlements Portfolio Committee, submitting commentary and providing legal opinion on legislation affecting the industry.
Our chairman and the NPF board met with the Minister of Human Settlements to discuss transformation of the real estate industry. The NPF has also been lobbying the EAAB about the abolition of trust accounts for smaller agencies and agencies that strictly don’t take deposits or use attorneys’ trust accounts.
principals and business owners can be members, the best interests of estate agent employees are paramount.
3
WHERE WAS REBOSA’S LOBBYING MOST EFFECTIVE IN 2016?
Rebosa lobbied for better dialogue between the property industry and the EAAB for consensus to be reached around challenging issues impacting the industry. That resulted in the formation of the Multi
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WHERE WAS THE NPF’S LOBBYING MOST EFFECTIVE IN 2016?
WHAT WILL THE NPF PRIORITISE IN 2017?
We will continue negotiations to drop the need for smaller agencies to have a trust account in instances where they don’t use one. The NPF plans to promote ongoing training
and improve the relevance of smaller agencies in the industry. npfsa.co.za
Stakeholder Group. This consultative body now includes other industry players and meets regularly to resolve important concerns. Rebosa was effective in addressing a multitude of CPD issues using this platform. 4
WHAT WILL REBOSA PRIORITISE IN 2017?
Priorities for 2017 include focusing on the Property Practitioners Bill (we will host a national convention), which will govern the way estate agencies operate in the future. We are aggressively growing membership to have a larger collective voice. rebosa.co.za
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PROPERTY PROFESSIONAL
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SOUTH AFRICAN INSTITUTE OF BLACK PROPERTY PRACTITIONERS
SAIBPP SINCE 1996 1
THE ESTATE AGENCY AFFAIRS BOARD OF SOUTH AFRICA
EAAB SINCE 1976
WHAT DOES THE SAIBPP DO?
1
Our corporate and individual members are property professionals, ranging from principals and agents to architects, quantity surveyors and developers. 2
HOW DOES THE SAIBPP SOLVE MEMBER ISSUES?
The SAIBPP’s main mandate is transformation within the South African property sector. We try to stimulate economic participation and skills development for previously disadvantaged individuals through networking, learning and an annual convention where members can network and discuss opportunities. 3
WHERE WAS THE SAIBPP’S LOBBYING MOST EFFECTIVE IN 2016?
We pride ourselves on being an organisation with a female president, vice-president and CEO in a very male-dominated industry. We raised our profile as
an organisation and grew our membership base by 66%. With heightened visibility through social media we succeeded especially in growing younger membership – many new entrants are young professionals and small-to-medium enterprises. We have been successful in sustaining our organisation financially, which has been a significant challenge in previous years. 4
WHAT DOES THE EAAB DO?
Anybody carrying out the activities of an estate agent as a service to the public needs to be registered with the EAAB and to have a FFC. This has to be renewed each year, as confirmation that they are legally entitled to do so.
WHAT WILL THE SAIBPP PRIORITISE IN 2017?
The SAIBPP plans to ensure that government is continually and sufficiently agitated so as to implement policies to ensure transformation takes place. We feel
the rate is unsustainable for the growth and success of the country. saibpp.co.za
2
HOW DOES THE EAAB SOLVE MEMBER ISSUES?
The EAAB mandate is to regulate and control the estate agency profession. This includes promoting standards of professional and ethical conduct, establishing educational standards for agents, and protecting and empowering property consumers by creating an awareness of their rights/duties/obligations in real estate transactions through consumer awareness programmes. We provide effective
professional support to agents and broad-based practical support to previously disadvantaged communities while encouraging employment equity and black economic empowerment principles. 3
WHERE WAS THE EAAB’S LOBBYING MOST EFFECTIVE IN 2016?
Our lobbying proved most successful in encouraging agents to understand and subscribe to the benefits of the CPD programme introduced by the EAAB. CPD is an ongoing process that continues throughout a person’s career – and is essential for continued knowledge, competence and skills retention. The EAAB implemented an innovative PrivySeal programme, designed to protect consumers in their dealings with agents. PrivySeal allows consumers to understand the competence of the agent they are dealing with (current registration, educational status and level of professional service). 4
WHAT WILL THE EAAB PRIORITISE IN 2017?
IMAGES: iSTOCK BY GETTY IMAGES
The EAAB will take ongoing steps to eliminate racism from the property sector. We remain convinced that racism,
discrimination and the use of derogatory language are morally and ethically unacceptable in a constitutional democracy. We will promote consumer awareness to ensure that property consumers are made aware of the functions, duties and roles that the EAAB performs in both regulating the activities of estate agents and protecting the interest of consumers in their dealings with estate agents. eaab.org.za
JANUARY/FEBRUARY 2017
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COVER STORY
WHAT TO EXPECT ANNE SCHAUFFER
What are the property peaks and pitfalls that could shape South Africa’s real estate landscape this year?
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PROPERTY PROFESSIONAL
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THIS IS WHAT WE KNOW
“The theme for 2017 is expect the unexpected and be ready for the unpredictable,” says Samuel Seeff, chairman of Seeff Properties. SENTIMENT IS A STRONG DRIVER IN THE CURRENT PROPERTY MARKET And it’s likely to taint 2017 unless consumer confidence is restored. Herschel Jawitz, CEO of Jawitz Properties, underlines the importance of restoring consumer and business confidence: “That’s the key to recovery of the residential market ... confidence, demand and price growth. In 2016, caution around the residential market had less to do with the economy and more to do with the current political leadership crisis.” UNCERTAINTY MAY HAVE AFFECTED THE MARKET NEGATIVELY BUT IS RESOLVABLE Says Craig Hutchison, CEO of Engel & Volkers SA: “Strong leadership and a clear economic strategy will smooth the road to an improved property market. South Africans have proven and will prove that ineffective government and state capture will not be tolerated. So, a bumpy ride in the short term, but long-term the outlook is positive.” STILL-SLOWER HOUSING MARKET EXPECTATIONS ARE THANKS TO THE LAGGED IMPACT OF FOUR TO FIVE YEARS OF PRIOR ECONOMIC GROWTH STAGNATION Says FNB household and property sector strategist John Loos: “For the overall housing market – despite some expected improvement in economic growth in 2017 – our projection is for average house price growth for 2017 to be slower than the 5.1% projected average for 2016, to the tune of 3%, accelerating only in 2018 to 4.7% on an annual average basis.” Loos predicts 2017 economic growth at closer to 1% – it was
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“THERE IS A RECESSIONARY MARKET ACROSS MOST OF THE COUNTRY AND FOR THE NEXT WHILE, PROPERTY PURCHASES WILL BE MADE OF NECESSITY RATHER THAN DESIRE” Lew Geffen, chairman, Lew Geffen Sotheby’s International Realty
0.2% in 2016 – but says it’s probably too soon for any positive turnarounds in employment numbers and consumer confidence. THERE ARE POCKETS OF PROPERTY STRENGTH Says Seeff: “We have in all likelihood now come to the end of a three-year cycle of positive growth for the market, with 2016 having shown a notable slowdown compared to 2015, and of course, the 2013-14 mini-boom peak phase.” According to Andrew Golding, chief executive of Pam Golding Properties, “The overall housing market may well continue to lose momentum, but there will be pockets of strength where positive real growth will continue to be recorded.” Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, predicts only marginal price growth: “Property price growth will again slow in most areas. However, there will be pockets of brilliance, such as Somerset West, which is still providing a great return on investment. Other pockets such as Lakeside provide a lower entry level, but will soon shoot up in value due to growing demand in Cape Town’s Southern Suburbs.” RATINGS AGENCIES COULD PLAY HAVOC The threat of financial agency downgrades continues. Goslett outlines the probable knock-on effect on property: “Access to finance will become more expensive and interest rates will soar. Financial institutions will need to hold more money in reserve, making it more difficult to obtain credit, and that which is granted will come at a higher cost. “Saving will become tougher but also more critical in respect of deposit requirements and the ability to negotiate better rates based on less exposure for the bank.”
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COVER STORY
AND THESE COULD BE GAME CHANGERS
EMIGRATION Seeff is concerned about possible tax hikes and a rush of HNWI/business entrepreneurs and their money leaving South Africa. “We’ve seen a rise in demand for Golden Visa-type destinations for those who can afford to do so, looking to hedge their bets with one foot in an offshore destination while they wait to see whether some sense and sensibility can again prevail,” he says. “Tax hikes are coming and these could include higher property taxes for top-end properties, a concerning move, since it is likely to have the opposite effect. These buyers will just walk away, perhaps rather electing to put their money into a Golden Visa destination such as Mauritius, Malta or Cyprus.”
FOREIGN DEMAND FOR LUXURY PROPERTY Geffen sees an increase in foreign demand for local property but it will “most likely be confined to the super-luxury bracket as the rand floats out further on the back of poor central governance”. Says Geffen: “The number of foreign purchases annually makes up a tiny fraction of the national market, so buoyancy in that area is unlikely to balance the scales.” What about the local luxury market? Says Geffen: “Nationally the picture won’t be quite as rosy; the local market is sentiment-driven and at the moment sentiment is down. There is a recessionary market across most of the country and for the next while, property purchases will be made of necessity rather than desire.”
POLITICAL EFFECT ON PROPERTY Recent political events in the US and UK could impact South Africa but it’s early days. Says Golding: “Markets are currently predicting that a Trump presidency will be positive for US economic growth but that this will ultimately result in higher inflation and interest rates. It would probably be positive for the dollar and global commodity prices. “Stronger US growth will be positive for global commodity prices and both will support South Africa’s economic growth rate. However, a stronger dollar may hurt the rand, with negative implications for inflation and ultimately interest rates.”
“WHILE THERE ARE STILL SOME BOXES TO BE TICKED IN TERMS OF THE DEAL GOING AHEAD, IT WILL BE OF CONCERN TO THE INDUSTRY THAT EFFECTIVELY THE PROPERTY PORTAL SPACE IS NOW OWNED BY ONE GROUP” Herschel Jawitz, CEO, Jawitz Properties
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PROPERTY PROFESSIONAL
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INVESTOR CONFIDENCE Investment is essential for job creation; jobs, in turn, are essential for entrance into the property market. Says Seeff: “The political instability that has crept in, the violence around service delivery and university fee protests, the poor governance and rise in corruption ... the world is watching and so are investors. “Without investment, the economy cannot grow, job growth has stagnated – in fact we’re losing jobs – and the economy is therefore not supporting upliftment of the poor. That means even fewer people can get into their own homes and fewer can get out of informal housing. “We need stability for economic growth and investment. Once that is in place, everything else will follow ... business and job growth, more people in their own bricks and mortar homes.” Yet Golding is positive about the knockon effect of government’s investment in infrastructure. Says Golding: “This is positive for economic activity and employment opportunities, which underpin the local housing market in each area.” This infrastructure is often focused on public transport, which can open new housing markets by making them more accessible.
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PROPERTY PORTAL SPACE Jawitz raises a flag about the recent acquisition of Private Property, South Africa’s second-largest portal, by the country’s largest portal Property24.com. Says Jawitz: “While there are still some boxes to be ticked in terms of the deal going ahead, it will be of concern to the industry that the property portal space is now effectively owned by one group. The industry will have to make sure that the consumer offering and the offering to estate agencies is both fair and market-related.” Lew Geffen, Sotheby’s International Realty chairman, calls the acquisition a “complete shocker” that has the property industry “concerned and irate”. Says Geffen: “We first created a monster with Property24, which we successfully counteracted by bolstering Private Property’s market share. Now both have bitten the hand that feeds them by creating a virtual online monopoly. “There will be steps taken to address this. But perhaps, most importantly, no marketing platform should forget that it’s the real estate companies that hold the intellectual property that underpins their business. We have stopped print publications’ property sections in their tracks previously when they’ve challenged the industry and online is no different. “My view is that as an industry we should collectively revert to print advertising exclusively for a time and gauge how the market responds. I think buyers and sellers will follow where we go. “Every large real estate company in South Africa has a comprehensive website to market its own properties online and their social media channels are well supported. The reach of sothebysrealty.co.za combined with the global reach of sothebysrealty.com already gives us an immensely strong online marketing presence.”
BUY TO LET AND RENTAL DEMAND Affordability and bond repayments will come under huge pressure in 2017, distressed sales will rise and more people will start renting. This should bode well for investors, according to Seeff. Adds Goslett: “Investors may not be as excited about the prospects of capital growth in the short term, but then again property was always designed to be a long-term investment.” Investors looking for good returns will need to be more discerning and wary of the untapped potential of up-and-coming areas. According to Goslett, “Cash will very much become king in the medium term. Buyers who have access to the necessary resources will likely benefit at the closing table.” Paul Stevens, CEO of Just Property, suggests that investors should accept slightly lower rental increases and search harder for properties with good yields because they won’t be as readily available. Says Stevens: “Buy-to-let owners are battling to push through inflation-beating rental increases when new leases are up for renewal. Also affecting rental yields in 2017 will be further rate increases and tenants’ rental defaults, as they buckle under the pressure of inflation and being overextended. Nationally, the average escalation rate of 2.89% indicates just how price-sensitive South African tenants are currently.” Stevens says the average rental achieved across Just Property’s rental book countrywide is R6,550, with the Western Cape showing the highest rental growth – almost 10%. Loos says the Western Cape has a “strong net inward migration” of repeat home buyers and renters, unlike other provinces. Unofficial reports suggest that almost 300,000 people have migrated to Cape Town in the past year. “Gauteng is a different picture,” says Stevens. “Historically, it has always been the rental hub of South Africa but over the past few years we have seen a decline in rental growth. This is mainly due to the increased supply of rental units in the Gauteng area where demand has now started to drop off and vacancies are climbing. The North West province and Mpumalanga have also been affected negatively by a depressed mining sector.”
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URBANISATION AND SEMIGRATION RealNet’s MD Gerhard Kotzé believes the effects of urbanisation will be felt especially in Gauteng, as thousands relocate from rural areas and smaller towns to cities in search of work or business opportunities. Many semigrants will be younger so keen on smaller, affordable homes close to city centres or commercial hubs, with shops, entertainment venues and public transport supplied. It should drive increased demand for flats and townhouses, leading to further subdivision and densification in old suburbs as freehold homes on large stands make way for multiunit developments. Everitt envisages increased housing demand in metros – especially Cape Town – driven by the search for education and employment, and a longer-term trend towards urbanisation and semigration to places perceived as being better-managed and/or offering an improved quality of life.
UNEMPLOYMENT AND FIRST-TIME BUYERS Job creation impacts significantly on the property market, particularly first-time buyers. Statistics SA’s most recent figures show unemployment increased from 26.6% in Q2 2016 to a record 27.1% high in Q3, its highest in 13 years. South Africa has the highest jobless rate among more than 60 developed and emerging countries. Says Golding: “First-time buyers are a huge positive for the housing market, but only if they are able to find employment. A young population is a positive fundamental for any property market – a source of housing demand for a sustained period of time.” Seeff highlights a slow pace of developments for the entry-level end of the market as a “real concern”. Says Seeff: “We are not seeing growth in first-time home buyers. The lower sub-R500,000 end of the market is not growing to any significant degree to alleviate the lack of property ownership that plagues the country.”
“BUY-TO-LET OWNERS ARE BATTLING TO PUSH THROUGH INFLATIONBEATING RENTAL INCREASES WHEN NEW LEASES ARE UP FOR RENEWAL” Paul Stevens, MD, Just Property
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AFFORDABILITY IS EVERYTHING Everitt notes improving macroeconomic conditions: “Expectations are that although the CPI will end 2016 at 6.3%, which is outside the Reserve Bank’s target range, it will slowly retreat to about 5.5%. Further good news is that economic growth is expected to rise from 0.4% to 1.3% in 2017. “While hardly stellar, this will be positive for property because it will bring about increased employment and improved consumer confidence. If properly managed, the R988bn allocated to state spending on energy and water projects, transport infrastructure and housing over the next three years will also assist in creating many new jobs – and potential home buyers.” MD of Rawson Property Group Tony Clarke says affordability is the watchword, especially if interest rates rise: “By increasing repayments on all sorts of debt, higher rates make it difficult for first-time buyers to save the deposits they need in order to be approved for a home loan. I expect to see their numbers decline quite sharply over the next few months and to see price growth slow at the lower end of the market.” Everitt does not expect interest rate increases in 2017 so predicts that “home loan rates will also not rise. Consumers may find it somewhat easier to qualify for new loans and to afford the monthly instalments if their salaries increase and they do not have too much debt”. Kotzé believes that in National Credit Act terms, “many South Africans have too much debt to qualify for a home loan, even if they believe they could afford the monthly instalments and would really like to become home owners”. They could struggle to pay off debt even if food prices decline thanks to more tax; if salaries increase less than the official inflation rate, and school fees, medical aids, electricity and water costs increase. Says Kotzé: “This means that the current oversupply of stock compared to financially able buyers is likely to persist – and that those who are able to secure home loans, or who can pay cash will be in a strong position when it comes to negotiating prices and keeping them down.”
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COVER STORY
“IN RECENT YEARS, SECTIONAL TITLE HAS BEEN THE STRONGER SEGMENT, ESPECIALLY THE SMALLER SECTIONAL TITLE ONE-BEDROOM AND LESS SIZE” John Loos, FNB household and property sector strategist
TYPES OF HOMES Says Everitt: “Although repeat buying and second-home buying will be bolstered by the equity that existing home owners have built up in their properties and are able to use as deposits, we expect rising property rates and utility charges to significantly boost the trend among such buyers towards downsizing to smaller homes and luxury apartments.” He says certain areas within the metros will be more popular and likely to experience sustained price growth. According to Everitt, “It will also, we believe, give major impetus to the development of upmarket cluster or sectional title developments where affluent residents share the cost of land, luxury amenities and high-tech security provisions.” Loos believes it is almost time for full title to outperform sectional title. Says Loos: “In recent years, sectional title has been the stronger segment, especially the smaller sectional title one-bedroom and less size. I believe a period of relatively strong first-time/younger age buying was a key driver of better small sectional title performance. In a downturn, though, the full title market tends to weather the storm better it seems, although both classes have recently been slowing.”
INDUSTRY TRIMMING Kotzé expects “considerable changes” in the real estate industry landscape over the next few years, along with some consolidation. “For starters, we expect agent numbers will decrease over the next couple of years largely due to retirement, as many of the current top agents are in their late 60s and 70s and young people are not coming into the industry in any great numbers,” he says. “Secondly, we expect to see more ‘property principal groups’ where strong independents in a particular town or city form localised alliances that do not impact on their daily business operations but give them purchasing power when it comes to training or advertising, for example, and enables them to share listings.” The knock-on effect could be squeezing out of smaller operators. “Thirdly, technology is increasingly enabling agencies to get more done and serve more clients with fewer agents, especially in areas where buyers and sellers are young and techno-savvy.”
DIGITAL SPACE On the technology point, Century 21 CEO Harry Nicolaides reminds us that traditional agencies should ensure that their digital offering is cutting edge to avoid falling behind. He says: “This digital phenomenon impacts only on the way properties are advertised and has no influence on the other intricacies of selling or buying a property.” Hutchison agrees. “The business fundamentals always remain the same. However, the platforms and how we achieve those fundamentals are rapidly changing with technology,” he says. Says Nicolaides: “The most active sector among consumers in the property industry are not the HNWIs nor pensioners, who may require a more personal and discreet service, but those in the affordable price bracket who have demanding careers, young families and limited time. They require fast, efficient and ‘on demand’ services. For them, the convenience of interacting on digital platforms is ideal. “This convenience is a requirement for most consumers but especially for the millennial and X generations who do not want to meet agents physically from the onset of their property search and who are influenced by what’s trending in the property industry on social media, not by what an agent may or may not say.” Consumers of 2017 want greater choice and more control over the property process. JANUARY/FEBRUARY 2017
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SECTIONAL TITLE OWNERS: THINGS YOU NEED TO KNOW The Sectional Titles Schemes Management Act of 2011 and its regulations came into effect on 7 October 2016 and introduced various changes to sectional title scheme management. One of these relates to the procedure to be followed when collecting outstanding levies from a sectional scheme member. In terms of Rule 25(2), it is now a requirement that if money owing is not paid by a member, the body corporate (via its trustees or managing agent) must send a final written notice to the defaulting member. The notice must state that the member has an obligation to pay the overdue contributions, charges and any applicable interest thereon, immediately. Moreover, the notice must warn the member that the body corporate intends instituting appropriate action to recover the debt, should it not be settled within 14 days of receipt of the written notice.
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Real estate agents play a role in shaping perceptions. How should the ethics of buying and selling property be managed?
CROSSING THE LINE SUNGULA NKABINDE
T
here are bad apples in every industry who can taint the name of a sector, even if they make up a small portion of the collective. It is no different in the property sector, if one or two agents cross the line when it comes to conducting business ethically. What sort of practices and industry norms may be legally permissible yet morally questionable? One example: agents may pressure their buyers to bid too much and their sellers to price too low to expedite a sale and claim higher commission. Or agents may steer buyers towards homes that offer higher commissions or towards their brokerages’ own listings. Alternatively, agents may offer higher valuations to secure an exclusive mandate from that seller, only to suggest later that the seller brings their price down when the property doesn’t sell.
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THE IMPORTANCE OF TRANSPARENCY
It’s tricky to measure how much unethical practices could cost clients, since they can involve lost opportunities that are hard to quantify. A recent Homeowner Insights study by Absa and Columinate showed that only 16% of home owners trusted estate agents when selling their properties. According to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, such statistics are largely due to a lack of proper expectations from the outset. Agents don’t provide realistic information as to what clients should expect, as they lack the necessary sales knowledge. Says Goslett: “With about 40,000 real estate agents operating in the property business, not everyone can be considered to be a full-time professional agent, regardless of their qualifications.”
Harcourts CEO Richard Gray says the industry has a responsibility to be more transparent and accountable. Most complaints relate to a lack communication, which leads to misunderstandings, a lack of trust and even a perception that an agent is hiding something. Says Gray: “Don’t be scared to give buyers and sellers bad news. They will find out eventually; rather be open with them.” THE SELLERS’ ROLE
But sellers also have a responsibility to build trust. Michael Bester, partner at Tyson Properties Atlantic Seaboard and City Bowl, says commitment from a client is essential. If a seller approaches numerous estate agents, expecting these agents to fully commit to them in return, it creates a tense business relationship.
PROPERTY PROFESSIONAL
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NEWSWORTHY
Source: The Homeowner Insights – Absa and Columinate Sold through one agent
56%
68%
71%
58%
Advertise their property on the estate agent’s website
NUMBER OF SHOW DAYS One to four
60%
TIME TAKEN TO SELL THE PROPERTY
Gave sole mandate
Declined on the selling price through an estate agent
42% 41%
In 30 days In 90 days
I often see how developers overpromise via their agents. They paint a certain picture, only for purchasers to find that the picture and the final product do not match Michael Bester, partner, Tyson Properties Atlantic Seaboard and City Bowl
Ultimately savvy buyers and sellers do their research about relevant property developers, find out what other properties in the area have sold for and request references for estate agents. CHECKS AND BALANCES
77%
Aware of the estate agent’s commision
ONLY
16%
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Did not need to fix anything on the property before the sale
Trusted the estate agaent
Says Bester: “Sellers get a substandard service from the estate agents who, understandably, choose to focus their efforts on other clients and sellers feel neglected.” To eliminate some of the mistrust, Bester recommends that clients should commit to one or two agents by way of either a sole or joint mandate to elicit similar professional and ethical commitment in return. SERVICE DELIVERY
46%
There also tends to be conflict between buyers and agents, particularly where estate agents are perceived to have overpromised and underdelivered. This occurs predominantly when property developers do not deliver on the promised specifications. Because buyers deal with estate agents and not the developers, they tend to direct their frustrations towards agents.
Says Bester: “I have often seen how developers overpromise via their agents. They paint a certain picture, only for purchasers to find that the picture and the final product do not match. In a sectional title development, for example, purchasers can buy a unit off-plan without any guarantee of the end product.” There is always an extensive specifications sheet detailing the materials, design and finishes for new developments. If a developer does not deliver, buyers have a legal recourse against that developer. Usually an estate agent, as the mediator, will try to negotiate some form of compromise. If that fails, the matter can be resolved by court action. Says Bester: “It may often be the case that the buyer is not prepared to engage in a legal battle with the developer and end up venting their frustrations with the agent.”
Jo Ann Gray, general manager of Firzt Realty Company, says it is best to get in touch with the Estate Agency Affairs Board (EAAB) to check whether an estate agent has a valid Fidelity Fund Certificate (FFC). The Attorneys Fidelity Fund insures sellers and community schemes against money lost through theft or fraud committed by a scheme executive or a managing agent. Dealing with agents who don’t have this certificate disqualifies clients from receiving cover. Says Lanice Steward, president of the Institute of Estate Agents: “A buyer or seller should ask to see a current copy of an agent’s FFC, the license required by the EAAB to operate as an agent. Registered agents should now also have a PrivySeal in their electronic communication, which confirms their status. It is also recommended to check if an agent is a member of any other professional body, such as the Institute of Estate Agents.” Steward points out examples of questionable ethics. “Rental agents used to include a sole mandate in their lease agreement, should the property in question go to market. This was stopped several years ago. The hot topic is deposits being used by agents for cash flow in their business. This is strongly prohibited by the Estate Agency Affairs Act 112, 1976 but unfortunately does happen.” Concludes Gray: “Raising the bar in the property industry is essential. New legislation, along with the criteria laid down by the EAAB, requires estate agents to be versed in all legal and ethical aspects of property law and keep abreast of any new legislature by attending regular seminars.”
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FINANCE
THE AFFORDABILITY
REALITY ANNE SCHAUFFER
Understanding how affordability affects the consumer during the prebuying and property searching phases is half the battle between success and a declined loan
A
ffordability remains the foremost consideration for anyone contemplating buying a home in South Africa. This was the key finding of the Homeowner Insights report, a partnership between Absa bank and Columinate, a digital market research company. The focus of the research was the impact of affordability on consumer behaviour during the two initial stages of buying a home, namely the prebuying and property searching phases. During these phases, prospective buyers not only have to consider the sheer size of the transaction and the duration of the commitment but also the associated risks and their ability to service the home loan consistently over a long period of time. The Homeowner Insights study found that 87% of respondents were confident of their ability to afford their newly approved home loan at the time of searching for a property. However, in Absa’s experience, only 38% of applicants are granted home loans following the bank’s assessment process.
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FINANCE
Lower approval rates indicate increased housing and mortgage finance affordability pressure on home buyers, along with the escalating costs of lending
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finance being turned down. Says Grönum: “If a home loan is assessed and granted based on nondisclosed information, customers could soon find themselves in a challenging financial position. Where customers have intentionally withheld information relating to their income and expenses, they will struggle to find protection under the NCA.” BEHIND THE DECLINES
While credit records and conduct of accounts play a key role when assessing home loan applications, affordability accounts for 22% of customers’ home loan applications being declined. In cases where applicants have healthy credit records and good financial conduct, some simply cannot afford the monthly instalment based on the bank’s affordability assessment. A further 35% are credit declines. Clearly, there is much more to assessing affordability than is understood by many consumers. More than a third of Homeowner Insights respondents said they had to reassess their needs once they started identifying suburbs and viewing properties they liked, with 37% citing affordability as the main reason.
THE IMPACT ON GROWTH
In ooba’s 2016 Q2 oobarometer round-up of South Africa’s property landscape, CEO Rhys Dyer commented on affordability: “Slowing economic growth, increasing unemployment, escalating inflationary pressure and higher interest rates continue to erode consumer affordability. Consumer confidence is at its lowest level in years. With property price growth below consumer price inflation, we expect zero to negative property price growth in real terms for a while to come.” Consumer pressure was confirmed by lower bond approval rates, down by 4.5% year on year from Q2 2015. Lower approval rates indicate increased housing and mortgage finance affordability pressure on home buyers, along with the escalating costs of lending. Says Dyer: “The year-on-year increase of 16 basis points in the average interest rate in Q2 2016 illustrates the increased cost of credit. Providing a sizeable deposit can make the banks look more favourably at a buyer’s home loan application because it reduces the risk to the bank. Banks are also more likely to be negotiable on the interest rate, because they are taking a lower risk with a deposit.”
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THE BIGGEST CHALLENGE
Despite its importance, the concept of affordability is often poorly understood. Says Carel Grönum, managing executive of Absa Home Loans: “Since the introduction of the National Credit Act (NCA), banks and other lenders have had to sharpen their credit approval process to ensure affordability. The act requires an understanding of a customer’s income and adds a detailed analysis of other credit commitments and living expenses.” The greatest test with the affordability assessment does not lie with the assessment process, but rather with the customer’s interpretation and understanding of their own personal financial situation. Says Grönum: “There are instances where customers purposefully fail to disclose all their financial commitments to the bank in order to secure a higher home loan.” Neglecting to divulge minor expenses such as a gym contract or television subscription could significantly change the affordability position of an applicant. Similarly, store cards, cellphone contracts and other recurring commitments that may seem insignificant to the buyer often result in the request for
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I N T E R N AT I O N A L
WORLD’S WEALTHIEST SPOTS: CAN VALUE BE FOUND?
GUNNING FOR FUTURE GROWTH Source: New World Wealth
Certain Australasian and Asian cities are experiencing rapid wealth growth, which makes them attractive destinations for
GEORGINA GUEDES
investors. Of the top 15 cities:
South Africans looking to invest overseas have noted the appeal of global cities. But how easily can they gain a foothold on the international property ladder?
Beijing, Shanghai, Mumbai and Sydney were the fastest growing in wealth growth terms over the past decade Mumbai is expected to be the fastest-growing wealth growth city during the next 10 years
I
n October, New World Wealth released their Wealthiest Cities in the World 2016 report, ranking cities according to the private wealth (property, cash, equities and business interests, less any liabilities) held by individuals in each country. Predictably, London, New York and Tokyo topped the list, with San Francisco and Beijing not far behind. With the volatile rand and growing global political uncertainty, South Africans might be wondering if there are any opportunities for them in key overseas markets. A number of local estate agents with an international presence or partnerships explained where savvy South Africans with cash to burn are investing. Says Nadia Read, partner and head of Seeff International: “Fuelled by economic and political instability and the performance of the rand, which has devalued by 100% since 2011, applications for global citizenship or Golden Visas have doubled in 2016. Most South Africans apply for the Golden Visa, but don’t actually emigrate. It is often a plan B option that may be utilised later; they prefer to have one foot here and one foot in an offshore destination.” BACKUP OR SOLID INVESTMENT
However, Lisa Bathurst, private consultant to Seeff International, says that South Africans are also looking for international opportunities simply for general investment purposes. As a result, there has been an increase in property companies setting up services to assist them in making this investment and offering financial products as part of the deal. Says Bathurst: “With financing available at such low rates, it really is a no-brainer and a great opportunity for South Africans to benefit from global GDP in a way that they simply cannot through South African investments.” According to Pam Golding Properties it has never been easier to acquire a property in a leading global destination. Says chief executive Andrew Golding:
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“Apart from being recognised by astute investors for the purpose of portfolio diversification and an effective currency and inflation hedge, a wide variety of real estate opportunities are available to those who seek a property for leisure use, permanent relocation, pure investment or even as a means of acquiring citizenship.” SEEING INVESTOR ACTION
Pam Golding Properties has recently added Berlin, Barcelona, Sydney and Paris to their international property portfolio. Golding says that their blue-chip destinations range from tropical islands such as Mauritius and the Seychelles to the traditionally sought-after top cities London, Paris, Sydney, Miami and Cape Town. Says Golding: “In identifying prime new global investment opportunities, we now also include Berlin, which is positioning itself to become the European start-up capital, and the latest property resurgence in Barcelona, with its exceptional climate, rich culture, cosmopolitan living and range of real estate offerings from traditional city centre apartments and chic designer penthouses to detached villas with private gardens and swimming pools.” Read agrees that Berlin is one of the prime destinations favoured by Seeff International’s South African investors: “Property prices are up to five times more affordable than London, yet it is one of the top three visited cities in Europe. Rental yields are about 3.5% with expected growths of 10% per year.” Chris Immelman, MD of Pam Golding Properties International & Projects Division, adds that Berlin offers a good entry level into the residential market in one of the most important cities in the European Union, and offers an array of interesting investment opportunities. Says Immelman: “Germany is said to likely become the largest beneficiary of Brexit, with Berlin and other major German cities set to host the service sector industries that are expected to move
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I N T E R N AT I O N A L
WEALTHIEST CITIES IN THE WORLD 2016 Source: New World Wealth
City
Trillion total wealth
Millionaires
Billionaires
Further information
London
$2.7
357,000
62
New York City
$2.6
336,000
65
Two largest stock exchanges (Dow Jones and Nasdaq)
Tokyo
$2.2
272,000
14
Fourth-largest stock exchange
San Francisco Bay
$1.9
174,000
45
Head offices of some of the largest global companies
Beijing
$1.8
122,000
45
Head offices of some of the largest global companies The Shanghai Stock Exchange, China’s largest and the seventh largest globally
Third-largest stock exchange
Shanghai
$1.6
118,000
32
Los Angeles
$1.2
168,000
28
Hong Kong
$1.1
224,000
50
Sixth-largest stock exchange, considered the gateway between Europe and Asia
Wealth is held in Beverley Hills and Malibu
Singapore
$870bn
213,000
23
One of the most business-friendly countries, low tax rates
Chicago
$860bn
135,000
12
Major industries include transportation, financial services, FMCG and manufacturing
Sydney
$850bn
110,000
14
Sought-after destination for its lifestyle, safety and climate
Toronto
$850bn
108,000
12
Major industries include financial services, real estate, IT, media and telecoms
Frankfurt
$830bn
120,000
20
Tenth-largest stock exchange, financial capital of Europe
Mumbai
$820bn
45,000
28
The Bombay Stock Exchange
Paris
$800bn
107,000
18
Major industries include financial services, real estate and manufacturing
from the UK.” Over the past decade it has experienced a surge in demand for real estate, with an influx of university students as well as highly educated baby boomers looking to their retirement. A range of luxury property options are priced from $338,540. DOING IT FOR CITIZENSHIP
Immelman singles out the rapidly regenerating central city of Lisbon. Says Immelman: “The historic and revitalised city of Lisbon in Portugal continues to rise rapidly in popularity, with the Portuguese Golden Visa Programme catching the imagination of savvy investors seeking easy access to the Schengen zone or ultimately, permanent residency.” Immelman says that Barcelona in Spain has a similar Golden Visa Programme, which is currently attracting increasing interest. However, Bathurst points out that while the Golden Visa is attractive to South Africans as it offers access to EU residence, investors should be cautioned that this is a residence programme so is unlikely to offer citizenship. On the other hand, Malta’s Individual Investor Program offers full EU citizenship in just more than one year. Antigua gives citizenship in four to six months, providing citizens with global visa-free travel to more than 130 counties including the Schengen zone and UK. LONDON REMAINS A FAVOURITE
Despite Brexit concerns, London remains an appealing property market for foreign investors. “Importantly, interest rates in the UK have been cut from 0.5% to 0.25%, against South Africa’s March increase from 6.75% to 7%,” says George Radford, director of Africa for property investment firm IP Global. Says Radford: “I’m still optimistic about the UK economy. In fact, a World Bank report recently ranked the UK the seventh best country in
the world for ease of doing business, while countries such as Germany and France – which are now courting UK businesses to relocate to their cities – were ranked 17 and 29 respectively. The UK has much less red tape, a friendlier tax environment and is, of course, English-speaking.” Radford says Southern African investors have generally shown a preference for the UK and Australia, due to the shared historic connections, followed by Europe and the US. ASIA RISING
Asia’s appeal is also on the rise. Berry Everitt, CEO of Chas Everitt International, says that many South African investors traditionally tied to Europe, the UK and Mauritius are starting to look closely at Asian cities, where prices are lower and yields are higher. He says cities most likely to draw interest over the next 12 to 24 months include Hanoi and Ho Chi Minh City, since Vietnam is currently attracting much of the manufacturing business that used to go to China and recently opened its doors to foreign property investors. Prices of new two-bedroom apartments in Hanoi start at about $140,000. Thane, a city within the Mumbai metropolitan area in India, has the highest economic growth rate in the world at 7.5%. Prices of new two-bedroom apartments start at about $25,000. Shanghai, the business and financial hub of China, has 50m2 two-bedroom apartments starting at about $250,000. And Taipei, now one of the top 10 cities for global corporate headquarters and the World Design Capital of 2016, has 85m2 three-bedroom apartments at about $220,000. “However, it is worth stating that property transaction procedures are different in every country and can be very complicated. Investors should never proceed without the assistance of a reputable broker with expert local knowledge,” says Everitt.
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LIFE HACKS TIAAN VAN DER BERG
The communication gap
KNOWLEDGE ILLUSION
Because we think we know the legal principles, we think our clients also understand them. Usually, however, we don’t have a full understanding of principles and procedures ourselves. More often, clients don’t know either – or their knowledge may be outdated. Your sellers may think they know how to close a utility account after registration because they sold a property 10 years ago, but they are often unaware of recent changes in this regard. The result: clients create their own expectations and jump to conclusions. When property professionals cannot deliver on these misguided expectations, clients then assign blame, whether the agent, conveyancer or another contractual party. It’s therefore important to provide clients with the facts. With the correct information, their expectations will be managed.
THE LEGAL LINKS
When clients are given proper information, the legal relationships between role-players are managed and protected. Foremost lies
the relationship between the seller and purchaser: each of the parties needs to understand their obligations and rights. Secondly, there is the relationship between the agent, the purchaser and the seller respectively. The perception exists that the estate agent carries certain legal obligations, when they do not. Clients then unjustly criticise a specific agent, the agency and agents in general as being unethical and unprofessional. Thirdly, there are the relationships between the respective contractual parties and other role-players, including the conveyancer, the municipality, Sars and the relevant home owners’ associations. Both the seller and purchaser need information on the processes and anticipated time frames of each of the role-players.
When clients are given proper information, the legal relationships between role-players are managed and protected
INFORMATION DISSEMINATION
The conveying of information broadly takes place within three time periods: 1. Listing and marketing The seller and purchaser must be informed of certain issues before they enter into the agreement. 2. Conclusion of the contract The purpose of the pro forma agreement is not only to legally bind the parties but also to explain various contractual elements. 3. Transfer This is normally a stressful period for both parties, exacerbated by the legal jargon used by agents and conveyancers. It’s essential to relay information in a way buyers and sellers can understand.
Tiaan van der Berg is the director of MC van der Berg Incorporated. He is a specialist lecturer in deeds and notarial practice, formerly at the University of Pretoria, but now running his own training academy. He is involved with EAAB CPD seminars countrywide.
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M
ost buyers and sellers do not understand the legal principles associated with property transactions. Even those who are more frequently involved in the business of home ownership do not fully grasp the intricacies of the law and the procedures involved. Estate agents and conveyancers, too, have become complacent about adequately informing clients in this regard.
Managing client expectations is essential before the conclusion of the contract, during the transfer process and also afterwards
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M O T I VA T I O N
Keep your focus on the target client
I
was always taught that the goal of marketing was to drive a large quantity of potential clients to my door. And I had become good at that. But, after attending a session at the Maryland Association of Realtors convention, my whole perspective shifted. One of the significant things I gleaned from keynote speaker Danny Cox was that I was marketing to the wrong client. A better goal was to drive a large quantity of quality clients to my door.
REFERRALS VS REPEAT
What characterises repeat clients? Start by defining what a quality client is. There are only three categories: strangers, referrals and repeat. Strangers do not know you at all and as such, are more likely to question everything you do. Referrals are
predisposed to trust you because someone they know and respect has raved about you. But your focus should be on repeat clients: they already know, like and, most importantly, trust you. When they come back for a second or third time, they do not question your professional fee or your interpretation of fair market value.
INTERIM MEASURES
Most people in the US move every 10 years – give or take. So the question is, what do agents do in the meantime? Luckily, there are still two types of clients on which we can focus: referrals and strangers. So which of these two would you say is the better option? It would have to be referrals as they are more likely to trust you and are therefore less likely to query your opinions and knowledge of the industry.
But your focus should be on repeat clients: they already know, like and, most importantly, trust you
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How much time do you spend trying to get the attention of strangers instead of repeat clients? Focus on the latter and you’re likely to have increased success
If all your clients were repeat and referred – buyers and sellers who had sought you out and begun the process already liking and respecting you – your ability to influence those clients would be greatly enhanced.
QUALITY CONTROL
To control the quality of client you attract, the number of quality clients and the likely outcome of every future negotiation, a proactive and focused marketing strategy is essential. After all, a large quantity of quality clients changes the dynamic entirely. With that in mind: how much of your time, energy and money do you spend trying to get the attention of strangers? Either you can focus on attempting to get the attention of strangers. Or you can spend your efforts maintaining the attention of those who already know, like and trust you.
Ed Hatch is the president of Ed Hatch Seminars and a senior instructor for the Council of Residential Specialists in the US, UK, Europe, Africa and Asia. Based in the US, Hatch has addressed international audiences since 1990 on topics including negotiation, business and strategic planning, customer service and leadership.
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ED HATCH
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