Business Day Home Front 03 July 2015

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FRIDAY, JULY 3 2015

HOMEFRONT PAGE 2

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SA’S BOOK TOWN IN THE KAROO

PROFILE: FROM DELIVERY MAN TO PARTNER

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THE STATE OF CAPE TOWN’S CBD

BUYING PROPERTY IN BERLIN

Are prequalifications worth the paper they’re written on?

Does a prequalification certificate make any difference to a potential home buyer’s chances of landing a bond?

WORDS: DAVID A STEYNBERG :: PHOTOS: ISTOCK

B

uying a house is as exciting as it is stressful.

The prospect of owning something beautiful and unique and that holds the future potential of your family’s or portfolio’s growth is a difficult feeling to match.

Very often, consumers trawl property search websites such as Private Property, enquire

about a home’s availability and view it within a week. If it is priced correctly, is in the right neighbourhood and looks in good enough condition, an offer to purchase is signed.

But what happens next is where many would-be buyers are caught out and have their dreams dashed: the offer is accepted by the seller, and the

West Cliff, Johannesburg

Asking R30 million

Classic contemporary living combines with masterful allusions to traditional heritage architecture. Open plan living, dining & entertaining to covered patio with high wood ceilings overlooking heated pool & tennis court, set on ±5035m². Matching luxurious 2nd dwelling.

Contact: Beverley Gurwicz 082 412 0010 Office: 011 886 8070 Web ref: 1174783 Each office is independently owned and operated

agent, with the help of a bond originator, approaches all the major banks as well as other credit providers for a loan.

This process should not take more than two to three weeks to conclude. Once everyone has been approached, either offers or letters of decline stream in. In the latter case, what might have changed the

Upper Claremont, Cape Town

scenario for the better? Does a prequalified buyer have a better chance of achieving a successful bond approval at a competitive interest rate?

Rhys Dyer, head of SA’s biggest bond originator, Ooba, certainly thinks so.

CONTINUED ON PAGE 6

Asking R8.5 million

Classic Georgian townhouse with excellent security in Prime Location. North facing 4 bedroom home with lovely mountain views. Light & spacious kitchen flows to open-plan dining room & lounge. Dining room opens out to undercover patio & pool. Barbara Manning 083 407 3656, Lesley Payne 082 455 480 Office 021 673 1 240 Web ref: 1246818

www.sothebysrealty.co.za

“Approval rates are 2.5% higher year on year and the average interest rate achieved by Ooba in May was prime plus 0.34%, which is well down on the average of prime plus 0.58% achieved in May 2014” Rhys Dyer, CEO, Ooba

Dainfern Golf Estate, Sandton

Asking R8.9 million

Beautiful north home facing on golf course - A perfect blend of light and glass with timeless quality finishes incorporating expansive living and entertainment areas.

4 Bedrooms all en-suite, study. Landscaped garden with atrium and koi pond. Entertainers patio with rim flow pool. Contact: Dermot 083 680 5286 / Dawn 082 575 9956

LIFESTYLE

Friday July 3 2015

An open book

LIFESTYLE

The appeal of Richmond, SA’s very own booktown, continues to grow WORDS: RIEKIE HUMAN :: PHOTOS: SUPPLIED

“You can’t call yourself a book lover if you’ve never been to Richmond. It’s the literary jewel of the Karoo” Darryl Earl David, founder, Booktown Richmond

“Y

ou brand a town as a ‘booktown’ by packing it with second-hand bookshops so that tourists will make the pilgrimage,” says Darryl Earl David, the mastermind behind Booktown Richmond’s literary status and head of the department of Afrikaans at the University of KwaZuluNatal. The most famous booktown in the world is Hay-on-Wye in Wales, but David’s research was based on European towns such as Bredevoort, the Netherlands, Redu in Belgium’s picturesque Ardennes region, and Damme, near Bruges, also in Belgium.

A WORK OF HEART Inspired by these towns, David — “the big makhulu baas of Richmond”, as journalist Denis Beckett calls him — brought the concept to the Karoo almost a decade ago, and to this day he remains hands-on.

“I invite the writers to the festivals, organise their accommodation, take the photographs and run the publicity,” David says. He has to drink and eat with all the writers: “It really is a tough job,” he jokes.

His right-hand man and co-founder of Booktown Richmond, Peter Baker, takes care of the technical details, including projectors,

memory sticks and sound requirements, and does the lion’s share of running the finances of Booktown.

Two book festivals are held in Richmond every year. The most famous is BookBedonnerd, which takes place in October, while the JM Coetzee/Athol Fugard Festival hits the town every May. “The latter started out as two separate festivals but we incorporated the Fugard Festival into the JM Coetzee Festival because it was impractical to host three literary festivals in a small Karoo town in the middle of nowhere,” says David.

Over the years many literary giants have attended these events, including Albie Sachs, Mongane Wally Serote, Ivan Vladislavic, Sindiwe Magona, Etienne van Heerden, Breyten Breytenbach, Deon Meyer and Ahmed Kathrada.

“Hundreds more have made the pilgrimage, with some even arriving by bus at 3am,” David says.

In May this year Fugard himself put in an appearance, “giving credence to our motto that the Karoo is the literary heartland of SA”, says David.

“To know him is to love him.

A person like Athol shows up only once in a lifetime.”

David Kramer has also been key to the town’s literary success. “He packed

Booktown Richmond to the rafters and is loved and hero-worshipped,” David says. Antjie Krog also gets a special mention. “People think poetry readings are dull.

They’ve never seen Antjie in full cry. It’s like watching Joe Cocker in a frock. You never forget something like that.”

And Diana Ferrus’s delivery of her epic poem on Saartjie Baartman was “one of the most unforgettable moments in the history of Booktown Richmond,” David says. “By the time she’d gotten to the last few stanzas, there wasn’t a dry eye in the house.”

BY THE BOOK While the literati flock to Richmond in the hundreds, good books by the thousands can be found here. John Donaldson, owner of Richmond Books & Prints, one of 13 bookshops in the town, is proud that he stocks “a bit of everything” — primarily out-of-print books as well as Africana and collectable prints and photographs.

“We started out small in 2007 in one house. Today, four adjoining houses are interlinked, holding about 70,000 books, 30,000 LPs and half a million photo negatives and prints,” says Donaldson. For him, a highlight has been seeing how, over the years,

the arrival of books and related shops, activities and projects have helped turn a ghost town into something of a landmark.

“It means that the town’s rich architectural heritage has remained intact,” he says.

Says Marthie Connolly of Richmond Info: “Richmond was established in 1843 and a good number of houses from that era still exist, including the original farmhouse.” The South African Heritage Foundation held its yearly symposium in Richmond in October 2014, stimulating renewed interest in the town’s history, which includes many draw cards for Anglo-Boer War history buffs, such as the old railway site Deelfontein.

Connolly points out that Richmond used to be a saddle horse breeding centre and at Die Krip Restaurant there are bar stools made out of saddles.

“We also have one of only two saddle horse museums in the world,” says David.

And then there is the beautifully restored Edwardian homestead that houses Modern Art Projects, where various painters, sculptors and designers exhibit their works.

The golden thread throughout Richmond is authenticity: expect to be delighted at every turn.

FOOD FOR THOUGHT “To dine out in Richmond is an experience in itself,” says Richmond Booktown’s Darryl Earl David. “There are very few festivals that allow you to share a table with SA’s greatest writers.” The Supper Klub is a case in point. “It’s the restaurant with the greatest atmosphere and it has one of the best bars in SA.” Die Krip is the newest restaurant in town and the only one that’s open year round. David maintains that it’s the closest you’ll get to the food for which the Karoo is famous — and at very reasonable prices.

“What’s more, their pizzas are out of this world.”

NEED TO KNOW Where to stay n Tom se Meule Guesthouse, 260 Hoop Street, 053 693 0351 n A Karoo Manor, 141 Pienaar Street, 053 693 0142 Where to eat n Richmond Supper Klub, 40 Loop Street, 053 693 0622 n Vet Muis Plaaskombuis, 56 Loop Street, 053 693 0313 n Die Krip Restaurant, 141 Pienaar Street, 082 9449 240 Festival info n Darryl Earl David, 082 576 4489, davidd@ukzn.ac.za n Peter Baker, 011 447 2517, pcbaker@mweb.co.za

LIFESTYLE Friday July 3 2015

Darryl Earl David’s Richmond journey When did you first visit Richmond?

On July 14 2006. I’d searched the Karoo for about seven years, looking for that special town to become SA’s national booktown. Richmond was one of the last towns I visited.

Who was to know that such a lovely town lurked behind that Caltex garage?

From the moment I drove through Loop Street, I knew I’d found my booktown.

Favourite place to stay?

I own property here but have been too poor to renovate it to livable standards. It’s probably the nicest house in Richmond, dating back to 1843. For now, my home in Richmond is Tom se Meule

Guesthouse. I’ve known a few others, but my four dogs got me kicked out of all of them when the owners caught them snoozing on the pillows.

But Alec de Bruin, owner of Tom se Meule, has a huge fenced property, so they’re seldom inside these days.

Booktown Richmond in a nutshell?

It’s truly a fairy-tale town. It’s the greatest success story in the annals of South African literary history because it was built with nothing more than the audacity of hope and the generosity of spirit of this country’s writers. We’re very proud that Richmond’s literary festivals are the only ones in SA that are free to everyone.

W

hen it comes to property, specifically buy-to-let property, a lot of the worth of an investment decision will come from the neighbourhood in which the property is situated and the degree to which the area appeals to prospective tenants. That’s one of the reasons why online property portal Private Property’s new neighbourhoods concept is such an exciting tool for investors: it answers the question, “What is it like to live here?”

PROPERTY

Property investment tool offers insight into SA’s neighbourhoods As any smart investor knows, there’s more to making a decision than just the figures WORDS: BRIDGET MCNULTY :: PHOTOS: ISTOCK

PUBLISHED BY THE CREATIVE GROUP IN ASSOCIATION WITH TMG

The Creative Group CEO: Shaun Minnie shaun.minnie@thecreativegroup.info

Unit G4, Old Castle Brewery, 6 Beach Road, Woodstock, 7925 021 447 7130

EDITORIAL TEAM Editor: Terence Steenkamp Creative Director: Mark Peddle

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CHOOSING A NEIGHBOURHOOD Simon Bray, CEO of Private Property, explains that its neighbourhood tool is a whole new way to interact with SA’s property market. “We already have all the properties on the market on the website, so we can certainly help you find your next home. But we realised that people don’t only choose their perfect home but also their perfect neighbourhood. An area is so much more than just the houses on the market: it’s the people who live there, the restaurants and shops, the schools and the businesses that make up a neighbourhood.”

BusinessDay PUBLICATION

Art Director: Lucia Viglietti Editorial Consultant: Bridget McNulty Chief Copy Editor: Yaron Blecher

The firm has taken this idea one step further by classifying these neighbourhoods with lifestyle tags, such as “leafy and quiet” and “urban sophistication”. “This means that people will be able to search for locations based on these tags, so if you like living in an urban neighbourhood, you’ll now be able see all other urban neighbourhoods across the country,” says Bray.

PROPERTY DATA AND INSIGHT Of course, alongside the lifestyle information is the property data and insight necessary to make a sound investment decision. Details such as median house prices in the neighbourhood for the different house types, the price trends over the past few years and relevant rental prices offer a view into the market that is based on statistics and insights.

“This is also the first time in SA that real-time sales data is presented right next to rental data in an area,” says Bray.

“It allows investors to see the capital growth in an area and compare it with the rental growth. Any savvy investor will see this as a great tool to compare rental yields across

different neighbourhoods and identify the best performing property types in those areas.”

Private Property has also embarked on a mission to film the top neighbourhoods in SA. These videos will include aerial cinematography; interviews with locals, to get the inside story of the neighbourhood; and information on key landmarks and community hot spots.

Its goal is to empower consumers — and investors — across SA to make the best possible property decisions.

WHAT INSIGHTS TO EXPECT Private Property’s neighbourhood concept includes: n Property and pricing data n An interactive map

showing the boundaries of the neighbourhood and the key suburbs within it n Local content about the area’s best features n A full gallery of the highlights of a particular neighbourhood n A lifestyle classification for the neighbourhood

ADVERTISING SALES Michèle Jones Susan Erwee Ian Pepler Bradley Sparks

michele.jones@thecreativegroup.info susan.erwee@thecreativegroup.info ian.pepler@thecreativegroup.info

bradley.sparks@ thecreativegroup.info

084 246 8105 (WC) 083 556 9848 (WC) 082 465 2734 (GP) 073 666 3842 (KZN)

An International Associate of Savills

BLAIR ATHOLL GAUTENG R26 MILLION Set alongside the Crocodile River with breathtaking, uninterrupted views and water features. This double-volume home is an entertainer’s paradise.

Bedrooms 4 | Bathrooms 4 | Garages 2 Jo Lotter 083 297 7992

REF# FW1192417

WATERFALL COUNTRY ESTATE WATERFALL R10.2 MILLION This beautiful family home is located in one of Johannesburg’s most sought-after estates.

With well-appointed indoor areas and manicured outdoor spaces, it easily surpasses all expectations.

Bedrooms 5 | Bathrooms 5 | Garages 4 Graham Pronk 083 578 3582 REF# MR1223115

PARKVIEW GAUTENG R9.5 MILLION Magnificent cluster with pristine finishes. Double volume living area with spiral staircase leads to undercover patio and pool, overlooking the golf course. A gas fireplace warms the spacious lounge and dining room. Includes study and family room, separate guest cottage, outdoor gym and double garage.

Bedrooms 3 | Bathrooms 2.5 | Garages 2 Shirley Fennemore 082 881 4818, Byron Thomas 072 324 3916

REF# HP1222199

www.pamgolding.co.za | m.pamgolding.co.za

RONDEBOSCH/ SILWOOD WESTERN CAPE R17.5 MILLION A glorious Victorian home adjacent to Bishop’s School set on 2 723 m². Charming living spaces with high ceilings, original wooden floors and fireplaces. Well-established English lawns open up to a tennis court surrounded by trees and a solar-heated pool.

Bedrooms 5 | Bathrooms 4 | Garages 2

REF# KW1209434

Pearl Sparks 083 626 0806, Robin Midgley 072 212 5714

FRESNAYE WESTERN CAPE R18.75 MILLION This immaculate home is perfect for lavish entertainment and relaxed living. Elegant interiors with exquisite fixtures and a cookbook kitchen.

Formal and informal living rooms flow onto a manicured lawn and pool with unparalleled sea views. Includes separate teen pad/playroom, office or staff suite.

Bedrooms 5 | Bathrooms 5 | Garages 2

REF# PR1216615

Jackie Rosenberg 083 414 6600, Janice Toay 082 770 1510

SIMON’S TOWN WESTERN CAPE R6.5 MILLION Situated in one of the most sought-after locations. Spectacular ocean and mountain views. Lovingly restored while maintaining its original charm.

Bedrooms 4 | Bathrooms 4 | Garages 2 Rosalie Jack 083 658 4187, Alan Dunlop 083 415 4505

REF# SIM1220444

INVESTMENT Friday 3 July 2015

CONTINUED FROM PAGE 1

“Our statistics point to continued competition in the market for home loan business among lenders, highlighting the importance of using an originator to source multiple quotes” Rhys Dyer, CEO, Ooba

Analyse it WORDS: PATRICK CAIRNS

A light in the Eskom darkness

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s South Africans, it’s sometimes difficult for us to know what to be upset about most. We can direct our displeasure at so many things, including Nkandla, corporate pricefixing and e-tolls.

Pros and cons of prequalifications “Yes,” says Ooba CEO Rhys Dyer, “our prequalification service comprises a credit check through credit bureaus as well as a full affordability assessment whereby we calculate, based on a customer’s income and expenses, what their available net surplus income will be for the purposes of obtaining a home loan. We have a large number of prospective buyers every month for whom we do this prequalification, where either as a result of a creditrelated issue (adverse listing or judgment), or as a result of affordability (insufficient net surplus income), would have been declined for their home loan. Our prequalification process assists customers in understanding what they can afford, and if there are credit issues, how they can fix these. Once they know what they can afford, they can search for properties within their range of affordability.”

Dyer notes that buyers who are not prequalified only find out that they have affordability or credit issues after they have been rejected at bond application stage.

“The buyers who have been prequalified in advance have a far greater chance of upfront bank approval, assuming their personal circumstances have not changed,” he says.

The company shows a 75% bond approval rate for the month of May, and that

number continues to grow.

“Approval rates are 2.5% higher year on year and the average interest rate achieved by Ooba in May was prime plus 0.34%, which is well down on the average of prime plus 0.58% achieved in May 2014,” he says. “Our statistics point to continued competition in the market for home loan business among lenders, highlighting the importance of using an originator to source multiple quotes. Being prequalified for finance before making an offer on a property puts buyers at an advantage as they have the confidence of knowing when they purchase their property that they have a far greater chance of being approved by the bank.”

Consumers should, however, remember that a prequalification certificate is not a guarantee that the bank will fork over the money. Says Standard Bank’s head of home loans, Steven Barker: “Upfront knowledge of the amount you would qualify for is not a

guarantee that the loan will be approved. A person is still subject to credit approval criteria (income verification) and the bank’s acceptable property as security.”

This caveat, that a prequalification is not a guarantee, says Dyer, is explained to buyers. “Buyers are fully informed that the prequalification service is a preliminary assessment of their ability to qualify for a home loan, which enables them to search for a property within their range of affordability while giving them the confidence of knowing that they are creditworthy,” he says.

But just two weeks ago, FNB entered this space with its Property Leader product, which allows buyers and sellers to check the value of their homes, the suburb’s performance, as well as offering buyers a prequalification service.

And this is not exclusive to FNB customers either.

“The preapproval process is just one of the many tools

“The actual application will always be more accurate than the prequalification. So far, however, we have seen a good success rate on conversion” Marius Marais, CEO, FNB Home Loans

we have made available to potential buyers to make their lives easier and to give people choice,” says Marius Marais, CEO of FNB Home Loans, noting that the system checks customers’ credit scores and, depending on their risk profile and affordability, automatically creates a preapproval letter, which serves as a provisional guarantee giving the buyer the necessary negotiating power.

“The actual application will always be more accurate than the prequalification. So far, however, we have seen a good success rate on conversion.”

Marais says the tools offered on the site will give estate agents more certainty when the buyer comes to the market, and sellers will be better informed.

While some may see this as a death knell for the traditional relationship between estate agent and bond originator, Dyer sees it as a healthy advancement: “A number of home-buying technologies and tools have emerged in the market, giving buyers a choice of options to consider. As the property market and the banking industry both benefit through buyers being prequalified before they purchase a property, it is advantageous to these industries that there is a range of tools available, including FNB’s prequalification service.”

The 92 renewable energy projects approved to date will produce 6,327MW. Once it is complete, Medupi will produce 4,800MW

One issue that tangibly affects us all is load shedding.

As morally indignant as we might become about the shenanigans in the public and private sectors, having the lights go out is a clear and present problem.

The sorry tale about how we got into this mess has been well documented. It should and could have been avoided. The government and Eskom have both failed the country in this matter.

However, SA’s electricity sector is not a total bust. In fact, the government and Eskom have also been doing something very important and doing it very well.

Despite, or perhaps because of, its problems with power generation, SA has a become a world leader in renewable energy. To date the government has approved 92 renewable energy projects, all privately funded, privately built and privately managed.

In total, the private sector has committed R193bn to this sector since 2011.

These private players are planning to generate electricity at rates that compare favourably with what it will cost to produce power at the mega-coal projects of Medupi and Kusile. And it only takes about 12 to 18 months to build a wind or solar energy plant as opposed to the 10-plus years it will eventually have taken to get Medupi fully operational.

The success of the renewable energy programme is significant not only because it is a major step towards sustainable power, but also because it shows what can be achieved when the right approach is taken. As Rob Spanjaard, director, Rezco Asset Management, points out, it is an example that deserves to be followed.

“A state, anywhere in the world, works best when it regulates, takes the position of referee, forces groups to compete openly and transparently, and then taxes them,” Spanjaard says. “At the very least, the government should analyse what has worked so spectacularly well for it in one area of power generation and apply these lessons to Eskom. The words of Winston Churchill, intended for Americans, can be applied equally well to South Africans: ‘Americans can always be counted on to do the right thing after they have exhausted all the alternatives’.”

PROPERTY PROFILE Friday 3 July 2015

One direction

Once a messenger, now a partner at Natal Property Consultants, Mduduzi Hlongwane talks about gardening, bicycles and his very first bakkie WORDS: ANDRÉ FIORE :: PHOTOS: SUPPLIED

t

e

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“I love seeing people love a home and getting to understand what sort of person will match a certain type of house is still an interesting challenge” Mduduzi “Mdu” Hlongwane, partner, Natal Property Consultants

H

e might just say it’s a family business, but those who work with Mduduzi “Mdu” Hlongwane will say it’s so much more than that. Once responsible for deliveries but now a director and partner at Natal Property Consultants, Hlongwane got to where he is today through perseverance, hard work, ethics and a positive attitude. “You’ve got to believe in yourself,” he says. And that he does.

Says Bruce Campbell, of the Pietermaritzburg-based family business that’s now almost 50 years old: “It started in 1973 when Mdu’s father, Nicholas, started working as a messenger for my parents, Monty

and Geraldine Campbell, who five years before that had set up Natal Property Consultants. Nicholas worked for us for 25 years and so, yes, from very young, Mdu was part of the family.”

Says Paul Campbell, Bruce’s son, who is also a director: “I remember Mdu from when he and I were boys.

He would hang around the offices after school as much as I would, learning about clients and colleagues alike.”

With 10 siblings at home, funds were always stretched, so for the last few years of his schooling (he matriculated from MehlokaZulu High School in Imbali), the enterprising Hlongwane got a job in Bruce

Campbell’s garden. “My father had asked Bruce to make me rich one day, and this was, I guess, the start,” Hlongwane says, smiling.

In 1997 things changed, as just days before the 25-year-service party that the firm had organised for him, Nicholas died.

Mdu, who by then was studying business management at the University of KwaZulu-Natal, changed course and presented himself to Bruce Campbell, saying that his father would be very proud if he took over the job of messenger.

“He didn’t have much to learn,” Campbell says, “as he’d been with his father on so many errands that he knew exactly what to do. It was testimony to his character, though, that while his father had used a bike for his duties, Mdu refused to do that. He was so fit that he used to run instead.”

After four and a half years as a messenger, during which he studied business computing and IT part time, Hlongwane left Natal Property Consultants temporarily to work at an IT company. “I needed the experience,” says Hlongwane, “but two years later I knew I had to make a change. I thought about myself in 10 or 20 years’ time and realised that I needed to start earning properly, so I took a chance and asked Bruce if I could work for him on commission.

People said you only needed to sell one or two properties and then you’d be able to buy a car, and so I started asking everyone I knew whether they wanted to buy a house.”

Hlongwane’s first sale took place eight years ago.

It was a house in Glenwood, Pietermaritzburg. “It was love at first sight,” he says about the clients and the house. For him, that remains an important part of the job: “I love seeing people love a home and getting to understand what sort of person will match a certain type of house is still

an interesting challenge that makes every day different from the last.”

Buying a car took longer.

Says Hlongwane: “I started working in the townships of Edendale and Imbali, which were new areas for an agency such as Natal Property Consultants. Still, I had to get there, so they would give me money for a taxi and I would pick up the clients and take them to see the properties.”

Says Bruce Campbell: “After that, we helped Mdu buy a car by selling him the office’s second-hand Ford Bantam, and once again it’s a testimony to his character that he still has it — along with his Audi.”

In 2011, when Bruce Campbell’s parents retired, Hlongwane was offered shares in the business. Today, as one of the directors, he fulfils the vital roles not just of selling but of training too.

Natal Property Consultants has a good number of agents who work solely in the townships as they find it a burgeoning market, and Hlongwane, with his estate agents exams under his belt, spends considerable time training them.

“To be successful, agents need to be positive, work hard, love people and be unfailingly honest. I believe that agents should write everything down.

They should go through a home and list all the faults and quirks and ask all the questions, everything that needs to be remembered and needs doing, so that they know what they are talking about when they take clients to view properties.

In the townships, sales are a little different too: it’s vital to get people preapproved for bonds, for example.”

Where to from here?

Hlongwane says: “I have two daughters, of seven and three, and a son on the way.

Natal Properties is my home and I’m part of the family.

I can’t think of working elsewhere, but we could have more branches, all over the country, in fact, and I’ll soon be heading up some of those.”

INVESTIGATION Friday July 3 2015

M

any property professionals have a general idea about bridging finance, but just how it works and how it can be used to facilitate transactions and seal deals is often less understood.

WHAT IS BRIDGING FINANCE? Bridging finance is a financial service — a shortterm loan — that bridges the time between when a transaction is signed and when payment is made. It can be used in many situations but is most commonly used in personal injury claims and property deals.

Minding the gap Bridging finance – the nuts, the bolts and how it can work not only for buyers and sellers but also for agents WORDS: ANDRÉ FIORE :: PHOTOS: ISTOCK

PERSONAL INJURY

Personal injury claims are straightforward examples of situations where bridging finance is regularly used.

Injured parties can often wait years before an insurance company pays out the claim that is due to them. During this time they can have substantial medical and living expenses (often their salary is also compromised as a result of the accident).

Bridging finance, in a situation like this, is a loan against the security of the claim acknowledged by the insurance company, which individuals can use to cover expenses while waiting for the insurance payout.

WHAT IS PROPERTY BRIDGING FINANCE? Property bridging finance is a service that allows property owners, sellers and estate agents to access their funds earlier.

The proceeds from a sale of a property or from a new or further bond only become available to the owner, seller or estate agent on registration of the transaction at the deeds office, a process that can take anything from 30 to 90 days, and occasionally even longer.

Many people need the proceeds sooner than this in order to pay deposits on their next property purchase, relocation costs, transfer duties on their new properties or other pressing expenses.

For them, bridging finance can take the stress out of buying and selling — and is sometimes the only way they can afford the purchase of a new property — by helping eliminate the waiting period for funds.

WHO NEEDS PROPERTY BRIDGING FINANCE? Sellers can make use of bridging finance to pay relocation costs, rates in arrears and transfer duties on their new properties.

In many cases they have specific debt, such as school fees and consumer debt, that urgently needs to be settled.

Buyers — if they are also sellers — can use bridging finance for the same reasons.

Agents, principals and licensees can also use bridging finance if they need advances on their commission.

HOW CAN BRIDGING FINANCE HELP SAVE A SALE? In many cases, buyers need to put down a deposit on their next property. If they are expecting proceeds from a current sale, they can access these funds through a bridging finance company.

Buyers often don’t realise the considerable costs associated with buying a property. Before a conveyancer can effect transfer of a property, the buyer will need to pay transfer duty (where applicable). If the buyer needs to raise cash to do this,

it can be bridged on the sale of the current property.

Sellers usually have to settle arrears rates while buyers typically have to pay rates in advance for the first few months. These costs can also be bridged on the sale of the current property if the seller or buyer needs to.

HOW CAN BRIDGING FINANCE HELP OUT THE AGENT? In addition to being a useful tool when it comes to helping buyers and sellers manage the cost of a sale, bridging finance can also benefit estate agents.

Firstly, in many bridging finance companies, agents, principals and licensees qualify for short-term credit, meaning that they can, through bridging finance, access their commission, or part thereof, before the transfer is registered at the deeds office.

Secondly, many bridging finance companies offer agents, principals and licensees commission on the loan if they refer a client to them, so it’s worthwhile finding out which reputable companies offer bridging finance and building a relationship with them.

WHY CAN’T YOU USE A COMMERCIAL BANK FOR A LOAN INSTEAD? Transaction turnaround times in bridging finance are usually very fast, and commercial banks are not usually set up to deal with short-term loans, nor are their systems geared towards lending money quickly.

WHAT SHOULD YOU LOOK OUT FOR WHEN APPLYING FOR BRIDGING FINANCE? There are quite a number of factors to be aware of when considering bridging finance. Andrew Church, chairman of the Bridging Finance Association of SA (BFASA) and CEO of Rodel Financial Services, offers the following advice: n The BFASA regulates the behaviour of its members. An estate agent or member of the public should, first of all, deal only with reputable bridging finance companies and never deal with a bridging finance company that is not registered with this body. n While certain attorney firms offer bridging finance, they are almost never registered as authorised credit providers.

Consequently, every year the Attorney Fidelity Fund receives claims from the public against attorneys who have engaged in bridging finance. Steer clear of attorneys who offer bridging finance, as they inevitably find themselves with a conflict of interest where they are involved as a moneylender and in

“ m b i r a a d n I t d s c t n s

INVESTIGATION Friday July 3 2015

“Sellers can make use of bridging finance in order to pay relocation costs, arrears rates and transfer duties on their new properties.

In many cases they have specific debt, such as school fees and consumer debt, that urgently needs to be settled”

a professional capacity as an attorney. And they very often flout the law society’s touting rules. n While bridging finance companies, like most financial institutions, are prepared to pay referral commission, look out for bridging finance companies that offer referral commission to attorneys, paralegals and estate agents and then add that commission to the client’s costs, as borrowers are always entitled to know when someone is earning a commission on their transaction. n Bridging finance is a short-term transaction and accordingly is more expensive than normal banking rates. Bridging finance is also charged on a daily rate and therefore the term of transaction should be kept to a minimum.

The shorter the term the cheaper the cost of finance, so you should always obtain bridging finance on the last day possible. n Principals, licensees and agents are usually entitled to commission from bridging finance companies and this commission is usually split within the agency in agreed proportions. n Principals and licensees of estate agencies need to take great care when signing any documentation pertaining

to bridging finance as they can unwittingly incur liability for monies borrowed by their agents. Bridging finance companies usually contract directly with the agents, not the agency, but a principal or licensee should always be required to consent

to one of their agents taking a loan. Principals who are unsure of what they are signing should query the documentation with an attorney or with the bridging finance company itself. n Buyers who haven’t been able to raise 100%

of the acquisition costs of a property can apply to certain financial institutions for a personal or top-up loan.

This is not bridging finance, but most bridging finance companies should be able to direct clients to suitable companies for this service.

Search property on any device.

A home for everyone www.privateproperty.co.za

USEFUL CONTACTS

n Bridging Finance Association of SA bfasa.org.za n Rodel Financial Services rodel.co.za

FOCUS ON 91 CENTRAL July 3 2015

Green Living at 91 Central The exclusive luxury development at 91 Central in Atholl comes with the benefit of energy efficiency. No more load shedding — save up to 75% of your monthly electricity bill

T

he seven luxury homes at 91 Central in Atholl, Johannesburg, offer elegance and contemporary style in a secure estate and the added advantage of green and energyefficient operations. It is one of a number of estates developed and marketed by iLynn Designs Property Development Specialists to feature energy-saving benefits. The other estates include AMANI in Atholl and Elysia, Elle and Thalia in Bryanston. All seven units at 91 Central can continue operating with minimal disturbance during power interruptions.

Each of these exclusively designed family homes features four to five ensuite bedrooms, double or triple garages, staffrooms and 24-hour security.

Each home is perfectly positioned for privacy and exclusivity on a generous stand of about 900m2,

a rare luxury so close to Sandton’s urban centre.

Also, 91 Central offers expansive living spaces, refined finishes and designer kitchens and bathrooms. Natural light floods the large rooms. Style meets comfort in the high ceilings, opulent design and the seamless flow between the interior spaces and the expansive garden with sparking swimming pool.

All homes at 91 Central include a gas geyser and stove to help keep the kitchen operating off the grid, while solar inverters store residual energy so that when the power goes out the lights and selected appliances continue to work. Additional energy savings are achieved via LED fixtures and insulated slabs.

“Together, these solutions can save home owners up to 75% on their electricity bills and ensure uncompromising luxury, convenience

FOCUS ON 91 CENTRAL July 3 2015

91 CENTRAL, ATHOLL Seven exclusively designed homes Sought-after address on the corner of Central Avenue and Oak Road, Atholl Spacious stands of about 900m² Four to five luxurious en-suite bedrooms Designer kitchens and bathrooms Sophisticated finishes Sparkling pool with spacious manicured garden Double or triple garages Staffrooms 24-hour security Proximity to shopping and entertainment centres and the Sandton CBD Close to Crawford Sandton, St David’s Marist Inanda and St Mary’s School Clusters from R9,785m Developer: iLynn Developments Marketing Agent: Lynn Estates 083 655 5539 info@lynnestates.co.za www.lynnestates.co.za

and comfort,” says Lynn Petzer of iLynn Designs.

The prime location of 91 Central within exclusive Atholl offers home owners sought-after peace and tranquillity while ensuring their proximity to the country’s most important business centre, the Sandton CBD, which is just minutes away.

The development provides home owners with convenient access to Sandton City and Melrose Arch as well as to Johannesburg’s most prestigious schools, including Crawford Sandton, St David’s Marist Inanda and St Mary’s School.

The Gautrain is nearby for convenient business travel and the M1 offers centralised access to the city’s main arteries.

Nearby neighbourhood centres such as BluBird Shopping Centre add to the ease and convenience.

Entertainment and sports venues such as the Inanda Club and

the Bidvest Wanderers Stadium are also just a stone’s throw away.

91 Central belongs to the portfolio of iLynn Designs Property Development Specialists, the property development division of Lynn Estates. iLynn Designs is rapidly establishing itself as a market leader in developing unique upmarket homes that facilitate the exclusive lifestyle requirements of the discerning individual.

Lynn Estates is responsible for marketing 91 Central and has established its reputation as the specialist in landmark projects in and around the Sandton area with developments such as the Michelangelo Towers, Sandhurst Towers and Sandton Skye.

Lynn Estates has 26 years of experience and an unmatched record in the area. Its holistic offering includes personalised interior design, letting and management services.

“Each home is perfectly positioned for privacy and exclusivity on a generous stand of about 900m2, a rare luxury so close to Sandton’s urban centre”

GET IN TOUCH

Lynn Estates 083 655 5539 info@lynnestates.co.za www.lynnestates.co.za

PROPERTY NEWS Friday July 3 2015

The state of Cape Town’s CBD South Arm

Cape Town’s Central City Improvement District (CCID) organisation recently released its exhaustive annual report detailing the state of affairs of the CBD in 2014 WORDS: TERENCE STEENKAMP AND DAVID STEYNBERG :: PHOTOS: ISTOCK AND SUPPLIED

om

Orphan

Parliament

Commercial

SON MANDELA BLVD NEL

CHRISTIAAN BARNARD

Caledon

N2

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TO MUIZENBERG

DISTRICT SIX

ROELAND

ROELA ND

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HATFIELD

NGE ORA

ND LA T JU

VREDEHOEK

ANN AND ALE

LL MI

DE PA WA RK AL

KLOOF NEK

on gt in re rr qua a H S

CANTERBURY

Albertus Barrack

BUITENSINGEL

The boundaries of the Cape Town CBD are Nelson Mandela Boulevard in the northeast, Buitengracht to its west, Orange Street at the southern section and Christiaan Barnard in the east, give or take a few cutaways around Parliament and the Castle GARDENS of Good Hope.

Martin

Jan Smuts

Caledon

Government Ave

Buiten

The Company’s Garden

Queen Victoria

Keerom

Bloem

TO AIRPORT

ty Ci all H

PLEIN

Burg Bloem

LONG

Pepper

LOOP

BREE

New Church

Leeuwen

WOODSTOCK

DARLING

Spin

WALE Dorp

d an de Gr ara P

Longmarket

Church

AD RO Y R W LO

R SI

AD RO Y R W LO

OF E PE TL HO S CA OOD G

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t ke ar e nmuar e e q Gr S

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Parliament

SHORTMARKET

Burg

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Heritage Square

BUITENGRAGT

Castle

N W TO AY E P LW ON CA RAI ATI ST

Church Square

LOOP

BREE

Riebeek

STRAND

TO CAMPS BAY

T KE AR M W NE

Old Marine

Thibault Square

Prestwich

WATERKANT

vic re Ci ent C

ADDERLEY

TO SEA PO INT

HERTZOG BOULEVARD

BUITENKANT

ijd

N1

Hammerschlag

T AN ENK T I BU

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St Georges Mall

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HEERENGRACHT

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WALTER SISULU AVE

SUZ MA NB LVD

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TO V& AW AT ER FR ON T

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PROPERTY NEWS Friday July 3 2015

The residents of the CBD 43%

Cape Town in context 11.3%

rent a home v 47% who own their property

contribution to the national GDP v 16.8% for Johannesburg

91.3%

reported being very happy to live there (89% said it’s SA’s best CBD)

3,861,000 people in live in Cape Town

40%

25.5%

are between the ages of 25 and 34

unemployment rate v the national average of 35.6%

22%

are between the ages of 35 and 44

27%

Residential property in the CBD R23.72bn

have children

66%

live close to work or school

the total market value of properties v R6.12bn in 2005

Commercial properties 1,025,000m2

R296.4m value of residential properties sold in 2014 (191 traded hands)

of office space, of which 515,535m2 is B-grade and 86,600m2 is the highest grade — P

R1.55m the average price of a residential unit sold in 2014 v R1.43m in 2013

13.4%

office vacancy rate at Q4 2014 v 17.3% in Johannesburg

80.73m2

R3.44bn

the average size of a unit (the smallest was 34m2 and the biggest was 315m2)

estimated value of property investments in the next five years

109.27 the number of days an average unit stayed on the market

22 sales in July (the busiest month)

R7,500 average monthly rental of a studio flat v R27,250 for a three-bedroom unit

I

t is almost unheard of for residential accommodation in a central business district to exceed R20,000/m2. But the Cape Town central city is achieving these prices.

In 2014, 191 homes worth R296.4m traded hands, bringing the total value of residential property in the CBD to R23.72bn, up from R6.12bn in 2005.

The Cape Town CBD is an area of 1.62km², not including neighbouring suburbs such as De Waterkant or the V&A Waterfront, where property values are even higher. But since there is some blurring of the boundaries, the average price of properties sold in those suburbs is added to the average sold prices in the CBD. That is why the value of CBD properties are quoted closer to the R3m

or even the R4m mark, says Rob Kane, chairman of the Cape Town Central City Improvement District (CCID).

“We’re sitting at the R1.92m average sales price per unit,” he says. Of the 50 properties sold during the first quarter of 2015, eight were below the R1m mark and came in at an average of R17,596/m2.

The size of flats being built in the CBD is getting smaller. Dave Russell, director of consultancy Baker Street Properties, says the older units of 100m2 or

more are being bought and subdivided. “The rate per square metre may well start to climb towards R35,000 to reconfigure existing office space into residential,” he says, “and the average size of the unit will be between 40m2 and 50m².” If buyers continue to buy for R1m, they will have to make do with less — flats in the 32m2 range, he says.

Given all the residential development taking place, companies have cottoned on to the global trend of residents trading their

COMMERCIAL TRENDS Property development group FWJK is busy with Touchstone House, a 15-storey building on Bree Street that is due for completion in October this year. According to regional director Craig Armstrong, final costs of the sectional title office development are below R19,000/m2 and include three parking bays for each 100m².

suburban homes for flats in CBDs, where amenities and job opportunities are close to hand.

“The rate of development in the Cape Town CBD seems to be setting us apart from the other CBDs in SA,” says Kane. “We’d obviously like to attribute this to the work the CCID and other partners in the City of Cape Town have done to turn the CBD around over the past 15 years.

“The city has also been very proactive in creating important infrastructure such as a new transportation system that links the CBD to the rest of the city.

“As a result we’ve been able to attract new investor confidence back into our downtown, and we’d like to thank investors for sharing in our vision and voting with their rand.”

FOCUS ON WESTERN CAPE PROPERTY INVESTMENTS Friday July 3, 2015

The case for buying residential property in Cape Town We look at the core factors that support inflation-beating value appreciation in residential property and why the Western Cape in particular makes a strong case for investment WORDS: MAURITZ ROBERTSON, SALES AND MARKETING MANAGER: MSP DEVELOPMENTS || IMAGES: SUPPLIED

Residential property remains one of the few asset classes that outperforms inflation in SA, regardless of where you live. After all, the statistics do not lie: from way back in 1966, house prices have appreciated by a compound average of more than 11% a year. This long-term trend implies that if had you bought an average house in 1966 for about R9,600 and sold it in 2014, you would have realised about R1.275m (source: housepricesouthafrica.com).

Astute investors know that when it comes to investing in property, the adage holds true: there are just three things to consider, namely location, location and location. They also understand that it is not a matter of timing the market but rather time in the market that creates real growth.

SUPPORT FACTORS In assessing the primary support factors for this consistent appreciation, it becomes evident that there are two primary drivers: inflation and population growth. While high inflation spells hardship for most, homeowners benefit because it increases the replacement value of their homes.

If you bought a house eight years ago, the bricks used to build that house would have cost considerably less than if you built it today.

The multiple double-digit increases in the cost of electricity have significantly

“There is a sense of hope that can only be ascribed to better management and administration of the Western Cape province as a whole”

Partial Payment

Did not Pay

Good Standing

Improve/ Decline

National Average

Paid on Time

Grace Period

Paid Late

Partial Payment

Did not Pay

Good Standing

77%

4%

12%

11%

5%

87%

0,34%

86%

<R3,000

64%

5%

11%

11%

9%

9%

80%

86%

Free State

64%

6%

10%

8%

5%

89%

-1,86%

86%

R3,000–R7,000

73%

5%

10%

8%

4%

4%

88%

86%

Gauteng

68%

3%

11%

8%

3%

86%

-0,06%

R7,000–R12,000

76%

4%

9%

7%

4%

4%

89%

86%

KwaZulu-Natal

69%

4%

12%

8%

7%

89%

86%

R12,000–R25,000

69%

5%

11%

9%

5%

5%

85%

86%

Limpopo

73%

5%

11%

8%

3%

0,61%

86%

>R25,000

58%

7%

16%

12%

6%

6%

81%

86%

Mpumalanga

70%

3%

11%

8%

89%

-3,28%

86%

Northern Cape

75%

4%

7%

4%

78%

0,66%

86%

North West

71%

3%

7%

9%

86%

-2,07%

86%

Western Cape

79%

9%

13%

5%

82%

0,02%

86%

3%

10%

9%

6%

88%

-0,67%

86%

National Average

Paid Late

Eastern Cape

Improve/ Decline

Grace Period

TPN rental payment profile

Paid on Time

TPN rental payment monitor Q4 2014

reach 1-billion people, but today it takes just 12 years to add another 1-billion to the population.

For sub-Saharan Africa the projections are quite astonishing: the World Population Bureau projects that the region’s population will double by 2050. By that time population growth in sub-Saharan Africa will have accelerated faster than it would have in Asian territories. This should allay concerns about the future of residential investment in SA, because in the end everyone will need to be accommodated somewhere.

increased the cost of manufacturing a brick. Such increases in manufacturing costs benefit those who have committed themselves to the residential market, but it places those who procrastinated on investing in residential property at a severe disadvantage. Inflation therefore dictates that the best time to buy was 20 years ago and that the second best time is right now.

The other support factor for appreciating residential values can be found in population growth. It took thousands of years for the global population to

Year

Billion

THE WESTERN CAPE According to census data, the population of the Western Cape grew by 28.7% between 1996 and 2011, or by roughly 1.9-million people. Many of these are people fulfilling a lifelong ambition of retiring near the coast, but many more are desperately seeking an alternative to crime, and specifically violent crime, in other parts of the country.

The Western Cape also experiences fewer service delivery protests when compared to other provinces and the provincial government is actively campaigning against the implementation of toll roads. There is a sense of hope that can only be ascribed to better management and administration of the province as a whole.

Recent proposals by the national government, namely that foreign ownership of property in SA should be regulated more closely or even embargoed, have had very little effect on demand for homes in the Western Cape. That is because the proposed regulations only apply to agricultural land and not to residential properties.

Years passed

FOCUS ON WESTERN CAPE PROPERTY INVESTMENTS Friday July 3, 2015

-

1927

3

127

1960

4

33

1974

5

14

1987

6

13

1999

7

12

2011

8

12

2025*

9

14

2043*

10

18

2083*

40

1

1800

2

* UNFU United Nations Population Fund estimate, October 31, 2011

“Inflation therefore dictates that the best time to buy was 20 years ago and that the second best time is right now”

CONCLUSION Residential property remains a premium asset class and, given the statistics above, it is set to remain so for years to come. The question therefore is not whether you should invest, but rather where you should invest.

Tenant Profile Network is the largest credit bureau in Africa specialising in vetting tenants for rental properties.

Its latest data for residential rentals indicates that tenants in the Western Cape pay their rent on time more than in any other province and that in the rental price range of R3,000

to R12,000 a month these figures are even higher.

Because Cape Town is situated in a peninsula, developable land is becoming increasingly scarce; hence expansion primarily happens out in the Northern Suburbs.

Buh-Rein Estate is situated in the newly proclaimed suburb of Buhrein and it offers a variety of homes second to none. Apartments are priced from R750,000, townhouses from R999,900 and freestanding homes from R1,849,900.

The estate has won the prestigious SAPI award for its innovative layout and

is being developed by the multiple-award-winning MSP Developments. If you’d like to get a foothold in the Western Cape residential market, you would do well to contact them.

CONTACT DETAILS For more information, call MSP Developments on 021 914 6703 or visit buhreinestate.co.za.

Average “nominal” house prices in SA 1966–2014 R1,400,000

R1,275,530

R1,200,000 R1,000,000 R800,000 R600,000 R400,000 R200,000

2014

2011

2008

2005

2002

1999

1996

1993

1990

1987

1984

1981

1978

1975

1972

1969

1966

R0

INTERNATIONAL Friday July 3 2015

F

Berlin: an investor’s market When investing in Berlin, property owners have two very different propositions: new, ‘carefree’ developments or older, more complicated building stock WORDS: DAVID A STEYNBERG :: PHOTOS: ISTOCK, SUPPLIED

rom 1961 to 1989 the Berlin Wall divided Germany’s democratic West from the communist East after the Allies and the Soviet Union fell out over how to divide the spoils of the Second World War. For almost three decades, communist East Berlin prohibited property ownership and saw its economy struggle, while the West enjoyed this privilege together with its booming economy.

Twenty-six years since the fall of the Berlin Wall, the perception remains that property is not owned but rather rented. This holds true in Berlin, the country’s political capital, where just 14% to 16% of residents are home owners, according to IP Global’s director for Africa, George Radford.

“This makes Berlin very much a landlord’s market,” he says, noting that investors can get about 6% in rental yields on average.

Numbers are one thing, but sentiment is quite another — not a single DAX-listed company is headquartered in Berlin and the limiting of rental escalations in older stock is legislated. Still, property players believe the market is slowly changing.

“Berlin home ownership is the lowest in the country, mostly due to Berlin’s special historic situation of the Berlin Wall,” says Sebastian Fischer, MD of Engel & Völkers.

“Things have changed since then and Berlin is now one of the most attractive cities and real estate markets in Europe: strong demographical development (about 45,000 net migrations a year), strong and above-average economic development

(a decreasing unemployment rate and continually rising average income) provide an excellent basis for a healthy and liquid property market.

With low interest rates and a lack of alternative investments, the home ownership rate in Berlin will significantly increase over the next decade.”

Competition is rising and the Berlin resident is beginning to view low interest rates as a reason to buy rather than rent.

But where should investors look? And what types of property offer the best returns with the lowest risk?

Radford says suburbs such as Mitte, Charlottenburg and Friedrichshain are the most attractive, offering returns of up to 10%. He notes that older inner-city stock is subject to the law of “Mietpreisbremse” (rental price brake), which limits rental growth. That is why his company is developing one- and twobedroom condominiums in these three suburbs.

“With the new private developments you can increase your rentals,” he says, noting that his company is building in a space where there is limited stock, so it naturally creates demand.

“The areas in which IP Global is investing are white-collar suburbs where residents have stable employment and more disposable income.”

He says this is a good proposition for investors, due

to portfolio diversification and hard-currency returns. Also, there are also no restrictions on South Africans in terms of buying property and there is no capital gains tax.

“Berlin is 40% cheaper than Munich,” he says. “The population will grow and listed companies and banks will move into the city.”

While Radford is looking to the outskirts of the city, Fischer points to the inner city, where one- or twobedroom flats are priced below €400,000 (about R5.4m). He says there is a rising demand for luxury flats in beautifully refurbished, pre-war buildings with stucco, high ceilings and historic details, or state-of-the-art new developments with garages.

“The rental market in Berlin is driven by young people (including students), international visitors or expats. The highest demand is for studios in excellent innercity locations,” Radford says.

“The condition of the flat does not need to be perfect: a ‘rough’ Berlin-style look is just fine. But the location is very important because the younger tenants all want to be in the same trendy districts of Mitte, Prenzlauer Berg, Friedrichshain, Kreuzberg and Neukölln.”

Fischer says that investors really have two choices when considering new or older developments: “Both can be attractive, depending on the profile of the investor,” he

“With low interest rates and a lack of alternative investments, the home ownership rate in Berlin will significantly increase over the next decade” Sebastian Fischer, MD, Engel & Völkers

says. “The all-round ‘carefree’ package is clearly a new development as it excludes the Mietpreisbremse fiveyear warranty bylaw and is a smart investment with few worries. Buying a pre-war flat requires a bit more attention

as the investor might need to fix things during the rental period or renovate the flat once the old tenants move out. But capital values can be more attractive, particularly if the flat is bought at below current market value.”

The demand from investors is shifting towards new developments, but Berlin’s demographic and economic development make older stock an attractive proposition, albeit at lower income yields.

INTERNATIONAL Friday July 3 2015

It’s not uncommon to see ‘This home is not for sale’ signs spraypainted on houses in order to stop con artists from trying to make a quick buck out of something they don’t own by producing fake title deeds and selling the home on to several buyers simultaneously

Winds of change

Nigeria may still have a long way to go towards housing its citizens, but steps are being taken to revitalise Africa’s largest economy’s property market WORDS: LEA JACOBS :: PHOTOS: ISTOCK

T

he Nigerian property market should be booming along with Africa’s largest economy, but unfortunately, although there is a drastic shortage of homes in the country’s cities, high mortgage costs, corruption and the lack of access to bond finance continue to stymie most buyers’ dreams of owning a home. But the tide could be turning as the Nigerian government focuses on making property finance more readily available.

In a country where in 2010 it was estimated that 61% of its citizens lived on less than $1 a day, the property sector, unsurprisingly, accounts for just 3.1% of GDP. And while residential property is being developed in cities such as Lagos, there is a large discrepancy between what is being supplied and what is in demand.

German-listed online real estate services firm Lamudi recently said that searches for Nigerian properties had risen by about 43% in the first quarter of 2015. It also found that the average selling price for a home in Lagos, per bedroom, was 13.4-million

naira (about R825,000) while the average rental price per bedroom was 694,000 naira (about R43,000).

Sadly, although 70% of those conducting online searches for homes were looking to rent, only 30% of the available homes were rental properties. And while vacant land represented less than 5% of the demand, vacant stands made up 30% of available property.

About 100,000 units are built each year — not nearly enough for a country with a population of more than 170-million.

Why aren’t developers storming into Nigeria to capitalise on the situation?

Corruption is one of the reasons. It’s not uncommon to see ‘This home is not for sale’ signs spray-painted on houses in order to stop con artists from trying to make a quick buck out of something they don’t own by producing fake title deeds and selling the home on to several buyers simultaneously.

Poor infrastructure, an erratic electricity supply and the exorbitant cost of construction (a bag of cement costs almost double

in Nigeria as it does in SA) have also played their part in the lack of delivery.

The battle doesn’t end when a suitable property has been found. Buyers have to hand over large sums to get the property registered in their names and then, provided they can get the property financed (it has been estimated that only 5% of all property in the country is bought using a bond), they will have to be prepared to pay punishing interest rates ranging from 18% to 28% a year.

Property registrations are fraught with difficulties, mainly because of legislation dating back to the 1970s, corrupt practices and inefficiency. More often than not it takes years rather than months to transfer a property into a new buyer’s name.

There is some good news, though. The government is implementing systems to help alleviate the problems within the housing sector.

In 2012 the central bank announced plans to reform the financial side of the market and has since clamped down on the hundreds of primary mortgage

institutions by introducing new capitalisation hurdles. By July 2014 only 36 mortgage institutions remained, of which 10 are licensed to operate nationally while the rest have regional mandates.

The Nigeria Mortgage Refinance Company launched by former president Goodluck Jonathan in 2014 should also help create more mortgages by

providing cheaper financing to the various mortgage institutions. The company announced recently that it will be selling 440-billion naira (about R27m) in bonds over the next five years in an effort to expand access to housing funds.

The Global Property Guide notes that at $1,000 to $1,200 (about R12,200 to R14,700) a square metre, Lagos has

some of the most expensive real estate in Africa. Supply has affected rental yields, while rentals in Ikoyi and Victoria Island show returns of between 3% and 5%.

The lack of supply has had a positive effect on rental returns, and those who lease out property in places such as Abuja can expect to collect between 6% and 8% a year on their investments.

NEWS Friday July 3 2015

FEWER DISTRESSED PROPERTIES ON THE MARKET

Coastal properties again on buyers’ radars

T

he 2008 economic recession had a marked impact on the leisure and coastal property market, but with the onset of the recovery of the national property market there have also been promising signs of a rise in the leisure market,

particularly following the holiday season of December 2014-January 2015.

Reporting on the latest Pam Golding Residential Property Index (PGRPI), CEO Andrew Golding says: “As the residential property market has become more

entrenched, holiday buyers have started returning, with many capitalising on the opportunities for sound value for money presented in the market.

“Notably, the last time that coastal areas enjoyed a price premium over non-coastal

regions was during the 2004 residential property boom.

The coastal premium then re-emerged in late 2013, a trend that continued into 2015. While the premium remains narrow, in the face of an ongoing supply of leisure properties, the sector is clearly benefiting from renewed interest among cashflush buyers.”

A recent Lightstone study of the average value of coastal properties showed that prices varied between provinces and holiday towns and that the prices diminished the further one moved from the beachfront, the range being 500m (most expensive) to 800m (cheaper). At that point (800m), properties no longer command a coastal premium.

FNB’s Holiday Towns House Price Index similarly registered a modest rebound in 2014 and early 2015.

However, an apparent glut of leisure properties, particularly in coastal areas,

is capping the strength of any rebound in prices. The conservative attitude of financial institutions towards mortgages for secondary properties is also limiting the market’s recovery.

Says Golding: “Despite these pressures, the market is starting to attract the attention of buyers, particularly in the traditional leisure property suburbs such as the Western Cape’s Atlantic Seaboard, along the Garden Route and on KwaZuluNatal’s North Coast. Other areas that appeal to coastal and leisure buyers include destinations on the Western Cape’s southern peninsula, Western Seaboard and up the West Coast; on the Eastern Cape coastline; and the South Coast. The local leisure market is also benefiting from renewed interest in second homes among the world’s high-net-worth individuals, who consider real estate an important asset class.”

The State of Cape Town Central City Report released by the Central City Improvement District in May, Cape Town has 3.861-million residents, and experts believe this figure will grow to 4.2-million in the next 15 years, hence the importance of developing this piece of land.

It also ties in with the city’s plan to curb urban sprawl by developing high-density housing along a main artery

— here the N2 — to feed commuters into the central city. Its other main focus is the Voortrekker Road corridor.

The AECI property is one of the last large stretches of undeveloped land in the Cape Town metro’s footprint.

The others include a Denel property in Khayelitsha that was recently in the news when squatters occupied it, and Philippi farmland that spans an estimated 2,370ha.

Multigenerational homes gaining in popularity

T

here appears to be a new trend in the property market: buying homes with the main purpose of housing more than one generation of a family.

These buyers are known as the “sandwich generation” because they have parents and children living in the same home, says Matt Mercer, sales manager at the Knight Frank Residential SA Hout Bay branch.

In several of these families, children return to live at home after completing their travels or their studies.

In some cases, says Mercer, they are children who have been through a divorce.

In the last year in Hout Bay, says Mercer, there has been a 35% increase in requests for homes that can be shared by more than one family, and usually of particular interest

are homes that have separate “homes within homes” and that can afford each family some independence and privacy.

Multigenerational homes are more common in some other parts of the world, whereas in SA, urbanisation led to smaller homes being built closer to cities. The trend now, however, is to move out of the city to slightly more “rural” areas, such as Hout Bay, and to pool the family’s financial resources towards a larger home that is then shared. This helps bring down the cost of overall home ownership, enables younger families to save and helps older family members to conserve their retirement savings while maintaining their standard of living.

Another benefit of multigenerational living, says

Mercer, is increased security, as there is typically someone present in the home. With this comes the peace of mind that one can monitor older, frail parents, while children benefit from spending time at home after school rather than at daycare. It has become as much a lifestyle solution as a financial one, Mercer says.

Cape Town buys up 684ha

O

ne of the last large undeveloped tracts of land in the greater Cape Town region has been snapped up by the City of Cape Town for R400m. The seller, Paardevlei Properties, a subsidiary of explosives and specialty chemicals company AECI, said the land had become “surplus to its requirements”.

Says AECI CEO Mark Dytor: “We are very pleased to have

concluded this transaction, which was well supported by the AECI board. We believe the city is the right buyer since it is best placed to develop the property strategically to the future benefit of Cape Town and its people.”

The city is yet to specify what it will do with the land, which is about the size of the City Bowl, but it did confirm that it will be a mixed-use development in

line with its regional spatial development framework and will predominantly feature residential housing units as well as a number of commercial elements. The city will aim to attract buyers with varying budgets.

According to the city, its housing backlog is near 400,000 units, which it will aim to alleviate by building low-cost housing on sections of the land. According to

Consumers seem to be managing their debt better and planning for tough financial times, as evidenced by the lower number of distressed properties coming onto the market, says RE/MAX of Southern Africa CEO Adrian Goslett.

This sentiment is supported by the TransUnion SA Consumer Credit Index for Q1 2015, which indicates that consumer credit health improved in the first quarter.

But Goslett points out that even though there has been some improvement in consumer money management, the estimated national household bank debt as a percentage of disposable income is at 77.3%, which is very high. Household income will come under increasing pressure owing to rises in the price of fuel, electricity and groceries.

“The TransUnion SA Consumer Credit Index also points out that inflation is expected to rise again in the second quarter, which will mitigate some of the positive effects of lower prices on household real incomes in the first quarter,” says Goslett.

Distressed properties will remain a reality in the property landscape as some home owners will undoubtedly find themselves unable to cover the costs of home ownership, he says.

The average price of a distressed property handled by the RE/MAX assisted-sales department is sitting at just above R1m, with 70% of the properties based in Gauteng, followed by 10% in the Eastern Cape and 10% in the Western Cape and 5% in KwaZuluNatal. The Northern Cape, Free State, Limpopo and Mpumalanga accounted for a combined 5% of distressed properties.

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