South African Property Monthly – December Issue

JANUARY 2013 #86

www.sapropertymonthly.co.uk

MONTHLY

South African property and lifestyle for international investors

TO THE MANOR BORN

Do you want to BUY, SELL, RENT or LET property in South Africa?

Visit www.seeff.com and view more than 33 000 properties in all areas and all price ranges and see what services we offer.

NEWS/TRENDS >>

South Africa versus global house prices

by DENISE MHLANGA House prices globally have risen on average by one percent in the last 12 months with mainstream global prices at 5.2 percent above the Q2 2009 lows.

This is according to the Knight Frank’s Global House Price Index Q3 2012.

Writing in the report, Kate Everett-Allen says Knight Frank’s Prime Global Cities Index, which tracks the value of luxury property in 26 cities across the world, shows that prime property values have climbed by 18.7 percent over the same period.

According to this report, the price of luxury homes in the world’s key cities rose by 1.1 percent in the third quarter of 2012 and by three percent on an annual basis.

While buyers await clearer signals as to the downside risks for the global economy, luxury bricks and mortar look to be retaining their safe haven status, points out Everett-Allen.

Fifteen of the 26 cities tracked by the Prime Global Cities Index (58 percent) recorded flat or positive price growth in the year to September, but over the last quarter 20 of the 26 cities (77 percent) have seen flat or positive growth – indicating an improving scenario.

The index now stands 18.7 percent above its financial crisis low in Q2 2009 with Hong Kong, London and Beijing having been the strongest performers over this period, recording price growth of 52.9 percent,

JANUARY 2013

45.4 percent and 39.5 percent respectively.

Five cities recorded double-digit price growth in the year to September; Jakarta (28.5 percent), Dubai (19.9 percent), Miami (18.0 percent), Nairobi (17.6 percent) and London (10 percent) – a city from each of the five key world regions.

Cities such as Dubai, Miami, Nairobi and London are increasingly considered investment hubs for high net worth individuals in their wider regions.

Nairobi, ranked number four, and Cape Town, ranked number 13 (1.2 percent), are the only two African countries included in this survey.

Everett-Allen says with the Eurozone now in its second recession in three years, buyer confidence is at an all-time low and it is no coincidence that all the bottom 12 rankings are occupied by European countries this quarter.

The Eurozone’s 17 member states have on average seen prices fall by 1.8 percent in the 12 months to September - this compares to other regions such as South America and Asia Pacific, which have seen growth of 9.8 and 4.2 percent respectively.

Prices in the US are now 3.6 percent higher than in the third quarter of 2011, vacancy rates are at their lowest level since 2005 and housing stats are up 49 percent year-onyear (y/y), according to the report.

Everett-Allen says confidence, affordability and debt are constraining Europe while strict lending and the looming fiscal cliff may dent the early signs of growth in the US, and regulatory measures

in Asia are keeping housing markets in check.

The current period of stagnation looks set to continue well into 2013, according to the report.

According to Ronald Ennik, Gauteng luxury homes agency Ennik Estates, the recent report by RMB Private Bank of current annual growth of 31 percent in the ranks of the wealthy in South Africa (compared with 19 percent in 2010) is good news for prime residential property.

“It will create a welcome new layer of buyers of luxury homes and the sustainability of the top end of the market will be reinforced as more of the new wealthy buy into it.”

Ennik says this growth will compensate for the (hopefully temporary) withdrawal of foreign investors who, in spite of the attractions of the weaker Rand, seem to be adopting a wait-and-see strategy based on recent negative socio-economic and political developments in South Africa.

Author of the global Wealth Report 2012, Renato Grandmont, chief investment officer for Citi Wealth Management and Citi Private Bank in Latin America, picks Johannesburg as one of the world cities of the future along with Cairo, Lagos, Mumbai and other well-established cities such as London, New York and Moscow.

“With its world-class infrastructure, Johannesburg remains the port of entry for foreign business visitors to Africa – and particularly the fast-growing Southern African region.”

He notes that as a result, upmarket Sandton is now by far the most favoured base for foreign corporates intent on establishing operating footholds in the region and this has hugely favourable implications for Johannesburg’s luxury residential property market.

- Property24.com

www.sapropertymonthly.co.uk

Home buyers are younger and savvier

by STAFF REPORTER The past few years have been an extremely interesting time that has irrevocably changed the real estate market as we know it.

This is according to Adrian Goslett, CEO of RE/MAX of Southern Africa, who says the housing crisis experienced at the end of 2008 changed the dynamic of the real estate environment and has impacted most in some way. However, not all of the results have been negative.

Goslett says that as a result of the recession, this generation of homebuyers has become increasingly more knowledgeable about home ownership. He notes that this is partly due to the fact that property ownership and access to finance requires more preparation and planning, along with the increased media coverage of real estate topics that home buyers have been exposed to over the past six years.

Younger consumers believe that the recession has made them more knowledgeable about the property market than their parents were at their age, he says.

“The increased amount of information regarding real estate and easier access to the information via the internet and property search portals has led to many consumers doing their homework more thoroughly before making one of the biggest investments of their lives.”

A large majority of consumers aged between 18 and 35 still believe that homeownership is a key indicator of success and are willing to do what it takes to be able to purchase their own home. Statistics suggest that 75% of consumers in this age group consider homeownership a fundamental indicator of success over taking an extravagant holiday or owning an expensive car.

“Although the stringent lending criteria of financial institutions have made purchasing a property more

challenging now than it was before, compared to the property boom period, many potential first-time buyers are eager to do the necessary research and save the required deposits, even if this means a change of lifestyle,” says Goslett.

While it is the Generation X population, which consists of adults between the ages of 31 and 45 who are generally well established in their careers, that is currently the most active and driving the real estate market, the Generation Y demographic, which consists of adults younger than 30, is a much larger generation and has already made its presence felt in the market. Statistically the population in South Africa shows that there were 18.74 million births (Generation X) between 1965 and 1985, while approximately 28.4 million consumers make up Generation Y. Goslett says that the larger generation will mean the demand for property will steadily increase as Generation Y come of age to purchase their first property.

However, considering that the average age of a first-time buyer in South Africa is in their mid-thirties and the oldest Generation Ys, born between 1985 and 2010 are now only 27, it could take some time before this generation reaches its full economic potential.

“The Great Depression shaped the lives of The Greatest Generation, while the oil crisis during the 1970s impacted the Baby Boomers.

Generation X and Generation Y are now leading the real estate market after the largest modern day housing recession we have seen.

“It seems that every generation has faced certain economic circumstances that have changed their collective perspective in some way.

Today’s generations believe that the risks, details and rewards of purchasing a property are integral to their planning for future financial success,” Goslett says.

- Property24.com

2

<< NEWS/LIFESTYLE

<< ASK THE EXPERT

Cape homebuyers head south Mortgage deposits for foreign buyers

by STAFF REPORTER Several spokespeople for Cape estate agencies have recently gone on record saying that for the first time in three or four years they are once again seeing genuine interest from upcountry buyers in Cape coastal homes.

They say this is in almost all the price ranges, including the top bracket and they have tended to issue all manner of advice to prospective buyers on what to avoid and what to look for.

Bill Rawson, chairman of the Rawson Property Group, says he too finds there is renewed interest in Cape property,

especially from Gauteng buyers.

However, he says buyers should never underestimate the southeaster (spring and early summer wind).

“There have been one or two cases in recent years where inexperienced upcountry buyers have been shown homes on idyllically calm days, fallen in love with them, made a good offer and taken occupation only to find that at the height of the summer, the southeaster can rage three, four or five days a week in their area. Understandably, they then feel cheated.”

Rawson says the coastal

homes south of Fish Hoek and Hout Bay possibly represent the best long-term prospects for investors in the entire Cape Peninsula and certain select sites out of the wind in these areas are often still available and represent the jewels in the crown.

“South Peninsula homes represent excellent value and as yet are not appreciated by the average Capetonian, except for those who are outdoor types like fishermen, divers, cyclists and mountain walkers.

The proximity to the Cape Point Game Reserve alone makes this area unique in South Africa. - Property24.com

BAROMETER

Property market set to remain weak

by STAFF REPORTER Following the festive season, property investors will not be jolly as property fundamentals continue to stutter, according to a report.

The Rode Report Q4 2012 reveals that hindered by general economic uncertainty, growth in the demand for office space has not been forthcoming.

Vacancy rates are “obstinately” refusing to drop and market rentals are at best showing feeble growth.

In Q3 2012, rentals in the Pretoria suburbs showed the best annual growth of 2 percent.

Nominal rentals in Johannesburg decentralised grew by 1 percent, while office rentals in the suburbs of Cape Town (-1 percent) and Durban (-4 percent) shrank.

Writing in the report, property valuer and economist Erwin Rode of Rode & Associates says irrespective of the region – and assuming building-cost inflation of roughly 10 percent – this implies that real office rentals declined by between 7 and 14 percent.

“Weaknesses in the manufacturing and retail sectors — the two support pillars of the industrial property market — are likely

3

to continue to place a lid on demand and, consequently, on rental growth.”

In the third quarter of 2012, nominal rentals on the East Rand, Central Witwatersrand, Durban and the Cape Peninsula were modestly up by between 4 and 4.5 percent, according to the report.

Rode notes that it seems only capitalisation rates are holding their own on the non-residential front as they continued to move sideways in the third quarter of 2012.

“This means investors still like income-producing property and this is so in spite of the pressure on cash flows owing to stubborn vacancy rates, poorly performing market rentals and fast-rising operating costs.”

In recent quarters, the growth in flat rentals has started to accelerate to such as extent that in the third quarter of 2012 flat rentals were — on a national basis — up by a yearly rate of 6 percent, he points out.

Rentals on houses could only achieve growth of about 4 percent while those on townhouses remained at roughly the same level they were a year ago.

Over the same period, consumer prices (excluding owners’ equivalent rent) showed growth of roughly

5 percent, implying that flat rentals were at least able to show real growth.

At present there are more factors that are likely to weigh down and dampen house prices than factors likely to support a recovery in prices, he says.

The return to growth in the value of new mortgage loans granted naturally bodes well for prices.

However, on the flip-side there are many things that will retard the growth in house prices. These are: 1. Consumer-price inflation that is uncomfortably close to the upper limit of the target range (thus diminishing the hope of an interest rate cut in the near future) 2. Broad-based weaker economic growth (likely to further scupper employment and disposable-income growth) 3. Stubbornly high household debt levels and tighter credit standards to households 4. House prices are still very high in real terms, thus making the continual development of new houses possible on the supply side. .

- Property24.com

www.sapropertymonthly.co.uk

I

’m looking to buy a house in Sandton, but am currently living overseas. I’ve heard that to get a mortgage as a foreign buyer (even with a SA passport) you need to put down a 50% deposit - is this correct? Also, given the high demand for Sandton properties does it mean the Sandton property market is more stable and less likely to depreciate in the future in comparison to other areas in Johannesburg?

and buyers can expect their property investments to hold their value well and to deliver good returns in the future.

Due to its popularity, property in Sandton is more difficult to come by than in other areas of Johannesburg (great buys are snapped up quickly). This too, adds value to the property you purchase in Sandton.

Charles Vining (pictured below) Licensee - Seeff Sandton www.seeff.com

T

he value of the bond granted over any property is subject to individual attention at the banks to which you apply for finance.

That being said, the ‘norm’ for international buyers is a 50% cash deposit. This is the usual bank credit policy and not law, so if a buyer is able to satisfy a bank with a particular structure the bank may give the buyer a larger loan.

Sandton is the commercial hub of Johannesburg (and arguably of Africa). It is for this reason that property in Sandton is in high demand

JANUARY 2013

CONSTANTIA UPPER

R19 950 000

CONSTANTIA UPPER

A RARE FIND INDEED! Bedrooms 4 Bathrooms 4 Garages 3 WEB 280002 Traditional country charm on over 10 000m2 with manicured gardens, a mini vineyard, rolling lawns and majestic trees. [O] +27 21 794 5252 JENNY WILLIAMS +27 83 956 6811 SHELLEY KRUGER +27 83 700 9001 | MARIE DURR +27 83 269 8608 constantia@seeff.com

CONSTANTIA UPPER

R7 800 000

UNIQUE CONSTA

COUNTRY LIVING IN THE CITY Bedrooms 5 Bathrooms 4 Garages 2 WEB 256080 An exceptional secure family home with all seasons verandah, situated in a cul-de-sac.

North-facing. Luxurious living. [O] +27 21 794 5252 SHELLEY KRUGER +27 83 700 9001 MARIE DURR +27 83 269 8608 | JENNY WILLIAMS +27 83 956 6811 constantia@seeff.com

ROBERTSON

R898 000

Bedrooms 4 Bathrooms 4

Magnificently positioned with stunning views over False Bay. This residen

[O] +27 21 794 5252 MARIE DURR +27 83 269 8608 | JENNY WILLIAMS +2

KNYSNA

R6 300 000

A CHARMING VICTORIAN

PRICE DRAMATICALLY REDUCED

Bedrooms 3 Bathrooms 3 Garage 1 WEB 263932 A beautiful house plus garden cottage conveniently located close to shops and within walking distance from centre of town.

[O] +27 23 626 6171 POLLA VAN WYK +27 82 711 3330

Bedrooms 5 Bathrooms 5 Garages 2 WEB 151582 Well situated on sought-after Thesen Islands, North-facing property close to the beach and on a wide water canal with jetty & gazebo plus spacious flat. [O] +27 44 382 5919 WENDY EVANS +27 83 461 9312 | SUE ABERNETHY +27 82 573 3353 knysna@seeff.com

POA

SANDHURST

R7 500 000

BEAUTIFULLY TUCKED AWAY, IMAGINATIVELY RENOVATED! Bedrooms 3 Bathrooms 2 Garages 2 WEB 280318 This gem of a home has open-plan reception rooms and gourmet kitchen, and is situated on 2 300m2 of lush garden with pool. [O] +27 11 784 1222 GEORGE PAPADOPOULOS +27 84 454 1834 | CORINNA LOWRY +27 82 652 8891 sandton@seeff.com

DALECROSS

ANTIA MANSION

ELEGANT FAMILY HOME UNDER SLATE

4 Garages 2 WEB 277828

nce boasts top finishes throughout and state-of-the-art security systems.

27 83 956 6811 | SHELLEY KRUGER +27 83 700 9001 constantia@seeff.com

PLETTENBERG BAY

R4 800 000

R5 470 000

Bedrooms 5 Bathrooms 3 Garages 2 WEB 280714 Large home is perfect for a growing active family. In a 24hr secure enclave, you get peace and quiet and peace of mind! Staff quarters. Entertainer's patio and more.

[O] +27 11 784 1222 MARIE-LOUIS CORNELL +27 82 570 4151 sandton@seeff.com

JOHANNESBURG NORTH

R1 650 000

LARGE FAMILY HOME IN UPMARKET WHALE ROCK RIDGE

HARMONY LIVING + COTTAGE

Bedrooms 4 Bathrooms 3 Garages 2.5 WEB 255318 This exquisite residence has superb surroundings & beautiful views. Great find for the discerning buyer.

[O] +27 44 533 0311 DANIEL VAN RENEN +27 82 883 6271 plett@seeff.com

Bedrooms 3 Bathrooms 2 Garages 2 Cottage 1 WEB 278137 Neat family home on big stand. Separate TV room/office from home with separate entrance. 3 Carports. Cottage with 2 bedrooms, lounge, study & patio. Family living at its best! [O] +27 11 476 3536 ELOISE DAY +27 82 929 7264 randburg@seeff.com

NEWS/TRENDS >>

The property market in 2013

by STAFF REPORTER Despite the prevailing challenging economic circumstances experienced in the property market, 2012 has been a good year for RE/MAX of Southern Africa.

This is according to CEO of RE/MAX of Southern Africa, Adrian Goslett, who says during 2012, the agency has seen a marked increase in the number of property sales achieved per agent.

During the first half of the year they saw a 12 percent increase in sales when compared to the same period of 2011.

More than 25 franchises opened in the Southern African region up to the end of October 2012. “The brand is continuing to grow its footprint that encompasses over 170 office locations and over 1 800 experienced estate agents,” Goslett says.

Locally, RE/MAX agents account for 6 percent of total agent numbers and for 15 percent of all sales transactions, and Goslett says the average agent commission earnings are up 31 percent in 2012, compared to the 2010 figures.

However, a few elements will influence the property market and those within the industry moving forward into 2013.

Access to finance The Rand value of the gross debtors’ book for mortgages has increased, as has the number of applicants applying for bond finance. Goslett says this is due to the fact that South Africa’s financial institutions have relaxed their lending criteria to the point where close to 51 percent of all home loan applications are approved.

Goslett points out that high debt-to-income ratios and a poor savings culture are the major reasons why many South African home buyers struggle to obtain finance. South Africa has a domestic savings rate of 20 percent of GDP. He says high debt and poor savings reflect negatively on affordability levels, which holds

6

back the market and slows down recovery - and for this to change in 2013, consumers need to focus on clearing their debt and starting a savings programme to ensure their ability to secure home loan finance in the future.

“Due to the limited access to finance, the rental market will continue to grow rapidly, which will assist investors who have a buy-to-let portfolio.”

Deposits required While financial institutions will continue to have a greater appetite for risk, 100 percent bonds will be scarce in 2013.

Statistics suggest over the last 12 months, only four out of 10 bonds granted are for 100 percent of the purchase price. This means six out of 10 successful applicants have had to pay deposits to secure a property.

The average deposit requirement for repeat buyers has risen to 20 percent of the home’s purchase price, so buyers are required to have a fifth of the purchase price in cash. For first-time buyers, who account for 35 percent to 40 percent of the home loans granted each month, the average deposit required is 12 percent of the purchase price.

Transformation in the industry A few years ago, estate agent training and qualification were at the forefront of the industry, with a strong focus on the professionalism of the industry players and many agents achieving the necessary NQF levels required. 2013 will see a transformation of the industry in the form of a revamped Estate Agency Affairs Board (EAAB).

Goslett says Tokyo Sexwale and the Department of Human Settlements are taking a proactive approach to resolving the issues within the industry and the EAAB, with the focus on professionalism and transparency.

One of the goals of the EAAB is to ensure the property industry is more representative of all races and genders, with an emphasis on attracting

the youth into the industry.

The number of estate agents in South Africa has dropped from 80 000 in 2008 to half that figure or less as a result of the global economic recession.

Goslett notes that real estate businesses that encourage transformation will continue to thrive in the market spectrum.

RE/MAX of Southern Africa has, for a number of years, been highly rated as a BBBEE organisation.

Technology With constant technological advancements,it will continue to play a vital role in the property industry in terms of marketing strategy and interaction between real estate professionals and their clients.

The trend of searching for property online will continue and more buyers will find their dream home through online property search portals.

Fair market value Next year, property pricing and the perceived value of property will continue to be an important factor to the success of a sale. If a property is priced correctly it will be sold within the first four weeks of being on

www.sapropertymonthly.co.uk

the market and will generally sell at the asking price.

“Although sellers are the ones that set their asking price, property pricing within a certain market is largely determined by what a buyer is willing to pay for that property,” says Goslett.

According to ABSA, the first ten months of 2012 saw house prices drop by 0.6 percent year-on-year, while the FNB house price index revealed a house price growth rate of 6.6 percent in August this year. The index’s average price of homes transacted was R865 900.

Goslett says that although house price growth has improved, RE/MAX expects trading conditions and the house price growth will stay relatively low during 2013 and follow a similar path to what we have seen over this year.

“With property market activity constantly increasing, so much so that certain areas are reporting stock shortages of certain types of property, 2013 is bound to a year of change with transformation coming to the fore of the property sector,” says Goslett.

- Property24.com

Starfish receives donation from JHI The Starfish Greathearts Foundation, an NGO that helps children in South Africa who are orphaned or vulnerable through HIV/AIDS, recently received assistance from Sandton-based JHI Properties.

The company’s sales and leasing brokers and staff led a campaign to support the charity where JHI donated R5,000 in cash while JHI staff packed Santa shoeboxes with toys, stationery and other useful items for the children in Soweto.

Starfish currently supports about 25,000 children through 50 community-based organisations.

The charity has permanent staff who work with local communities to better manage child protection, health and education support programmes for orphaned and vulnerable children.

Among other projects, Starfish supports the Ikageng community based care programme in Soweto.

- Property24.com

JANUARY 2013

<< LIFESTYLE

Creating a bedroom retreat

by KATLEGO SEKANO When your work life, finances and other day to day items start ‘bleeding’ into your personal space it elevates your anxiety and takes away from your dream bedroom. So, the answer to creating a restful getaway starts with a well defined space.

Premium bedding When it comes to spending on your personal sanctuary, bedding is where your money should go.

Nico Brits, Sales Manager at Exclusive Home Fashions, says quality bedding is made from better quality fabrics that are put together beautifully.

He says it is more expensive initially but it will pay for itself in the long run.

Make luxury your bottom line so when you finally crawl into bed after one of those “I don’t want to talk about it” days you’ll be grateful for the ‘returns’.

Brits says for the best quality you should buy percale linen with a thread count of at least 180. He says while shopping for bedding you should hold up the fabric to the light to see how dense it is. The denser it is the better, he says.

“Other points to cover before making a purchase include feeling the fabric – if it has

JANUARY 2013

a smooth finish it has been mercerised, which means that it won’t pill after washing.”

Brits says you should also check the inside seams for over-locking and always invest in good quality fitted sheets in a neutral colour that works with various duvet sets.

Whichever bedding set you decide on, make sure it meets high quality standards and your comfort quota.

For that ultimate in comfort and luxury, Brits says, when you buy duvets and inners always invest in one size bigger than your bed.

The role of colour Anne Roselt, Colour Manager at Plascon, says colour creates a mood and atmosphere and it is the first thing we notice when we enter a room.

For a bedroom retreat you need a palette that communicates nothing but calm and quiet. But that doesn’t mean shying away from bright colours.

What you should be aware of are loud colours like red.

Roselt says red is a stimulating action-orientated colour that increases the heart rate and raises the pulse. This choice of colour is not ideal if you’re trying for a tranquil feel.

Green, she says, has a balancing effect on us and blue

is considered gentle, calm and relaxing. Cobalt blue may not be the colour for an oasis but a robin’s egg blue or a subtle mint green could be a great starting point.

The small luxuries What will set your bedroom retreat apart from luxury hotel rooms are the personal touches you choose to use.

Your choice of flowers, magazines, the books you read, family photos or the jewellery box you picked up while travelling are all ways of

www.sapropertymonthly.co.uk

making a personal impression on the space.

Because this space is all about you, you can make your own decision about including a TV in the room. Some people prefer to watch a bit of television to unwind and others read or listen to soft background music.

Tidy up and store away The biggest threat to maintaining a luxurious bedroom is an unmade bed and clutter. Even if you’ve had a long day, make it a point not to

leave a messy bed or clothing, magazines and takeaway boxes on the floor or on furniture.

Commit to finding a storage system that works for you or steal some extra closet space from another room, just don’t let the clutter build up.

Working long hours and not finding a space to recharge can kill off any creativity or enthusiasm you might have had. Creating your own oasis directly impacts on your wellbeing for the better, so do enjoy.

- Property24.com

7