September/October Issue by Property Professional

PROPERTY PLATFORM: EXPERT OPINION ON PROPERTY VALUATION IN SA

BRING RETAIL TO THE PEOPLE

MORTGAGES: WHERE THEY HAVE COME FROM AND WHERE THEY ARE GOING TO

IS LAND REFORM THE END OF PROPERTY RIGHTS?

SEP TEMBER/OCTOBER 2013

ED ITO R’S N O TE

PUBLISHED BY THE PROPERTY ADVERTISING JOINT VENTURE 6 Beach Road, Old Castle Brewery Woodstock 7925 021 447 7130

EDITOR’S NOTE

This issue marks the publication of Property Professional’s inaugural Property Platform, hosted in Sandton in August, and sponsored by Knowledge Factory. The aim of the Property Platform is to bring together a selection of South Africa’s leading property businesspeople to discuss, debate and share insights around a particular topic on a ‘by invitation only’ basis. This Property Platform tackled property valuation methods. When it comes to the valuation of property, banks, homeowners, developers, estate agents and the municipality all seem to get to different figures. While everyone took the fifth when it came to discussing municipalities and their property evaluations, it is interesting to see the difference in perspectives on valuation methods that developers and the banks have. Read what some industry leaders have to say in the discussion on page 10. In other industry news, while the training debacle rages on - which we provide some updated coverage on in this issue on page 16 - the good news is that the Estate Agency Affairs Board has extended the deadline for affected estate agents to be certificated against the required real estate qualifications until 30 June 2015. Be that as it may, extension or no extension, there are still agents out there who deem the whole educational process to be unconstitutional and who are therefore considering their legal options. The training issue has a long way to go before it can be considered resolved, and we will keep you posted every step of the way. In this issue we also touch on land reform and what the future holds, green building trends and the economic challenges that are still facing the industry. There is an interesting feature on mortgages on page 28, and we look at retail development trends on page 36. The Q&A with auctioneers on page 40 provides some interesting insight into that section of the property industry in relation to the perception of the auction as a property sales mechanism and in response to Lightstone’s findings that distressed sales that transact in the market are on average 13.2% higher than those sold at auction.

CEO - PA MEDIA Shaun Minnie 083 629 6081 shaun@pamedia.co.za EDITOR Michelle Funke 011 462 8959 michelle@velvetsquare.co.za ADVERTISING SALES Sarah Steadman 082 334 4367 sarah.steadman@pamedia.co.za ADVERTISING PRODUCTION & SUBSCRIPTIONS Nikki Barnard nikki@velvetsquare.co.za ACCOUNTS & FINANCE Nicolette Lubbe 011 476 6293 PRINTING Paarl Media

New agents and top performing agents are also featured, along with our regular facts, figures and tech reviews. Thank you for all your positive feedback on the magazine, it is always great to hear when we are getting things right! We look forward to receiving more of your feedback and suggestions.

MICHELLE FUNKE

michelle@velvetsquare.co.za

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

CO N T EN T S

CONTENTS 0 4 I N D US T RY NEW S

32 IN TO THE EYE O F THE EC O N O M I C S T ORM

1 0 P R O P E RT Y P LAT FORM

36 BRIN G RETAIL TO THE PEO PL E

1 6 THE TRAINING DEBACLE 2 0 L A N D R E FORM 2 4 CA P E T OW N ACCELERAT ES T OWARDS E NE R G Y SM ART-STAT U S

40 HO W DO AUC TIO N S FIT IN TO T H E S OUT H AFRIC AN PRO PERTY PUZZLE? 44 MARKE T SHARE: PRO PERTY FIN AN C E IN S O UT H AF RI C A 46 PRO PERTY PRO FE SSI O NAL N EW AG EN TS O N THE BLO C K 52 PRO PERTY PRO FE SSI O NAL TO P PERFO RMIN G AGEN TS 58 TEC H TO O LKIT

2 8 T H E D E VIL IS IN T H E DETAILS 60 DEV ELO PMEN T UPDATE 3 0 F I N A N C E & FIG U RES: H O W D O H OM E LOANS M EASU RE UP?

64 WO RD O N THE S TREET

ON OUR COVER FROM LEFT TO RIGHT: Mike Walters, Zain Sayed, Kumeshini Naidoo, Mohammed Areff, Ewald Kellerman. COVER IMAGE: Kelly Jane Photography

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Page 6: I N D U S T RY N EW S

INDUSTRY NEWS South African property owners and businesses seek more from their financiers Entrepreneurial, owner-managed South African businesses and property owners are increasingly looking for more value added services and flexible financing arrangements from their lenders than prior to the economic crisis in 2008. This is according to Gary Palmer, CEO of Paragon Lending Solutions, who says that prior to the financial meltdown, clients primarily sought finance from their lender. “As market conditions deteriorated, the clients’ needs changed and they are now not only asking for access to finance if they require it, but also with assistance for buying and selling of property, how changes in regulations affect their investments, how market conditions can affect their business practices and how lenders can assist them with a variety of other financial matters.” Recent credit data from the Reserve Bank has indicated that growth in unsecured lending has slowed, while mortgage lending has only grown at less than 2% a year because banks have tightened rules around long-term lending. However, Palmer says that South Africa’s economy still offers good opportunities for entrepreneurs and owner-managed businesses if they employ the right strategy and utilise diverse value-added services.

Palmer says that no matter what the businesses situation, they should always consult a professional lender to assist with cash flow forecasts. “A financial oversight can potentially bring devastating financial losses if adequate planning, risk management scenarios and financial resources are not in place.” He adds that a financier can also assist with the sale and purchase of a property to ensure that all legal and compliance affairs are in order. “Property rights and the associated legalities are also complicated issues and individuals often misunderstand what is required of them or neglect to consider what the legal parameters are when looking to finance a property deal. This is particularly important when it comes to urban development and town planning matters,” says Palmer. Furthermore, he says that a financier would also facilitate if a client is considering buying a distressed apartment block. “The financier would only be able to lend to the client if the National Home Builders Registration Council (NHBRC) is involved and deems the building as compliant,” he says.

“Smaller businesses and property owners unfortunately do not have access to financial advice and support in the same manner as larger corporations do. These larger businesses are in the position to employ experienced staff who have established relationships with commercial banks, have additional financial advice from auditors and access to legal experts who have a thorough knowledge of that enterprise.”

“However, one of the most common mistakes property owners make is that of under or over insuring because they neglected to have an appropriate property valuation conducted at the offset, due to bad or incorrect advice.”Palmer adds, “Non-bank lenders can also assist with deceased estates to prevent any loss of capital and to protect the financial interests of the heirs. The Master’s office supervises the administration of deceased estates to ensure an orderly winding up of the financial affairs of the deceased in terms of the Intestate Succession

As a result, Palmer says that private non-bank lenders, who are also not governed by the same regulations as the major banks, are in the ideal position to assist clients who require financial assistance via their valueadded services. “Private lenders are usually entrepreneurs themselves and therefore understand and can identify with entrepreneurial challenges and how to respond to them.”

Act, 81 of 1987.” Finally, he says that there may be certain transactions which are more suitable for commercial banks. “The lender may also be in the position to assist with Commercial Bond Origination by applying for a commercial loan on their behalf. The client submits a variety of financial information to the lender who will determine their eligibility and what interest rate he or she will pay,” he concludes.

First South African property fund to list under the new REIT structure Tower Property Fund was officially the first new fund in South Africa to list on the main board of the JSE under the Diversified REITs sector when it listed on 19 July 2013. Tower successfully raised R300-million for the listing. REITs (Real Estate Investment Trusts) have been introduced in South Africa to bring the listed property sector in line with international

standards and are tax advantaged investment vehicles that invest in and derive their income from income-producing property and distribute rental income to the holders of shares or units.“By investing in REITs investors are given exposure to a diversified portfolio of properties, which may be high quality office, industrial and retail properties, in one investment,”

ARE THERE PROVISIONS THAT AUTOMATICALLY APPLY TO A LEASE AGREEMENT?

In an effort to protect the rights of Tenants, the Rental Housing Act lists certain provisions that are deemed to be included in each and every rental agreement for residential accommodation. This means that the provisions apply to the agreement, irrespective whether the Landlord and Tenant actually included these in their written or oral agreement; and they cannot contract ‘out of’ these provisions either. The deemed provisions are found in section 5(3) of the Act. In the below bullet points we highlight the most important of these: •

The Landlord must furnish the tenant with a written receipt for all payments received from the Tenant. The receipt must show the date, address of the rented premises and what the payment was for (ie arrears, monthly rental, etc).

•

If the agreement provides for the payment of a deposit, the Landlord must invest it in an interest-bearing account with a ﬁnancial institution. At the end of the lease period, the Landlord must pay the interest (and deposit) to the Tenant (or the balance thereof, if repairs for damages were required). The interest rate must at least be equal to the rate offered by the relevant ﬁnancial institution on a savings account.

•

If, during the lease, the Tenant requests written proof of the interest that had accrued on the deposit, the Landlord must oblige. (If the Landlord is an estate agent, the deposit and interest thereon is dealt with as provided for in the Estate Agency Affairs Act.)

•

The deposit (plus interest) must be returned to the Tenant within 7 days of the expiry of the lease. If the money was used to pay for repairs of damage caused by the Tenant, the balance must be returned to the Tenant within 14 days after the repairs were effected. In the latter case, the relevant receipts which indicate the costs incurred, must be available to the Tenant for inspection.

•

The Tenant and Landlord (or their agents) must jointly, before the Tenant moves into the premises and also before he moves out, inspect the dwelling to ascertain the existence or not of any defects/ damage .

•

If the Landlord (or his agent) fails to inspect the dwelling in the presence of the Tenant as required, he is deemed to acknowledge that the dwelling is in a good and proper state of repair. The Landlord will in that case not have a claim for damages that were ascertained after the Tenant moved out.

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Page 8: I N D U S T RY N EW S

says Marc Edwards, CEO of Tower Property Fund. Tower was well received by investors and its shares rose from the initial offering of R8.70 to R10 per share on the first day of trade. The fund has benefitted from its REIT status as a number of smaller developers have placed their properties into the fund in exchange for shares to take advantage of the Capital Gains Tax Rollover relief they obtain.“Tower aims to provide investors with strong investment returns, comprising a growing income stream and capital value. This will be achieved firstly by adding value through active property asset management, and secondly through the cost-effective ‘greening’ of properties in the portfolio, which will result in reduced occupation costs for tenants and increased investment performance,” says Edwards. “Our investment strategy is to target acquisitions of medium-sized (R30million to R200-million) properties, diversified across the retail, office and industrial sectors, and geographically across the major metropolitan areas. Competition for medium-sized properties is less intense, and well-located, good quality, medium-sized properties provide a diversified earnings base, better yields and, frequently, the opportunity to improve performance. However, larger properties will not be excluded where

suitable opportunities arise.”“Properties acquired, and to be acquired, by Tower were and will be selected for their potential to generate and sustain strong rental income streams,” explains Edwards. “Diversification is a key component of the company’s investment strategy, and is achieved through a geographic spread of properties across major urban centres, a mix of property types, a staggered lease expiry profile and the fund’s active ‘greening’ strategy.” According to Edwards, Towers’ initial ‘greening’ focus will be on improving energy efficiency, which will result in significant savings in electricity costs, thus making buildings more competitive and helping to ‘future-proof’ them against future rises in tariffs. Basic cost-effective energy and water savings measures that can be implemented at low or no cost will be applied immediately, while additional measures will be implemented over time as opportunities arise. “We will be benchmarked against the Green Building Council of South Africa’s Energy and Water Benchmarking tool and improvement in performance will be monitored and reported on. These measures will increase the competitiveness and values of buildings in Tower’s portfolio over time.”

Escalation of Green Star South Africa ratings in month of June June proved a bumper month for green building certifications with a total of six new buildings receiving a Green Star South Africa rating from the Green Building Council South Africa. This upsurge further substantiates that the green building movement is rapidly gaining ground in South Africa as developers and progressive businesses increasingly embrace sustainable building practices. These new ratings take the total number of Green Star rated buildings in South Africa to 36, and include some impressive and significant developments such as the Department of Environmental Affairs’ head office, which has scored a 6-Star Green Star SA rating – the highest rating possible and a first for a national government-owned building in South Africa. Hyundai’s new head office, situated in Bedfordview, is another exciting development to receive a Green Star rating as it signifies buy-in and commitment to sustainable practices from this large motor corporation – the first green building rating in South Africa achieved within this sector. The Hyundai building, which achieved a 4-Star Green Star SA Design rating comprises two floors of A grade office space and one basement level, and will accommodate 200 full-time employees.Another notable rating is that of the 9 000m2 Chevron Project CORE building, situated in Century City in Cape Town, which achieved a 5-Star Green Star SA Design rating – an exciting indication of the shift in mindset towards green business practices from one of the leading refiners and marketers of petroleum products in South Africa - Chevron South Africa. The impressive Portside building, which achieved a 5-Star Green Star SA Design rating, is a joint initiative between Old Mutual and FNB, and is set to become an impressive landmark tower in the foreshore

area of Cape Town’s CBD - featuring 32 floors, over 52 000m² of office space and 1 200m² of retail and banking space.The Lakeside Office Park in Centurion, which is a redevelopment of the Meerlus building, not only scored a 4-Star Green Star SA Design rating, but also recently won the (SAPOA) Innovative Excellence Award for Green and Industrial Property Development. Located opposite the Centurion Gautrain Station and with easy access to the national roads network, the building offers over 5 000m2 of lettable space for tenants seeking proximity to major transport nodes and other amenities. The building is the first of three to be developed in the Lakeside Office Park. Finally for June there was the 5-Star Green Star SA ‘As Built’ rating achieved by the Nedbank Menlyn Maine – Falcon Building in the Menlyn Maine Precinct. The Menlyn Maine Precinct is envisaged as a live, work, play neighbourhood where the buildings and urban planning design strongly subscribe to environmentally sustainable principles. All buildings within the precinct will be required to achieve, at a minimum, a 4-Star Green Star rating, and it is the first project in Africa to be registered with the Clinton Climate Initiative, a stringent rating mechanism evaluating the carbon neutrality of a project. “The GBCSA is very encouraged to see this spike in the number of buildings achieving Green Star SA ratings,” says Brian Wilkinson, CEO of the Green Building Council South Africa. “We are confident that the green building movement in South Africa will continue this upward trajectory and that we will increasingly see green building practices becoming the norm. The industry is embracing this absolutely necessary shift towards sustainable practices and it is exciting to be part of this change.”

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New South African REITs and real estate as an asset class – not all it’s cracked up to be? Much has been said about the benefits of the new Real Estate Investment Trust (REIT) structure which has become available to the South African property sector. Aimed at aligning the South African listed property sector with our international counterparts, REITs may create a more attractive investment structure, significantly enhancing international interest, whilst at the same time bringing about much needed tax and regulatory changes that local property structures could certainly benefit from in the long term. However, Grant Alexander, director of Private Client Holdings, warns that REITs might not offer investors as much as hoped and advises that real estate as an asset class holds several pitfalls which South African investors must be aware of.“The arguments in favour of listed property include diversification with strong, predictable returns when equities are weak; good yields compared to cash; benefits afforded in a low interest rate environment and being a good inflation hedge.” “However, there are many arguments against listed property,” says Alexander. “Volatility is higher with listed property than a defensive or balanced portfolio; property yields are currently lower than bond yields making property more expensive but there is more risk associated with property; the rand is a threat to our bond market and given the close correlation, the property market is also under threat from a weaker rand; lower economic growth causes increased vacancies and rising operating costs will eat into profits.”Alexander states that rising bond yields is the

main threat to the sector – higher yields mean lower prices. “Listed property has benefitted from strong retail performance – and many of the factors which have led to this strong performance, such as unsecured lending and salary increases ahead of inflation, are unsustainable. If the retailers slow down, the property sector will slow down as vacancies rise and retailers will start resisting annual rental escalations more. According to Alexander, the introduction of REITs to South Africa will make real estate more attractive to foreign investors, but it does not significantly change the South African property investment structure compared to the previous regime. “It is thought that one of the main benefits provided by the REIT structure is the tax change. South African investors will receive gross distributions from a South African REIT entity – without the 15% dividends withholdings tax being levied. However, investors will have to pay tax on the distributions at their applicable marginal income tax rate, so paying tax is unavoidable,” says Alexander. “Real estate is a complicated asset class as one must consider many factors such as occupancy levels, yields and retail demand. However, all of this being said, REITs are a good diversifier and should be held as part of a balanced portfolio, but if you intend to buy as your sole focus, caveat emptor - ‘let the buyer beware’,” concludes Alexander.

Property buyers beware! Rates clearance certificates are a cold comfort In a ruling with significant implications for property owners and banks, the Supreme Court of Appeal (SCA) recently held that all amounts due for unpaid debts are secured by the property, even when a rates clearance certificate has been issued confirming that municipal charges for the preceding two years have been paid. Lior Nickig, associate attorney at pan-African corporate law firm Bowman Gilfillan, explained that for new property owners this means they are at risk regarding unpaid municipal debts that are more than two years old, and the property concerned can be sold in execution and the proceeds used to pay the outstanding debt. “The Supreme Court of Appeal recently held, in City of Tshwane Metropolitan Municipality vs Thomas Mathabathe and Nedbank Limited, in relation to a section 118(1) clearance certificate issued in terms of the Municipal Systems Act 32 of 2000, that all amounts due for unpaid municipal debts are secured by the property. “The SCA held that all amounts owing to the municipal authorities that have not prescribed are secured by a lien on the property and this lien is not lost when the property is transferred,” explained Nickig. The SCA confirmed that if municipal charges for the two-year period preceding an application for a clearance certificate are paid, the municipality is obliged to issue

a clearance certificate. However, the court also held that if there are additional charges due over and above those that arose during the two-year period, the municipality is not entitled to withhold the clearance certificate. The remedy available to the municipality in respect of these charges is that it exercises a lien in respect of the property for an unlimited duration. It was confirmed that if these charges are not paid, and an appropriate court order is obtained, the property may be sold in execution and the proceeds applied to the unpaid debts. Nickig explained that, in practice, this means that the new property owner is at risk in relation to charges owed to the municipality for unpaid debts older than two years. “Conceivably, this means that the municipality could sue the previous owner for outstanding charges and if the previous owner is unable to satisfy any judgment obtained in this regard, seek to sell the property in order to satisfy the judgment.” “A purchaser of a property will be well advised to ensure that once a rates clearance certificate is issued, there are no additional amounts owing to the municipality. In circumstances where there are outstanding charges owed to the municipality, a purchaser should obtain sufficient collateral from the seller in order to limit its exposure.”

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National Debt Mediation Association (NDMA) welcomes survey showing consumers benefit from alternative dispute resolution services The National Debt Mediation Association (NDMA) has welcomed a survey by the National Credit Regulator (NCR) that shows that alternative dispute resolution (ADR) services offered to consumers are largely seen as effective in resolving a range of disputes between service providers and consumers. “Alternative dispute resolution, which includes mediation, offers consumers a way to resolve their disputes in a quicker, simpler and cheaper manner instead of following a court process that is adversarial and expensive,” says NDMA CEO Magauta Mphahlele. Within a short period of time, the NDMA has been able to establish its footprint across most provinces and has handled more than 6 000 disputes and complaints with more than 70% success rate for cases with a resolved outcome. The high success rate of alternative dispute resolution is confirmed by the research report which reports that 85% of respondents were satisfied with ADR services provided by various entities and would recommend them. However, the report indicates a low usage of free services offered by the NDMA, NCR, provincial offices and ombudsman. It is important to note that the low usage might also be due to private companies having very big marketing budgets and therefore consumers being more aware of their existence. This is supported by the finding of the report that a majority of consumers heard about the services through newspapers, radio and television. “Over the past few years, the NDMA has been advocating for mediation as it is able to help consumers through the often legally complex and technical aspects of credit and payment disputes and offers huge benefits to consumers, especially low income consumers who most times cannot afford the services of a lawyer,” says Mphahlele. The NDMA, which is currently in the process of transitioning into an independent consumer services NGO, is considering applying a mixed model where those who can afford the dispute resolution services are

NUMBERS TO KNOW Numbers to know is a feature that catalogues the most notable, quirky and surprising statistics in South Africa. See this issue’s selection…

charged a nominal fee, but those who cannot afford it are assisted for free through donor funding or partnership referrals. This is because the report indicates that consumers sometimes prefer to pay for these services as this gives them the confidence that their ADR agent will be on their side and will be committed to ensuring the case is resolved in their favour. This should, however, not discount the important role played by the various ombudsman schemes as they service an underserved and often low income and vulnerable market. Consumers need to understand that ADR often happens through mediation where the purpose is to find win-win solutions and therefore there is always a balance of rights and responsibilities. The report proposes that ADR agencies need to be regulated. While the NDMA agrees with this proposal to some extent, it is important to note that most service providers, including ADR service providers, are regulated by the Consumer Protection Act, which covers advertising, service standards, contracting and fair pricing. It is therefore important to consider what is already covered in existing legislation before additional regulations are imposed. Concerns raised by the NDMA regarding some ADR agents are misleading advertising, overcharging and lack of transparency. The NDMA and the various ombudsmen report publicly on the cases received and resolved and this ensures accountability and transparency. THE SERVICES OFFERED BY THE NDMA INCLUDE: • • • • •

A national helpline that provides information on any credit related matter, including the explanation of the options available to consumers to resolve their debt problems. Budgeting and payment plan assistance where consumers are experiencing difficulties with repaying their debt. Assistance with credit disputes, except debt counselling complaints which are referred to the NCR. Direct or employer hosted consumer education workshops. Referral assistance where the NDMA does not have jurisdiction.

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PROPERTY PLATFORM Evaluating property in South Africa

There is more often than not a discrepancy between property valuations from various institutions and developers. So just how should property be effectively valued in South Africa? The inaugural Property Professional Property Platform asks some industry leaders what their thoughts are on the matter.

Timothy Akinnusi, head of sales and client value management at Nedbank Home Loans Everyone seems to get to different figures when valuating property. Property Professional wanted to find out how and why, and what the future holds. Ewald Kellerman, head of sales at FNB Home Loans, Zain Sayed, regional manager of FNB Commercial Property Finance for Gauteng South West and East, Timothy Akinnusi, head of sales and client value management at Nedbank Home Loans as well as Mike Walters, divisional and asset manager at Renprop sat around the table discussing how we can, or perhaps should, effectively value property in South Africa.

Photographs: Kelly Jane Photograph THE MEASUREMENT METHODS While everyone took the fifth when it came to discussing municipalities and their property evaluations, it is clear that the residential and commercial property sectors use completely different evaluation methods. Walters says that from a commercial perspective, the valuation exercise is a lot easier. â&#x20AC;&#x153;There are essentially two ways in which commercial property can be valued: Firstly based on the income that the property

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Ewald Kellerman, head of sales at FNB Home Loans

Mike Walters, divisional and asset manager at Renprop

produces or the known cap rates for the area, which are published by Rode. The calculation is a simple percentage of net income that the property can produce while there is a lease in place. Factors that influence the cap rate are location, the age and condition of the building, the terms of the lease and the type of tenant. The second way in which commercial property is valuated comes into play with vacant buildings, where generally a rate per square metre is used which will fluctuate depending on age, design and whether or not the property is already built. This rate is negotiated and agreed at the time of sale.” Kellerman says that on the residential side there are number of different challenges compared to the commercial side as residential property is not driven by the same commercial factors. “A typical residential buyer will place value on a property based on its features that meet their requirements,” he says. “A modern kitchen, for example, would win over one buyer, while the fact that the property is close to a certain school may win over another. Specific investment value that is placed on a certain property by a person with unique requirements can mean that the property will sell for more than what open market would pay for it. This is where a lot of anomalies come in to residential property values.” Kellerman goes on to say that with residential property valuations, there is a lot of irrationality as it’s usually a personal decision. “In the residential market, a comparable sales approach is typically used to determine the value of a property, and is based on property sales in the area, adjusted for time, difference in characteristics and other market conditions in the area. This method has its own anomalies as it can drive irrationality and help the market get ahead of itself easily. The gap between value and income stream from buy-to-let properties in the residential sector is quite big generally, as is the gap between replacement value and market value. The residential market is strongly driven by sentiment – what buyers are willing to pay for properties.”

Zain Sayed, regional manager of FNB Commercial Property Finance for Gauteng South West and East,

TOP VALUE INFLUENCERS When it comes to commercial property, the cliché of location, location, location holds true, says Sayed, followed closely by the term of lease and the type of tenant and then the condition of the building. Akinnusi points out that residential property values are based on the same criteria, except where the term of the lease is important from a commercial perspective, amenities close to the property, accessibility and town planning take precedence in the residential sphere. “Accessibility and amenities are what really give residential property its real intrinsic value – it’s not just the bricks and mortar with which the house is built, but rather what the surrounding suburb can offer such as schools, shopping centres and the like.” Kellerman takes a step back, and looks at specific market drivers like debt levels, which have a huge influence on the market. “When financial institutions had a greater appetite for lending, it was a massive driver for residential sales in the boom years.” He also points to external economic factors, particularly around inflation and interest rates, and lastly, from an economics perspective, is supply and demand. Walters says the state of the economy and GDP play a massive role in the value of property, as does the political climate, the unemployment rate, individual levels of disposable income and the government’s ability to deliver, or not, on existing and new infrastructural projects. THE VALUATION CHALLENGES While commercial property valuations don’t seem to have the complex issues surrounding them like the residential side of things, Sayed says that one of the biggest challenges in commercial property finance is trying to explain the difference between market value and replacement

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value. “Market value is based on the willing buyer and willing seller principle, whereas replacement value is linked to costs of rebuilding the building. There are anomalies here, like a building in Sandton, for example, might have higher market value than replacement value, whereas a building in the Johannesburg CBD will have a market value that is a lot lower than the replacement value.” According to Walters, there are fundamental challenges with the way in which banks value new residential property projects which does not sit well with developers. “Most of the time the valuers that the banks appoint are not as close to the market as the developers are, so they are often unaware of the needs/demand in a particular sector,” he says. While historical data plays a role, he says it is not the only basis on which a new project should be valued. In addition the method used and the use of external valuers can be seen as an easy way out for the banks, especially when the valuer does not find value. From a banking perspective, Kellerman says that when it comes to valuations, the purpose is to use the valuation as a prudency check during the loan approval process. “The bank looks at it from a security perspective and so has to take the resalability of the property into account.” Walters says that even so, the way in which the banks value properties is a huge challenge – both for the institutions themselves and for the purchaser. He says that valuations are generally conducted by external or independent parties who only look at historical sales figures and price growth. “Due to the fact that they look at historical figures, it is extremely difficult from a development point of view – no matter whether you are looking at an urban city environment or a country town environment – as the statistics can skew the figures to such an extent that developers are disadvantaged by the method that is used. The historical figure evaluation method lacks a broad approach that we would like to see. Valuers and banks are not at the coal face of the property market, and should therefore rather look at the developer and their track record to see the potential for the development over the historical area data.” While Kellerman agrees that on the residential side there is a historical bias, he says that financial institutions work on scientific information – the nature of which is not forward looking. “While it is a good idea to look at the credibility of the developer, many banks have burnt their fingers with many developers, so we need to protect the assets and money we invest. We are not in a position to take an uncalculated risk – if growth in an area’s property market cannot be proven, it is difficult to commit finance and show that we have lent money prudently. There are a couple of factors involved, and while I think a developer’s credentials can be relevant, there has to be caution around the risks. There have been many developments or inexperienced investors over the past few years that have received financial backing in situations where the potential for growth has not been realised.” Sayed adds that while commercial property does not seem to have a valuation problem as there is generally a consensus between all parties on the value most of the time, when it comes to residential property, post

KNOWING PROPERTY INSIGHTS* AND OUT 5 TYPES

336 743

OF PROPERTIES

MEDIAN

NUMBER OF TRANSFERS

51.8

MILLION

ANALYSIS REPORTS

PEOPLE

PERCENTAGE

13.2

HOUSEHOLDS IN FORMAL DWELLINGS

9,4

MILLION

25 AVERAGE

MILLION PROPERTIES LISTED

EMPLOYED

AGE IN RSA

24.2

PERCENTAGE ‘AT HOME SINGLES’

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Page 16: P RO P ERT Y P L AT F O R M

unfortunate part of our business, our losses are just as leveraged so we end up losing a lot. Generally in the market, the losses are between 20% and 30% when a loan goes into default, which are massive loss rates considering the low margins of home loan finance. This makes it a very risky business in a very competitive environment and because of that, the valuation methodology needs to be sharpened. We are quite far away from replacing the traditional valuation methods; however there is a space for more innovative methods or improvement on the current methods, particularly around the process of conducting valuation and not so much the methodology.” There is a general agreement around the table that going forward, the commercial property valuation model is successful and will stay much the same. According to Sayed, the only factor that might influence commercial property value in the next couple of years is the interest rate. “We are at the bottom of the cycle, and if the rates increase, it could slow down the values of commercial property, but other than that, this market is expected to stay on its current path.”

2009 almost all financial institutions took a big loss and have therefore limited their lending capacities towards residential developments. “But Mike has a point; there is perhaps room for developers to be backed financially based on their track record. However, one should bear in mind that unlike commercial property, leases are shorter in the residential sector and there is still a long-term loan on the property that needs to be serviced. It becomes more challenging in the residential sector as financial institutions have to look at other important factors that can influence the property value such as the market demand, growth of area and other factors.” On the commercial property front, while getting to a value that everyone can agree on is not really an issue, government’s delivery on infrastructure is. So much so that there seems to be a move for development further up Africa as there is a willingness from the governments to co-operate with developers through offering a smoother process in terms of land rights, access to services such as power, zoning and the like. “South Africa is losing potential investment as there seem to be better returns developments up Africa. While there are challenges in every market, South Africa’s service delivery seems to be getting worse,” says Walters. TIME TO CHANGE THE WAY PROPERTY IS VALUED? Kellerman says that the comparable sales approach or the scientific approach has been a viable one for banks in the past. “A home loan is a highly geared asset as we can lend up to 100% on residential properties, and when we have to call in an asset, which is a very

When it comes to valuating residential property, Akinnusi feels there is data lacking. “Valuation is a very critical part of the process. Over reliance on finance is only going to stop when people start saving up for a deposit and when sustainable jobs are created. And that will only happen when the economy begins to strengthen. In the meantime, those who are leveraged to the hilt will fall hard with any interest rate hikes.” For Kellerman, the biggest gap between banks and developers is lack of information. “From a banking perspective there are many risk factors as we sit with the asset for 20 years after a developer has handed over the key. However, there is a lot of room for improvement to bridge the gap between industry players. Perhaps banks are overly conservative to a degree, but smaller companies are a lot more agile and are better able to respond to changing market conditions. The fundamentals of property valuation will stay the same, but there is a huge gap in the valuation process and technological information relating to it and hopefully necessity will breed co-operation between the various entities.” It is evident that while the current valuation methods used by financial institutions serve the purpose for determining finance feasibility to a degree, they fall short of foresight and lack a certain understanding or comprehension of market potential. If this knowledge gap or lack of information and communication between banks and developers is bridged, it could unlock a whole lot more potential for development in South Africa.

BY MICHELLE FUNKE

The Property Platform is sponsored by Knowledge Factory, a leading data, property and marketing insights company. Knowledge Factory consolidates, interrogates and interprets relevant data sets to provide clients in the financial, hospitality, FMCG, property and media industries with reliable market data that highlights needs and opportunities and supports informed strategic business decisions. Knowledge Factory is a proud subsidiary of Kagiso Media Limited, South Africa’s largest BBBEE media group.

Page 18: T H E T R A I N I N G D EBAC LE

THE TRAINING DEBACLE: WILL AGENTS HAVE TO RESORT TO LITIGATION?

The educational policies introduced by the powers that be have ruffled more than a few feathers. It now appears that the entire process could be placed under a legal microscope in order to ascertain whether or not the policies are legal There must have been a collective sigh of relief among thousands of estate agents across the country when it was announced by the Estate Agency Affairs Board (EAAB) that the deadline for NQF4 and NQF5 compliance had been extended to 30 June 2015. While it could be argued that agents have had more than enough time to get their acts together and complete the necessary qualifications, there is a large number of agents who completed the course in plenty of time, only to discover at a later stage that the training provider they had utilised had lost its accredited status. Stuck between a rock and a hard place, these agents struggled to get answers and results from the Services Sector Education and Training Authority (SSETA) and the EAAB and, judging by numerous emails received by the Property Professional magazine, some are gearing up to go to court in an effort to get the situation resolved. Although the EAAB has thrown agents a temporary lifeline, SSETA still has a lot to answer for. Why, for example, are agents who completed the qualification two years before the respective training providers they utilised lost their accreditation still waiting to be certified? Perhaps, more importantly, will the extended deadline provide enough time for SSETA to get its house in order once and for all? The confusion, lack of communication and the threat of losing their licences to sell property have led to some people questioning the entire

Page 19: T H E T R A I N I N G D EBAC LE

education process. Alon Rathbone, from the Property Scene, says he suggested to the EAAB that agents who had written the EAAB exam should be accredited with a minimum qualification that matched the NQF4 qualification. He believes that the new qualifications should have been phased in rather than disrupting the industry in the way it has. “Before this whole fiasco started, we had approximately 87 000 registered agents; today the figure has dropped to approximately 16 700. The EAAB has estimated that by the end of this unacceptable process, we will be lucky to have 8 000 agents. This is insufficient to service the industry and could place the country and its coffers in jeopardy.” Ongoing education is a fact of life and occurs in many professions across the world. Rathbone argues that while keeping up to date with the latest changes in legislation and the like is understandable, being told that agents will lose the right to sell property if they fail to complete courses that take months to complete isn’t acceptable at all. He isn’t talking about agents who are entering the profession; he is referring to those, like himself, who wrote the old Estate Agency Affairs Board exam and who were found competent to sell property in South Africa. “It is our democratic and constitutional right to earn an honest living in the industry, as the EAAB themselves qualified us prior to their new requirements, and have issued a certificate for this existing qualification,

entitling me and others to display CEA (Certified Estate Agent) behind our names in recognition of this qualification issued by them. By proposing to revoke this qualification, which is precisely what they are proposing, they are jeopardising my constitutional and democratic right to earn an honest living.” He may well have a point. Both the legal and medical professions have undergone enormous changes over the years. Doctors, for example, now have to complete one year of compulsory community service before they are allowed to practise. The legislation, however, only applies to new graduates and has no bearing whatsoever to those who qualified in years gone by. The legal profession has also been faced with ongoing changes to the law, however, while it may have become compulsory for older practitioners to attend certain courses, no one has threatened to remove their initial qualification. Why should this be any different in the real estate industry? While further education within the real estate sector was undoubtedly a necessity, there are those who question the compulsory standards imposed on those who are already qualified and the way in which the entire process was rolled out. Stories of agents and principals paying for courses and not receiving the correct learning materials are prolific. Accredited training providers who had been endorsed by the EAAB, then had their accreditation withdrawn, leaving learners high and dry with little or no recourse, also abound. In short, it appears that the

Page 20: T H E T R A I N I N G D EBAC LE

legislation that was supposed to improve the industry has created a major headache for those caught up in the mess. Rathbone is determined to take the matter further and has sought legal advice as a first step to having the qualifications found unconstitutional. “We have based our claim on the fact that we have already been found competent to sell property by the EAAB and believe that once a person has qualified, they are always qualified.” When asked his opinion about the EAAB’s decision to delay the implementation of the required educational standards again and if he believed that the decision was going to help the industry in any way, Rathbone responded: “They are making a mockery of the whole thing because they know that what they are trying to do is potentially unconstitutional and illegal. The extension is just delaying the inevitable, by kicking the can down the road…again. Unless the law is changed during this extension time, giving them the authority to withdraw their initial qualifications, which is again unconstitutional, they will be exactly where they are at the moment, with empty threats and promises.” He has also approached the office of the Public Protector, which, at the time of going to press, had lodged Rathbone’s dispute with the EAAB and SSETA.

“We are also in the process of gathering information from all affected parties and are proposing to institute a class action, if need be, against the EAAB. We intend holding them accountable for loss of earnings and damages should we not find a resolution prior to the D-Day proposed. By not issuing us with Fidelity Fund Certificates timeously - they themselves will make us illegal operators.” Rathbone doesn’t believe that the EAAB understands the ramifications of their actions, which, in his opinion, will lead to the demise of the industry. “When we asked the EAAB to forward our objections and queries to the relevant departments or authorities, which included the minister responsible for our industry, we were told that it is not in their mandate to do so. We then asked for the ombudsman’s contact details, but to date have not received a response. In our opinion, the Constitutional Court may be the last resort as, in our opinion, we have an industry in crisis and it is our aim to find a resolution.”

BY LEA JACOBS

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LAND REFORM: IS THIS THE END OF PROPERTY?

Page 23: L A N D R EF O R M

‘Let them eat cake’ has to be one of the most memorable statements made before the French Revolution, which saw the ruling royalty lose their heads. Whether Marie Antoinette actually said that is not known, but it is what she is remembered for. What do you suppose the slogan in South Africa will be? Perhaps it will be ‘let them eat promises’ after land reform becomes a reality and food production and property rights become a thing of the past. Land reform has become a hot topic and it’s little wonder why; the voices against re-opening land reform and its ugly twin sisters, the Expropriation Bill and Property Valuation Bill, are foretelling lots of doom and gloom should they come to pass, but how true is this? Land reform was formed in 1994 and entailed a three-pronged process of land reform, embracing restitution, redistribution and tenure reform. Basically the aim of land reform in 1994 was to transfer 30% of commercial farmland to black people either by restitution or redistribution. They wanted to have this finalised by 1994, then the date became 2014 and now it looks like it might only be realised by 2025. Before we look at re-opening land reform, the question must be asked, did it work the first time around? One of the problems that quickly surfaced was false claims; some had no historical foundation, while others were claimed by more than one person. False claims are worrying but even more so are claims that have been inflated by the officials involved. Another problem arose in the way the land was redistributed; rather than being divided up into the community (in the case where the land was given back to a community), it was given over to the community as a whole, who then had to decide which members were to be allowed to use the land. This naturally led to massive conflict. The restitution process for the farmers who sold their land didn’t work, dogged as it was by inefficiency; there were often delays in payment, sometimes for years. But the feather in the cap of land reform was the failure of the land reform projects. By government’s own admission, between 50% and 90% of all land reform projects have failed. Formerly successful farms have failed to produce any marketable surplus. The government has endorsed a restitution project that has cost billions of your money; only to leave hundreds of farms defunct of purpose, threatening the one thing on which we are all reliant – food production. Agri Eastern Cape president and fourth generation farmer, Ernest Pringle, has gone so far as to say, “ To date nearly all successful land claims have resulted in highly productive farms being given over to communities, and becoming unproductive, with total destruction of their infrastructures. It should be clear to even the most fanatical demagogue that turning productive commercial farms into communal farms is a certain way of terminating food production on those properties. Since this is clearly a by-product of the restitution process, it should be fairly obvious that restitution is a threat to food security as well as agricultural exports, and should be terminated as an option.” Strong words but the facts behind them can’t be ignored – threatening food production will do little to put faith in the agricultural industry and will start a mass exodus in this sector, and place South Africa on the road to starvation.

Even though the Restitution Bill will seek only to put land back in the hands of those who will use it productively, the potential productiveness of one person in charge of a new farm is not an easy thing to measure. It’s even harder to measure in advance on paper before a court. There is a range of factors that measure whether a farm will be productive or not and few people have faith that the courts will be able to accurately decide this. Instead, Dr Anthea Jeffery, the head of research at the South African Institute of Race Relations, says, “Lost agricultural production also means lost jobs on farms that used to be thriving concerns but have since collapsed. Already, some 331 000 agricultural jobs have been lost (in the period from 2001 to 2012), and some of these job losses have resulted from failed land reform initiatives. The loss of these jobs has already worsened rural poverty, while more land transfers are likely to put an end to more farm jobs – with few compensatory benefits to others – and add to destitution.” South Africa needs commercial farming to feed the millions of people who reside in urban areas. At present some 90% of food produced in South Africa comes from the country’s 37 000 commercial farmers. How many of these farmers will find themselves on the claim list if land reform is re-opened? The actual timeframe for land reform will severely compromise the security of the agriculture industry; the actual process will take two decades to complete, meaning tenure insecurity for farmers for at least the next 20 years. In terms of the actual effect on the property industry there are a number of red flags raised by the two bills, which will go hand in hand with the re-opening of land reform claims, namely, the Expropriation Bill and the Property Valuation Bill. The Expropriation Bill of 2013 has been lauded as better than its 2008 predecessor as it allows the courts rather than the state to decide the compensation payable for expropriated property, but says Dr Jeffery, “Although this seems like a major advance, in practice the gain is likely to be negated by other aspects of the Bill, in particular, it allows hundreds of organs of state to take ownership and possession of property simply by giving notice to the owner before any compensation has been paid.” In addition, the Bill also fails to recognise that, where expropriation includes a person’s home, there are eviction laws that come into play and require the express authority of the courts. The Valuation Bill in the meanwhile defines property as including ‘immovable property’, ‘rights in such property’, and ‘any movable property which is contemplated to be acquired with the relevant immovable property.’ The provision for immovable property in the Bill will allow the state to expropriate not just farmland but also farm equipment, vehicles, irrigation systems and livestock. But a far more dire aspect of this Bill is that it doesn’t just extend to farmland, even though it is being introduced by Rural Development and Land Minister Gugile Nkwinti, its provisions extend to land on which mines, factories or other buildings stand. The Expropriation Bill gives the power of expropriation to all the national and provincial departments, municipalities and organs of state. If you want to contest the compensation that has been decided by the courts for your property and land, the Valuation Bill allows the

Page 24: L A N D R EF O R M

government to proceed directly to expropriation, regardless of whether or not there is any dispute over the compensation by the parties involved. You, as the owner, may lodge an objection with the office of the valuer-general within 30 days, and the valuer who was responsible must then ‘promptly’ (there isn’t a time limit given so promptly, could mean anything,) decide on the objection and give a written reason for his decision. If you are still not happy with the outcome, you then have to apply for a review of this decision by a ‘valuation review committee’, who are able to close its meeting to the public when deliberating on a decision. The lack of transparency in this process is frightening. Who will be ensuring that this process is fair and accurate and not touched by corruption? Once a decision has been made, that decision is final and binding and is only subject to a review by a court of law. So only after you have been through two review processes totalling who-knows-how-many days can you actually take your case to the courts, an option that in reality only the very wealthy could afford, as going through the courts is a lengthy and costly procedure for someone who has just lost their property and possibly their only source of income to the state. The Expropriation Bill will attempt to make it quicker and cheaper for the State to expropriate land for less than market value and with no mind for further losses suffered by the owner, including loss of future income.

Dr Jeffery sums up both bills perfectly, “In combination with the Expropriation Bill and the green paper, the Valuation Bill threatens the property rights of all South Africans. It clearly forms part of the ‘second phase’ of the ruling party’s national democratic revolution. Part of its aim is doubtless to make it easier to achieve ‘state ownership of all the land in the country’, as the Congress of South African Trade Unions (COSATU) has urged in order to ‘empower the democratic state to break the power of white capital’. Cosatu will in fact be getting even more than it anticipated because so much property other than farmland will also be vulnerable to cheaper and quicker expropriation by state.” The government seems to be playing fast and loose with the property rights enshrined in the constitution and it remains to be seen whether the Pandora’s box of bills will pass or not. One thing that can’t be denied is that there are surely better ways to go about addressing the wrongs of the past than destabilising food production and pushing bills through parliament that will destabilise the property industry in South Africa, an industry that contributes greatly to the economy, to job creation and wealth creation for all.

BY COLLEEN MAY

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Page 26: G R EEN CA P E T OW N

CAPE TOWN ACCELERATES TOWARDS ENERGY-SMART STATUS

Otherwise known as the city with a conscience, Cape Town is known as the growth engine of the Western Cape. And on a national scale, it has been a top investment destination for some time. From a global perspective, the city has become a fierce competitor in attracting foreign direct investment into the country. As the cityâ&#x20AC;&#x2122;s status of being a high return investment destination gains momentum, industry players are realigning business strategies across different sectors of the property market. Renewed focus with a global perspective on the joint benefits of long-term economic growth coupled with environmental sustainability is evident. Accelerated growth in the commercial and industrial property sectors, as well as commerce and tourism, is linked to the practice of sustainable business principles as well as the environment. A number of support

Page 27: G R EEN CA P E T OW N

structures have enabled private enterprise to gain a foothold in local markets that would bear long-term dividends. These are provided by various business forums, the City of Cape Town, the Green Building Council South Africa and the Graduate School of Business at the University of Cape Town. While fulfilling its role as facilitator in the process of strategic development and economic growth, the city has partnered with business to encourage and incentivise environmentally sound business practice. Also spreading their wings to southern shores are some South African REITs companies, now regulated to compete in global investment markets. Central to the acceleration process are the actions of the Accelerate Cape Town/KPMG Sustainability Forum. In collaboration with local business and city authorities, it aids the process of corporate implementation of green building initiatives. Chris Wheelan, CEO of Accelerate Cape Town, says South Africa currently has 35 Certified Green Star Buildings, and projections are that this number will increase to 150 by 2014, 300 by 2015 and 500 by 2016. He says examples of green building initiatives are seen nationally within different sectors of the property market. Speedy transformation in the government property sector is seeing 4-Star ratings at offices fast becoming the norm. This is setting the tone for achievements such as the Department of Environmental Affairs Head Office in Tshwane’s accreditation of the state’s first 6-Star Green Star rating, says Wheelan. Wheelan says large corporate institutions that are developing new properties, as well as those committed to upholding leases for rentals in older existing buildings, are benefiting from transformation within the property sector. He says when looking at global cities, new development and refurbishments of buildings reflect long-term vision based on tried and tested research models. Available in South Africa, he says, are locally developed models by the Green Building Council South Africa. He says these offer a wealth of research and certification training programmes to local industry, while studies such as the Davis Langdon Environmental Study of 2011 provide efficient design useful for broad applications.

of the Green Building Council South Africa went hand-in-hand with a commitment to only implement tried and tested measures with clear track records.” In addition, only those that could be applied across a broad spectrum of business principles would be implemented. Another large scale Cape Town project where impressive energy savings have been implemented is the Black River Office Park. This office development in Observatory features the biggest roof-mounted solar photovoltaic system in southern Africa. This installation, to take place over three stages, will soon be ready to take advantage of local carbon tax benefits when implemented. Estimations are that the system will save 1 725 tons of carbon dioxide per annum by not relying on electricity produced from coal. Black River Park developer and stakeholder Joubert Rabie says it makes sense to run an operation that is green and sustainable, not only because of the impact it has on the environment, but also from a good business practice point of view. He says installation costs for this system, which will operate for a minimum of 25 years, will be recouped within the first seven years. The design allows power usage throughout the park to be monitored and micro managed. From a business principle perspective, this was one of many factors taken into consideration before the Green Building Council South Africa moved its offices to Black River Park. Brian Wilkinson, chief executive of the Green Building Council South Africa, says the opportunity for tenants to be able use green energy and potentially go off grid means Black River Park meets some of the sustainable criteria for green building accreditation. Also adding to the long list of green developments in the city is Hotel Verde, which will shortly be launched in the Cape Town International Airport Industria precinct. Named as South Africa’s first green hotel, it is the brainchild of a family of foreign owners who have invested heavily in a commitment to the environmental and economic benefits of sustainable development. Their wish is for Hotel Verde to serve the hospitality, business and tourist industry with an educational model that will illustrate sustainable building as it applies to hotel accommodation.

Another factor driving greener operating principles that go beyond green building certification is the need for commitment to corporate reputation as well as staff wellbeing. A recent example is the design and construction behind Allan Gray’s head office in Cape Town. Michael Smith says: “During the planning process Allan Gray realised that the biggest lesson of green building lies in the realisation that real substance is what gains respect from clients and employees.” He says investing is about so much more than just capital growth, but rather the finer balance between optimum productivity, occupant health and corporate reputation. Smith says the nine-month design and planning process took place in collaboration with the company’s landlord, the V&A Waterfront. During this time extensive research and feasibility studies around sustainability principles of the architectural design, construction and occupancy of No. 1 Silo were prioritised. He says: “Operating within the guidelines

André Harms of Ecolution Consulting says his client is aiming to achieve Gold or Platinum accreditation within the stringent LEED green building certification programme. Guests at Hotel Verde will participate in a number of energy saving programmes, such as Friday night dinners served by candlelight from a wood fired pizza oven. Hotel guests will also be incentivised to reduce, recycle and reuse to minimise consumption at all levels. Of particular interest during the building site tour was a surprise view from the hotel rooms onto a green open space adjacent to the premises. Harms said this municipal retention pond, originally created to absorb water in the area, is now rented from the city by Hotel Verde in an effort to uplift the neighbouring surroundings.

BY ANNA-MARIE SMITH

Page 30: T H E D EV I L I S I N T H E D E TA I L S

THE DEVIL IS IN THE DETAILS There was a time, not too long ago, when agents had two major problems to contend with – finding a buyer who was seriously interested in buying a home and finding a buyer who was in a financial position to raise a bond. Thankfully, it appears that buyers are well and truly back on the scene and that the banks have once again opened the purse strings and are again writing out cheques. Overall, the property market seems to have picked up in all sectors and agents around the country are reporting an increase in sales and enquiries across the board. The demand for 100% bonds is still high with both Ooba and Bond Gallery indicating that close to 50% of bond applications received are for the full amount. Unfortunately, Elmar Pittendrigh, managing director of Bond Gallery, also notes that the decline ratio on 100% loans is still higher than in the case where a deposit is available. There has been a steady influx of first-time buyers and Kay Geldenhuys from Ooba says that 52% of bond applications received by their company comprised first-time buyers.

procedures that had to be adhered to and was not yet in a position to grant these subsidies.” She said that this was confirmed by the Western Cape Minister of Housing, Bonginkosi Madikizela, in an interview on Radio 567 Cape Talk. But, says Klopper, he apparently later told Mike van Alphen, national manager of Rawson Finance, that the department thought it essential to “educate” first-time buyers before embarking on the FLISP scheme. More recently, it was learned via the government’s website information service that the full sum set aside for these subsidies had been entirely allocated as part of the state’s R17,9-billion poverty relief programme. “Exactly to whom the grants had been made was not spelt out, but the net result was that the franchise’s potential homebuyers had clearly been left out in the cold,” says Klopper. While the lack of a subsidy may be extremely frustrating to those who desperately need a roof over their heads, it has become pretty clear that first-time buyers will benefit from ‘homeownership’ education.

Sadly, however, the much hyped Finance Linked Individual Subsidy Programme (FLISP), announced by President Zuma in his 2012 State of the Nation Address, hasn’t borne fruit. Daphney Klopper from the Rawson Property Group says that although the FLISP scheme looked exceptionally promising because it offered subsidies of up to R87 000 towards the purchase of a home by a first-time buyer, clients who approached the group, banks or mortgage originators for a bond making use of the scheme have not as yet seen any concrete response to their applications.

Interestingly, FNB’s Affordable Housing Division has taken its compulsory homeownership education programme for first-time home buyers out of the classroom and onto the web – with great success. First-time homeowners applying for a Smart Bond are expected to complete the course before registration of their bond. Of all the bond applicants, 75% are now choosing to use the e-learning system. Since its introduction of e-learning in February 2013, FNB has seen an 87% decrease in turnaround time for completion of the course from 9.8 days to an average of 1.3 days. There are currently 4 000 first-time homeowners who have either completed or are currently completing the course through e-learning.

Klopper says, “The banks appeared to be equally keen to implement the scheme, but when approached for this type of subsidy were almost always told that the Department of Housing was still establishing the

“Our homeowners programme has always been an important aspect of the bond registration process for our customers. Good quality financial education on owning a home is vital in order to ensure that homeowners

Page 31: T H E D EV I L I S I N T H E D E TA I L S

High debt and the lack of a deposit continue to plague South African property buyers

understand the financial impact of their decisions and make the most of their biggest asset,” says Marius Marais, CEO FNB Housing Finance. First-time buyers aside, Nedbank reports that recent estate agent surveys indicate that smaller-sized properties are still driving activity in the residential market. “Our outlook remains positive, with the growing source of demand from the emerging middle class seeking to upgrade to better homes mostly in middle class areas,” says Timothy Akinnusi, head of sales and customer management at Nedbank Home Loans. He says that unfortunately consumers’ disposable incomes remain under pressure due to high levels of debt, mainly due to the surge in unsecured lending, which carries much higher interest rates, given the greater risk of default. Consumers are also finding it increasingly difficult to uphold credit repayments resulting in compromised credit bureau profiles. This subsequently prevents them from accessing further credit based on default payment behaviour. Nedbank’s statistics are backed up by what is going on in the marketplace. BetterBond reports that it secured bonds for 6 400 buyers during the second quarter of this year. In the same three months, the company’s statistics show that the average approved bond amount for the total market was R770 200. The average approved bond amount for first-time buyers was R619 000. Self-employed individuals are still finding it more difficult to secure bond finance. Pittendrich notes that it is definitely more challenging in terms of supporting documents required and the amount of motivation in getting the self-employed deals finalised successfully. “This is simply as a result of the responsibility on the bank to ensure that they abide by the National Credit Act (NCA) and reckless lending guidelines.” He says that the banks are required to ensure that a client is able to service his bond instalments by conducting checks on affordability and sustainability of income. In the case of a salaried person, they cannot do more than

confirm employment, income etc. with the applicant’s employer. In the case of a self-employed individual, however, the bank requires certain accounting criteria to be met regarding the financial health of the business. These include the latest set of audited financials (also previous years) and management accounts. “Personally, I do not foresee any change in this trend as it does not only rest on the bank’s appetite for lending in the self-employed space, but more so on the requirements in terms of reckless lending,” he says. The amount of debt that the average South African consumer carries continues to have a negative effect on those attempting to secure a home loan. Rudi Botha, CEO of BetterBond, says that the average household debt to income ratio is currently sitting at around 75%. “This means that although a potential borrower may have a substantial monthly income, a great deal of it is most likely being used to repay existing debt, such as vehicle and furniture repayments, credit and store card instalments, and quite likely the repayments on a personal loan. When all that is taken into account, plus the monthly regular expenses such as food, transport, utilities, insurance and school fees, there is often not enough left to afford the repayments on a home loan. As noted, the NCA requires that the banks check on this before granting any new credit, in order to avoid situations in which the consumer is over-borrowed. Of course, a large household debt load also makes it difficult for consumers to save money towards a deposit, and with the majority of buyers (65%) being required to pay a deposit in order to be granted a home loan, that is also a challenge – especially to first-time buyers who do not have any equity in an existing property to put towards a deposit,” says Botha.

BY LEA JACOBS

Page 32: F I N A N C E A N D F I G U R ES

HOW DO HOME LOANS MEASURE UP?

Property Professional gathered information from some of the country’s leading mortgage originators to provide some insight into what the average purchase price is per age group as well as what percentage of loans are granted per purchase price and what the average deposit amount is required for buyers. In addition, we asked what percentage of bonds have been granted with further advances for renovations. We compare statistics from January 2013 to end-June 2013:

20-30YRS 31-40YRS

Average purchase price per age group:

41-50YRS 51-60YRS

1 400 000

>60YRS

1 200 000

1 000 000

800 000

600 000

400 000

200 000

0 JAN ‘13 Source: BetterBond

FEB ‘13

MAR ‘13

APR ‘13

MAY ‘13

JUNE ‘13

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Percentage of formally granted loans per purchase price:

0-R250K R250K-R500K

R500K-1M

R1M-R1.5M

R1.5M-R2.5M 35

>R2.5M

30 25 20 15 10 5 0 JAN ‘13

FEB ‘13

MAR ‘13

APR ‘13

MAY ‘13

JUNE ‘13

Source: BetterBond

Average deposit requirement of buyers: JAN 2013 - JUN 2013

200 000 Additional loans required for renovations: Loans for renovations (further advances) currently only make up about 2% of total loan applications through BetterBond.

150 000 100 000 50 000 0

JAN ‘13

FEB ‘13

MAR ‘13

APR ‘13

MAY ‘13

JUNE ‘13

JAN ‘13

FEB ‘13

MAR ‘13

APR ‘13

MAY ‘13

JUN ‘13

DEPOSIT FOR ALL OOBA BUYERS

133,805

125,843

120,936

147,543

154,652

125,608

DEPOSIT FOR FIRST TIME BUYERS

101,814

55,337

67,555

76,672

77,208

69,596

Source: ooba

Page 34: E CO N O M I C WO ES

INTO THE EYE OF THE ECONOMIC STORM IS THE WORST OVER OR YET TO COME? A volatile mining sector, political uncertainty, rising costs and levels of debt have caused an economic storm. With the rand falling and the cost of living reaching unheard of highs, what caused the economic woes we now find ourselves in and how should we make sure we survive and thrive in the tough economic climate? MINING STRIKES START THE ECONOMIC WOES Before you can look at how to react to the current economic reality of South Africa, you must understand how the country got to where it is today. One of the biggest factors that contributed to the current economic woes is the volatile mining sector. In order to grow the economy, you need to export more than you import. The mining sector in South Africa is one of the biggest contributors to export earning in South Africa.

With unrest due to labour challenges, which are not yet over, wildcat strikes and a government that has not resolved this ongoing problem, the mining sector has been in serious trouble since last year. What this essentially does is wave a red flag to investors who invest money in South Africa and help create economic growth; and when investors start fleeing, the rand price drops and this slows economic growth and increases prices. In July, the finance minister, Pravin Gordhan, said that South Africa would cut the economic growth forecast for 2013 to as low as 2%, partially due to mining strikes. POLITICAL UNCERTAINTY SENDS INVESTORS PACKING But itâ&#x20AC;&#x2122;s not just the mining industry that has investors worried about putting their money into the South African economy; social unrest and

A Self-Made Man Few dream of becoming an agent during high school and no

A move to Seeff and eventually to Pam Golding followed where

one studies to become a real estate agent at university and.

he was nominated as the Empowerment Agent of the Year in the

Yet it is a career that enables thousands in South Africa to work

highest sales performance category in 2010.

for themselves, to be their own boss. Today Oneil’s primary focus is his family; he supports his Oneil Jacobs learnt the lesson early on and is now the owner and

parents and is raising a son and loves being in nature – he’s

principal of Leapfrog Strand, Leapfrog Somerset West, Leapfrog

even part of a hiking club. On the work front he’s busy building

Kuils River and Leapfrog Eerste River. “It is important to me to work

a mini-empire with four franchises under his belt. In fact, the

for myself”, says Oneil, “I grew up on a farm between Stellenbosch

Kuils River franchise wasn’t part of his current plan but, not

and Somerset West where my parents were workers and I decided

being one to turn a good opportunity away, he took the plunge.

early on that I wanted to be my own boss”.

“For the moment I’m planning just to focus on what I have; to be content with it and to build the franchises up into solid

Jacobs briefly studied architecture at university

businesses”, he explains.

but soon realised that it wasn’t for him. Instead he ended up working for the City of Cape Town

“Property has been good for me during my life”, says Jan le Roux,

as a traffic official in 2001. “At the time we were

CEO of Leapfrog Property Group, “and I believe it’s been good

getting a housing subsidy and I started using this

for Oneil as well, and will continue to be so; he’s working hard

to purchase a property per year which I’d fix up

on building a solid reputation for great service in his areas and

and resell at a profit”, explains Oneil, “It was

putting a lot of focus into training his agents”.

then that I realised that there is money to be made in property”.

He mentions that one of his biggest struggles at present is finding experienced agents with whom to grow in these areas.

Deciding to further explore the

“It’s easy to find interns sure, when it comes to agents who

possibilities he started working for

understand the game it becomes more complicated”, Jacobs

an independent real estate agent,

explains. That being said, he himself was a rookie agent once;

managing to earn his Fidelity

a beginner who managed to make not just a living, but a name

Fund Certificate within a year.

for himself as a self-made man.

Move on Move up Franchise areas and individual opportunities are available. Valerie Kritzinger 082 568 7060 valerie.kritzinger@leapfrog.co.za

www.leapfrog.co.za

Page 36: E CO N O M I C WO ES

the political climate have caused business confidence to fall sharply. The Bureau of Economic Research’s business confidence index fell by four points to 48 in the second quarter of 2013 (any figure below 50 indicates that most of the respondents are pessimistic). In the manufacturing sector, the percentage of people who rated the ‘political climate’ as a constraint to investment is the highest it’s been since 1993. The government was unable to quell the mining problems and the unfortunate events of Marikana are seared into the nation’s subconscious. With elections coming up next year, the government is trying to use the National Development Plan to accelerate growth, but how exactly this will be implemented is very uncertain, especially as the labour market policy and macroeconomic policy in the National Development Plan will put the ANC at loggerheads with its alliance members, the Congress of South African Trade Unions and the South African Communist Party. The political sentiment in South Africa has reached a tipping point right now with the arrival of the Economic Freedom Fund, spearheaded by Julius Malema, whose promises of land grabs without compensation paint a picture of civil war that will see investors flee faster than you can say “Zimbabwe”. But what is even more frightening than the effect one man can have on the economy is the thought that he will challenge the ANC in the next election and gather up all the angry, unemployed youth votes, of which there are many. Confidence in the ANC is lacklustre at best; one particular example that highlights this is when last year the headlines screamed ‘Jacob talks and the Rand drops’ – after Jacob Zuma commented on government involvement with the labour unrest in the

mining industry, the rand experienced a sharp drop less than 24 hours later. Coincidence? I think not. Foreign investors are looking for a country that will offer them the best return on their investment, and a country that is gripped with strikes, civil unrest and the possibility of civil war is hardly a country people want to put their money into. So now the investors are leaving, selling off their investments in South Africa and this makes the rand drop, devaluing our currency and causing a situation where you are paying more for the same goods as inflation starts to rise. The first thing to rise is the fuel price; because the rand is weaker than it was the month before, the same barrel of oil now costs more and that extra cost is passed on to you in the shape of you paying more for petrol. But it’s not just petrol that goes up; the petrol price has a domino effect on the price of other goods, like food, which have to be transported. And with rising oil prices and a weaker rand, the pressure of inflation is felt quite sharply by you, every time you buy groceries or fill up your petrol tank. RISING COSTS CREATE MORE DEBT One way to see that people are struggling to meet the rising costs of living on the back of weak economic growth is to look at the level of everyday debt in South Africa. “Consumers are highly indebted and funding everyday needs with debt. Further to the costs pressures felt by consumers and the business community, the recent sharp increases in the valuation roll in major urban metropolitan areas are expected to increase rates and taxes of consumers

Page 37: E CO N O M I C WO ES

who are already under pressure as a result of the rising petrol price, high food costs and transport costs. Despite these cost pressures, inflation moderated in May 2013 to 5.6% from an average of 5.9% in Q1 2013, but even the Reserve Bank is not optimistic that price increases will be contained as it foresees this reduction as temporary and could peak to 6.3% later in 2013, surpassing the inflation target upper limit,” says Ndibu Motaung, head of research at Jones Lang LaSalle. According to the National Credit Regulator, 46.8% of a total of 19.97 million credit-active consumers had impaired credit records by the end of 2012. With the cost of living rising drastically, people are unable to meet their financial obligations. Even though the interest rate remained unchanged in July, people with large amounts of debt are unlikely to feel the effect of the lower interest rate and the best way to ensure you survive the current economic conditions is to pay off debt and address the state of your finances. Before you take on any more debt, you have to ask yourself if you really need the item in question. Right now is the time pay off debts and get your finances in good shape. If they already are, then start saving money. “Despite efforts by the authorities to boost spending through infrastructure investment, the remainder of 2013 is expected to yield a weaker outlook as a result of higher cost pressures and lacklustre global demand. This is being exacerbated by the continuing uncertainty in the mining sector, where unions are demanding unrealistic pay increases, resulting in declining foreign investor confidence. However, as the United States, European and Chinese economies start to improve, we are likely to see improved exports, which in turn should start improving the economic environment. The United Kingdom is not out of the woods yet, the United States data is beginning to improve and China recently downgraded its growth forecast, although still positive above 7%; this means some improvements are expected, but the remainder of this year remains a challenge,” says Motaung. WHAT ABOUT THE PROPERTY INDUSTRY? According to Jacques du Toit, a property analyst at ABSA: “Single digit nominal house price growth is forecast for 2013. This will be the result of recent developments regarding house price growth, as well as trends in and prospects for the economy, household finances and consumer confidence, which are expected to be reflected in the performance of the residential property market.” Most of the top property agencies remain positive, like Pam Golding, whose CEO, Andrew Golding, had this to say: “While the trading conditions in the residential property market remain challenging, particularly for homeowners and aspirant home buyers who are faced with rising electricity, fuel and food costs as well as increased property rates and stringent bank lending criteria, the residential property market appears to have entered a new and more positive phase.” Seeff chairman, Samuel Seef, echoed this sentiment and added: “While the wider macroeconomic landscape is still not conducive to a real recovery, the market has settled into a new normal. Overall consumer indebtedness has reduced since 2007/8 and the banks are more willing to grant loans, although the high levels of consumer debt still constrains overall sales volumes. This notwithstanding, there is life in the market and well-

priced properties are selling, with stock shortages becoming a reality in most of the major metropolitan areas.” Despite the current woes, it’s not all doom and gloom; the property market looks set to keep up with the changes in the economy and will gradually improve as the economic situation improves in 2014. SO WHAT SHOULD YOUR BUSINESS BE DOING RIGHT NOW TO CONQUER ECONOMIC WOES? A D R I A N G O S LE T T , C E O O F R E / M AX S AY S : • Focus on strengths and core business. • Be flexible enough to be able to adapt to different situations, but not at the expense of the company’s values. • Build relationships with existing and past clients and suppliers. • Look to innovate, but ensure that before launching into something new, adequate research has been done to test the product/service. • It’s important to know what is happening in the economy, but don’t focus on it. You have no control over it.

• They call it an economic cycle because that’s exactly what it is – a cycle. Some are longer than others.

• History shows that the companies that have succeeded in buoyant and challenging economic times are those that have developed a proven systematic approach to business – a formula of sorts that rarely changes. • Jim Collins best describes this as the SMaC recipe. A simple, methodical and consistent approach to business that requires discipline, creativity, a mindset of “expecting the unexpected” and passion. • This doesn’t mean doing what you always did. It means doing the right things right and doing more of them, while at the same time evaluating whether you are currently ‘doing the right things’. While these are testing times and the last part of this year does not look set to be any better, the best way to survive in a tough economic climate is to understand the process and plan for it. If you can predict what the economy is going to throw at you, then you can ensure you weather any storm.

BY COLLEEN MAY

Page 38: B R I N G R E TA I L T O T H E P E O P LE

Eikestad Mall where Nedbank Corporate Finance holds an equity stake. Marketed by Pam Golding Properties

BRING RETAIL TO THE PEOPLE

Investors are increasingly capitalising on retail success in areas where consumers live and work within close proximity

Bankers and developers say they no longer regard high foot traffic as unique to top end malls in exclusive residential areas. Shopping malls in and around townships, where consumer convenience includes short distances to retail and entertainment destinations, are also reflecting high foot traffic compared to those in rural regions where consumer shopping experiences are largely dependent on limited means of public transport, resulting in low foot traffic. The ripple effect following the demise of desolate shopping malls in isolated areas remains the worst nightmare for consumers, owners, bankers and developers. “By bringing retail to the people, historic events can be rectified,” says Richard Thomas of Nedbank Corporate Finance. Although consumer spending remains affected by infrastructural challenges, such as transport and limited employment opportunities close to home, retail convenience does stimulate economic growth. When it comes to investment funding, Thomas says it is essential to understand the growth within communities, as well as its ability to support a retail facility within a specific environment. This principle has led to various successful retail developments in townships, financed by local financial institutions, while aiding sustainable community development, playing a role in uplifting the country. One such investment is the R123.5-million redevelopment of the township facility at Kagiso Mall near Krugersdorp, which entailed a demolition and extensive rebuild before reopening last year. “Strategic planning for the execution of funding is vital as different situations are playing out in various property sectors,” says Thomas.

“When considering any good funding opportunity, be it into the listed sector or directly into property, it is essential to understand the development space, as it relates to the consumer.” He says when feasibility studies are completed, it will show the demand required for a specific space, while accounting for the demographic ability of consumers to support a new shopping centre. Growth resulting from demand and supply within different sectors of the commercial property market is also stimulating residential development, both in inner city and suburban spaces. This phenomenon is particularly obvious at high foot traffic properties, including Cape Town’s V&A Waterfront and Century City, as well as at Melrose Arch in Sandton and Menlyn Park in Pretoria, where increased demand for retail and office space has led to catering for the lifestyle needs of consumers. This includes new residential development, in particular that of sectional title units such as recently seen at the V&A Waterfront. The provision of high quality office space provided at the V&A caters to a specific business sector that provides the momentum with which to attract top end retail tenants. This has also resulted in several new high end brands becoming available to a sophisticated consumer base. V&A Waterfront CEO David Green says that one of the upshots of this demand is a huge upgrade of the precinct’s broadband facilities. He says that by catering directly to tenants, residents and tourists, high end consumers now have the ability to check prices of top brands at boutique outlets online, while in a store.

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up using the latest technologies with a focus on stability and usability making it highly adaptable to the requirements of users. Fusion provides a comprehensive toolset to manage every aspect of your Agency from feeds to multiple portals, lead management and matching all the way through to deal tracking and reporting. Shareholding is open to any and all registered Agencies.

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mark@fusionagency.co.za

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Page 40: B R I N G R E TA I L T O T H E P E O P LE

Also vital is the recognition of potential long-term growth when doing feasibility studies. A recent example of such potential investment is seen in Braamfontein, where Nedbank Corporate Finance has granted R42-million to Capstone Property Group for the purchase of The Media Mill office park. This building is positioned within close proximity to a retail strip at 44 Stanley. Here, a trendy set of creative media employees have easy access to an eclectic mix of décor, design and entertainment offerings. “As a result, existing retail facilities here are set to benefit from increased foot traffic generated by The Media Mill,” says Brian Azizollahoff of Capstone Property Group, a former executive at the Resilient property group. He says the area is calling out for a residential component that would take advantage of a ‘work, play, live’ concept as seen at the successful Wembley Square development in Gardens, Cape Town. Other precincts benefitting from retail demand include university towns such as Grahamstown, Stellenbosch, Rondebosch and Potchefstroom, as students represent a considerable number of retail consumers, and they are also residents within close proximity of retail facilities. Research shows that retail trends in these towns rely heavily on the stability of 11-month student accommodation leases. This, despite a one-month vacancy period typically attracting brief, high season holiday rentals, as well as preferred vacancies for landlords to complete annual maintenance prior to January intake. The financing and development of the massive upgraded Eikestad Mall has resulted in additional top end residential accommodation to cater for increasing consumer demand in the area. “However, as the dynamics of communities change for the better, increased wealth makes greater demands on retail facilities,” says Thomas. This has been seen at Cavendish Square in Cape Town’s

affluent Southern Suburbs, where initial foot traffic has changed significantly over 20 years. This motivated an extensive upgrade resulting from a change of LSM levels, mostly of Grade 3 to 4, to top end consumer foot traffic within LSM 1 and 2. But, high foot traffic is not the answer to every aspect of successful retail development. Property investors and financiers are lured by reliable tenants, who play a vital role in attracting consumers in the first place. And, to attract tenants in good standing, property companies able to prioritise good management that produces well-run centres automatically show better occupancy rates than neglected and poorly managed facilities. Coastal retail centres dependent on seasonal demand are known to suffer the effects of slow economic growth. Yet, in areas where large infrastructural and industrial investment is present, small coastal towns have been known to thrive. The West Coast town of Langebaan is currently seeing increased demand for retail space, directly resulting from development taking place in nearby Saldanha Bay. Emil Weiss, Rawson Property Group’s Langebaan franchisee, says that retail rentals along the main road have doubled in the past five years, where demand is seeing rental escalations to have reached R100/m2. Weiss maintains that contrary to public perception, the town is moving away from being only a holiday destination – as proven by approximately 700 daily commuters between the city and neighbouring towns.

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Page 42: H OW D O AC T I O N S F I T I N T O T H E S O U T H A F R I CA N P RO P ERT Y P U Z Z LE ?

HOW DO AUCTIONS FIT INTO THE SOUTH AFRICAN PROPERTY PUZZLE? Auctions in South Africa have typically been viewed as an effective means to dispose of properties in liquidation or deceased estates, but auctioneers believe that auctions always have, and always will be, a viable way of selling property. Property Professional did a Q&A with four of the country’s leading auction companies to get their views

Lightstone findings on auctions as a sales mechanism for distressed properties Lightstone, a provider of comprehensive data, analytics and systems on property, took a look at the behaviour of distressed homeowners who could no longer afford the monthly mortgage payments and were issued with a Sale in Execution notice (SIE). Lightstone’s findings showed that the Distressed Sales Factor (DSF) of distressed sales that transact in the market are on average 13.2% higher than the DSF of properties sold at auction. The findings also indicate that the average DSF for properties currently sold at auction is 55% (slightly up from 53% in 2012) and that of market transactions being 68% (slightly up from 66% in 2012). Another implication of this finding is that a distressed property transacting in the market will fetch on average 24% more than it would at an auction. This difference between the median DSF of auctioned and market distress sales has been constant over the period of 2007 and 2012 and is not currently decreasing. When comparing the DSF of market transacted and auction distressed sales it is clear that market transacted distressed sales sell at a price closer to market value than those properties sold at auctions. Downes notes that even if the property is situated in a suburb where there is a lower demand for properties, the market still outperforms auctions by about 10%.

Jonathan Smiedt CEO OF CLAREMART AUCTION GROUP Q: What, in your opinion, is the difference in perception between residential property auctions and commercial property auctions and is the perception correct? A: There has traditionally been a perception in the minds of the public that most residential property being marketed by auctioneers falls within the distressed sale category. Contrary to that belief, the public has in the past also maintained a perception that auction was the mechanism of choice to sell commercial property - a perception substantiated by our group submitting up to 35 investment properties at our monthly multiple auctions. In reality, these perceptions are not entirely true as we are often instructed by private sellers of residential property, who simply prefer the auction vehicle as a means of sale, and likewise we are marketing various commercial properties within our deceased estate, legal instruction, liquidation and insolvency estate categories. Q: What percentage of your auctions are distressed sales versus ‘normal’ sales in both the commercial and residential market? A: Regarding commercial property, approximately 90% of our mandated properties are private and 10% distressed instructions. We are seeing that, on average, 60% of our residential instructions come from the private sector and 40% are of a distressed nature. This percentage has a variance, though, as we find that many of our properties in excess of a R3-million mandate price tend to come from private sellers. Q: What would your response be to Lightstone’s findings? A: We consider the Lightstone’s findings surprising as our group has often sold property on auction for a far higher price than the property was able to achieve during the real estate mandate period. Some properties, both distressed and private instructions, have at auction achieved prices in excess of 30% of the expected outcome. Prices used to compare with auction sale prices are often the advertised price and this is a figure that is often not achievable.

Page 43: H OW D O AC T I O N S F I T I N T O T H E S O U T H A F R I CA N P RO P ERT Y P U Z Z LE ?

It should also be taken into account that the Lightstone assessments are based on computerised averages and as valuers, we find these online average ‘values’ have the potential tendency to inflate or deflate the true prices in a particular area. When it comes to the difference between the median DSF of auctioned and market distressed sales being constant over the period of 2007 and 2012 and not decreasing, we are once again not experiencing this observation by Lightstone. We have seen that over the past few years there has been a steady decrease in distressed instructions, particularly insolvencies and liquidations, as many of the banks have developed internal structures to assist their clients in debt and financial management. Q: Do you believe the auction platform reflects a more realistic picture of the property market? Please explain the reasons for your answer. A: Yes, the auction platform is an excellent barometer of market conditions as whenever there is an upswing in the economy and related property market; we see huge demand for luxury and development property, for example. When there is a downturn economically, which naturally creates adverse effects on the property market; we see a higher incidence of distressed properties on our auction floor. Q: What, in your opinion, is the benefit of an auction as a sales platform – for both residential and commercial property? A: For both property categories transparency is the fundamental advantage with auction, which cannot be achieved in a signed offer where the bidder is competing against unknown competitors offering unknown amounts. Also there is the immediacy element of an auction, which also benefits the highest bidder in knowing that his or her bid will be taken under serious consideration by the seller and confirmed within the stipulated timeframe. This allows buyers to continue their search for the ideal property and not lose out on other opportunities. These ‘other opportunities’ are another advantage apparent only at auction. There are a few select auction houses that facilitate multiple residential and commercial auctions to showcase their entire portfolio. We also believe that the marketing capabilities, methods and reach used by auction houses casts a wider net and often yields more favourable results. Finally, there is a growing need in the market for arm’s length deals, where sellers are able to dispose of their property without lengthy and complicated marketing, viewing and negotiation processes with brokers. Q: How do you see the future of the auction industry in the South African real estate context? A: Personally, after 30 years in the industry, I can say that I have seen a total shift in buyer confidence due to ongoing consumer education on behalf of reputable auctioneers, which has resulted in more sellers and buyers utilising the auction mechanism. Auction has become far more competitive over the years and

the levels of service have altered and increased dramatically to accommodate that growth. Furthermore, auctions are attracting crowds unseen in previous years with unprecedented attendances of over 200 members of the public being present at many of our auctions. What is also a sign of an industry that is healthy and being accepted as an effective sales vehicle for quality property is that we are seeing double the amount of properties on our auction floor as well as properties that have infinitely higher values than previously seen at auctions. In today’s climate, we are seeing up to 100 homes and commercial properties being auctioned on a monthly basis. This shift and growth is evident and is quantifiable even in the past five years. Lastly, the mechanism is steadily becoming the first choice of asset disposal for many large corporate institutions and likewise this trend is gaining ground in the private sector as well and correlates with the growing market demand for arm’s length negotiation.

Rob Whiteley MANAGING DIRECTOR OF RAWSON AUCTIONS JOHANNESBURG Q: What, in your opinion, is the difference in perception between residential property auctions and commercial property auctions, and is the perception correct? A: Mention the word ‘auction’ and everyone immediately transposes the word with ‘bargain’. While this is true at some auction events, the property industry has, for many years, disposed of immovable assets through this method – at prices often far in excess of the seller’s expectations. Q: What percentage of your auctions are distressed sales versus ‘normal’ sales in both the commercial and residential market? A: Let’s qualify one thing. All the properties (whichever asset class) are not always in distress when we put them on auction. The vast majority are there because the seller is motivated to sell within a short time window. They may be leaving on a jet plane, emigrating to greener grass or downsizing due to empty nest syndrome and have already bought elsewhere. The

Page 44: H OW D O AC T I O N S F I T I N T O T H E S O U T H A F R I CA N P RO P ERT Y P U Z Z LE ?

reasons for selling are diverse – but the motivation for selling at auction is universal – to achieve a market related price within a defined time period. While bank repossessions are far more common in the residential asset class, commercial buildings (shopping centres, petrol stations, warehouses etc) also appear on liquidators’ lists. We tend to find that the ratio of distressed residential to distressed commercial auction sales is approximately 10:1 or even more. All these properties, though, have to be sold as quickly as possible in order to minimise liability costs and maximise the sale price and the only method of sale that can reasonably achieve this is by way of public auction (as opposed to a Sheriff’s auction – which is far more onerous for the seller).

Q: How do you see the future of the auction industry in the South African real estate context? A: Property auctions have come a long way in South Africa in a relatively short space of time and are now regulated by the Consumer Protection Act (CPA) and the Estate Agency Affairs Board (EAAB), giving both the seller and buyer alike a high level of security and confidence when dealing with an auction house. Terms and conditions, like in the television commercials, also do apply, but they have to either be read out at the auction, or be available in hard copy so that everyone is aware of them before they bid.

Q: What would your response be to Lightstone’s findings? A: We have always found that good properties fetch good prices and, at an auction of around 30 bank-repossessed residential properties, which were all held on site at each property, we achieved an average of 80% of market value and a clearance (acceptance) rate of 83%. A leading bank quotes the average figures of 57% of value if the property is sold by the Sheriff. Add to this all the acrimonious discord that accompanies this type of sale, the court appearances, the disharmony within the family etc, and you begin to understand why the distressed seller prefers the ‘friendly auction’ route before the Sheriff knocks on their door. Q: Why do you believe the auction platform reflects a more realistic picture of the property market? A: Property auctions are the only true indicator of current market value. They attract a motivated and qualified buyer and the price they bid is the price that the market is prepared to give for that property, on that day. If the value achieved at auction is lower than expected, it usually means one of two things: There were no real, motivated buyers, or the property simply as not a good one (there’s no demand for it). Q: What, in your opinion, is the benefit of an auction as a sales platform – for both residential and commercial property? A: We are finding a substantial increase in the demand for non-distressed residential auctions coming from sellers who are tired of Sunday show days and non-motivated buyers appearing at 6pm wanting to warm their feet. Sure, buyers normally have to view the property before they bid (although some don’t) but marketing a property auction is short and sweet – normally taking place over the two weeks or so leading up to the auction, so inconvenience is minimised. Commercial non-distressed sellers have seen the auction method as a primary course of sale for many years – many opting only for this process to achieve a quick disposal. They like the fact that they can control the whole process, from sale conditions (deposit amount, guarantee date etc) up to the date and time of the event.

Roy Lazarus CEO OF PARK VILLAGE AUCTIONS Q: What, in your opinion, is the difference in perception between residential property auctions and commercial property auctions and is the perception correct? A: I don’t believe there is a difference in the perception towards residential and commercial property. In South Africa, there is a perception that property auctions, residential or otherwise, stem from a distressed scenario, but this no longer applies. Increasingly, we are seeing more people and businesses voluntarily going the auction route to sell their properties. Q: What percentage of your auctions are distressed sales versus ‘normal’ sales in both the commercial and residential market? A: Approximately 50/50. Q: What would your response be to Lightstone’s findings? A: Generally speaking, we have found that the properties we sell at auction achieve similar or higher values to those achieved via traditional channels. Indeed, we have a vested interest in achieving the highest possible values, which is why we market our properties (and assets) so extensively and create as much hype as possible. It is worth noting that Lightstone’s findings support my initial statement that, increasingly, auctions are not being used purely as a sales mechanism for forced sales.

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Q: Do you believe the auction platform reflects a more realistic picture of the property market? A: In a nutshell, yes. In our case, we field properties across the spectrum. As such, we are in tune with market trends and limitations and can therefore market properties appropriately.

the auction process and it is an effective, dynamic and nonsuspensive environment that brings numerous benefits to both buyers and sellers alike. This view is a more accurate reality of the auction industry and process and in reality residential properties on auction benefit from these same advantages.

Q: What, in your opinion, are the benefits of an auction as a sales platform – for both residential and commercial property? A: There are myriad benefits to selling property via auction. For example, properties are marketed to large, receptive audiences; auctions bring together qualified buyers prepared to buy; there are no suspensive conditions or loose ends and transactions are brought to finality quickly.

Q: What percentage of your auctions are distressed sales versus ‘normal’ sales in both the commercial and residential market? A: Aucor Property specialises in commercial, industrial retail and residential properties across the spectrum, however, we have a very low percentage of distressed properties on our books. Currently the figure stands at approximately 2% of total sales. We proactively seek to work with listed property funds, large corporates and private individuals looking to buy and sell property in order to grow their investments or consolidate

Q: How do you see the future of the auction industry in the South African real estate context? A: At present, the real estate industry as a whole is somewhat over-regulated and we’re hoping that the processes will be streamlined. In terms of the auction industry, we have every confidence that South Africa will follow Australia’s lead, where auctions are the sales mechanism of choice.

Mark Kleynhans DIRECTOR OF AUCOR PROPERTY Q: What, in your opinion, is the difference in perception between residential property auctions and commercial property auctions and is the perception correct? A: There definitely is a difference in perception from a buyer’s point of view between the two categories. Historically distressed residential auctions carry the stigma of debt, a person losing their assets due to financial implications, such as repossession or death as in the case of deceased estates. Commercial property, however, is viewed very differently. Firstly, it is important to point out that the market of commercial buyers is a completely different demographic to buyers within the residential sector. The auctioning of commercial property is seen in a positive light as savvy buyers understand that true values are driven by

their current portfolios. For us it is about more than just taking a property to auction, it is about strategically understanding our clients, their needs, the market and demand. Q: What would your response be to Lightstone’s findings? A: Statistics and the figures quoted do present a slightly one-sided view of the market. In our opinion it is fundamental to balance the value of time and money in this process. Often sellers will hold out for as long as possible to try and achieve the best price for a distressed property by selling via private treaty. The situation is completely different once a property has been repossessed and the banks or liquidators need to get a quick sale and turnaround and that is when you see these properties coming to the auction floor. In reality, again, this is where the market really does dictate the price and value but, to reiterate, the benefit is that the bank/liquidator knows that the sale will be quick and non-suspensive and therefore it is a route they generally prefer to take. Q: Do you believe the auction platform reflects a more realistic picture of the property market? A: Absolutely – the auction floor is a real reflection of what price the market is willing to pay for a property and therefore what the perceived value of that specific property is. Q: How do you see the future of the auction industry in the South African real estate context? A: We believe that the auction industry is going to continue to grow as a preferred tool for buying and selling of properties and we will do our part to educate the market on the benefits of using the auction platform to help grow the category. In global markets, auctions are the only way to buy and sell property (Australia is an example) and as new trends and techniques develop, so we will encompass those into our business and market to further develop the channel.

BY MICHELLE FUNKE

Page 46: M A R K E T S H A R E

PROPERTY FINANCE IN SOUTH AFRICA Market Share of Active Bonds within Province

Property Professional speaks to some of the leading industry statistic and insight providers to find out the market share per bank of active bonds within each province as well as the average bond, purchase amount and cash purchase amount per age group and province in the country.

EASTERN CAPE

FREE STATE

GAUTENG

KWAZULU-NATAL

LIMPOPO

MPUMALANGA

NORTH WEST

NORTHERN CAPE

UNKNOWN

WESTERN CAPE

50,00% 40,00% 30,00% 20,00% 10,00% 0,00% ABSA

FNB

INVESTEC

NEDBANK

OTHER

STANDAR

UNKNOWN

Credit: Information supplied by Lightstone www.lightstone.co.za

Average bond, purchase amount & cash purchase per age group

0-25 26-35 36-45

R1 400 000

46-55

R1 200 000

56-65

R1 000 000

65+ R800 000 R600 000 R400 000 R200 000 R0 AVERAGE BOND

AVERAGE PURCHASE AMOUNT

AVERAGE CASH PURCHASE AMOUNT

Page 47: M A R K E T S H A R E

AVERAGE BOND

Average bond, purchase amount & cash purchase per province

AVERAGE PURCHASE AMOUNT AVERAGE CASH PURCHASE AMOUNT

R1 400 000 R1 200 000 R1 000 000 R800 000

WESTERN CAPE

NORTHERN CAPE

NORTH WEST

MPUMALANGA

LIMPOPO

KWAZULU-NATAL

GAUTENG

R200 000

FREE STATE

R400 000

EASTERN CAPE

R600 000

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

KNOWING PROPERTY INSIGHTS* AND OUT 5 TYPES

665 000 MEDIAN

OF PROPERTIES

ANALYSIS REPORTS

NUMBER OF TRANSFERS FOR 2012

51.8

MILLION

PEOPLE

PERCENTAGE HOUSEHOLDS IN FORMAL DWELLINGS

9,4

13.2

MILLION

MILLION PROPERTIES LISTED

EMPLOYED

AVERAGE

24.2

Property Intellect provides an accurate, reliable and constantly updated data research tool that results in every business decision being successful.

AGE IN RSA

Property Intellect’s searches are smarter with increased functionality and richer data, along with uncapped reporting. But don’t take our word for it, give it a try. We know* you’ll love it.

PERCENTAGE ‘AT HOME SINGLES’

103 204 AVERAGE ANNUAL HOUSEHOLD INCOME

336 734 MEDIAN

PURCHASE PRICE FOR 2012

4.9

MILLION SPEAK ENGLISH

SEARCHES AVAILABLE

The Smart Way to Search Powered by

tel: 0861 53 53 53 www.propertyintellect.co.za

Page 48: P RO P ERT Y P RO F ES S I O N A L N EW AG EN T S O N T H E B L O C K

PROPERTY PROFESSIONAL

NEW AGENTS ON THE BLOCK

MANDY MITOULIS

BRANDON MARSH

PA M G O LD I N G P RO P ERT I ES SEA POINT

PA M G O LD I N G P RO P ERT I ES F O U RWAY S

WHY DID YOU DECIDE TO PURSUE A CAREER IN PROPERTY?

Property has always been my passion; paging through the property pages became my hobby and as soon as my kids could fend for themselves, I decided to take the leap.

I was approached by Byron Thomas (a top PGP agent) and he convinced me to start at Pam Golding Properties (PGP). I was very fortunate to be paired up with Kyle Ebben (a PGP Douglasdale Gold Club agent) who was more than willing to share his knowledge and expertise.

WHAT DO YOU FIND TO BE THE MOST ENJOYABLE AND MOST CHALLENGING ASPECTS OF THE JOB? Most enjoyable – being your own boss in a way. Challenging – balancing a demanding 24/7 job with family life. WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY? Honesty and integrity as well as a good dose of stamina! Selling people’s homes and sometimes their most valuable asset requires empathy and a lot of understanding and patience in order to gain confidence and trust. WHAT ARE SOME OF YOUR CAREER GOALS? My goals are simple. They are to be the best I can be, to continuously improve on my personal best, to be the agent of choice in my hood (freehold property in de Waterkant, Green Point and Sea Point) and to try to be successful in all I do. I do believe in ‘no pain – no gain!’

NUMBERS TO KNOW

75.5%

WHAT DO YOU FIND TO BE THE MOST ENJOYABLE AND THE MOST CHALLENGING ASPECTS OF THE JOB? The most enjoyable aspect in property is that I get to interact with people from all walks of life; the most challenging is managing all of their expectations. WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY? To become a good agent you have to have a passion for what you do! People skills and negotiating skills are essential! WHAT ARE SOME OF YOUR CAREER GOALS? My career goals are to move up the Pam Golding ladder. Lastly I would just like to say thank you to the whole Pam Golding family for welcoming me, guiding me and believing in me.

Most recent debt-to-disposable income ratio for the household sector stood at 75.4%, which is down from the 2009 peak of 83%. Property24 - Interest rates impact on SA consumers

Page 49: P RO P ERT Y P RO F ES S I O N A L N EW AG EN T S O N T H E B L O C K

CANDICE VAN RIET

BELINDA LISTER

R E / M AX LI V I N G

H U I Z EM A R K R U S T EN B U RG

WHY DID YOU DECIDE TO PURSUE A CAREER IN PROPERTY?

I have a degree in marketing and instead of going the corporate route I realised there is a gap in the real estate market for young professional realtors. I believed that to move forward with my career I had to have a passion for whatever I decided to pursue. I enjoy working with different people on a daily basis, making a difference in their lives, and I also have a fascination for the property industry in general.

I have been an entrepreneur my whole life and have been involved in different sectors of the market. Real estate always intrigued me and when I closed the doors of my last retail business, specialising in sportswear, I started with my research. I had to make sure that the real estate business in Rustenburg was challenging but lucrative, so I would be able to be successful financially. I also wanted to be part of a highly motivated team that strives for professionalism and after various conversations and interviews with Ryno Cilliers, I decided to join the Huizemark team.

WHAT DO YOU FIND TO BE THE MOST ENJOYABLE AND THE MOST CHALLENGING ASPECTS OF THE JOB? I enjoy helping my clients buy their first property as an investment or to live in and to see the joy on their faces makes my job worth it. Even helping tenants settle into a new area and seeing that they’re at peace knowing they have a place to stay means a lot to me. The most challenging part of this industry is the bad image agents have created in the past and even today, which ultimately affects us new agents as the public see us as being greedy etc., and having to explain to the public that we are the new generation, who are educated, ethical and look out for the best interests of all parties. WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY?

WHAT DO YOU FIND THE MOST ENJOYABLE AND THE MOST CHALLENGING ASPECTS OF THE JOB? The best part of my job is to do new listings. I have come to the conclusion that I was an investigator in my previous life. I must admit that I have a knack for obtaining new mandates, and soluble ones I must say. I suppose that when a sale registers and the commission gets paid out that it must be very rewarding, but I’m in the process and will let you know when it happens. The most challenging bit must be to do price counselling with sellers. It seems that Rustenburg caught a very favourable wave in the past when it came to house prices, but I find that things have stabilised a bit and that sellers do not get what they initially wanted. How does one fast-track to the correct pricing? Here again, I will let you know when I have the answer to the question.

A good agent is one who is honest and puts the client’s needs and interests first, who is not selfish and greedy, who loves to deal with different people, has a passion for property as this is their product, therefore believing in the property industry is important.

WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY?

WHAT ARE SOME OF YOUR CAREER GOALS?

Enthusiasm, good communication skills, patience, determination, self-discipline and a personality that can adapt to different situations and characters (i.e. the clients).

My personal goal is to be able to give the best service and advice so that my clients can trust me when dealing with their homes and that my name will be spread amongst family homes, restaurants and at work. My career goal is to ensure that I don’t restrict myself with regards to doing rentals or sales. I would like to continue to do both in the Atlantic Seaboard and City Bowl area.

WHAT ARE SOME OF YOUR CAREER GOALS? I want to establish myself as a real estate professional in Rustenburg who is honest, hardworking and positive. Obviously you strive for financial success, but it seems like this job is so rewarding in so many other ways. My ultimate career goal is to be a real estate professional for as long as I can be and to still enjoy it as much as I do now 10 years from now.

Page 50: P RO P ERT Y P RO F ES S I O N A L N EW AG EN T S O N T H E B L O C K

KATE SMITH

PATRICIA SOLOMON

JAW I TZ P RO P ERT I ES J O H A N N ES B U RG

C H A S EV ER I T T I N T ER N AT I O N A L FA L S E BAY

WHY DID YOU DECIDE TO PURSUE A CAREER IN PROPERTY?

Although based in the United Kingdom at the time, I was keen to invest in property in South Africa. As a result, I spent many hours with my agent going backwards and forwards between Johannesburg and London, sorting out paperwork. My fascination with the industry grew as I often ended up accompanying my agent to appointments. These were invaluable as they gave me a really good insight of the dynamics of buying and selling property. During the process of my offer and bond application, I took the liberty of referring buyers to available properties that I had previously viewed. To my delight, four of them bought.

For me it all started when I joined Chas Everitt as an office administrator. This enabled me to gain first-hand knowledge of and experience in the real estate business and I also became fascinated by the daily activities and challenges faced by the

WHAT DO YOU FIND TO BE THE MOST ENJOYABLE AND THE MOST CHALLENGING ASPECTS OF THE JOB? Helping people realise their dreams. Finding the right home for a buyer is incredibly satisfying; as is achieving an acceptable price for a seller. With everybody happy it really is a win-win situation. One of the most challenging aspects is aligning people’s expectations with the prevailing market. WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY? Firstly it is essential to be up to date with legislation pertaining to property in addition to the latest bank lending criteria. An agent should be professional, transparent, knowledgeable and enthusiastic in order to build trust with buyers and sellers. Maintaining a constant flow of communication keeps parties informed of what is happening at all stages of the process. Being a self-starter and one who thrives on competition is vital. The industry is exceptionally competitive and it’s up to the individual to make things happen. Being a competent negotiator is a prerequisite as is the ability to empathise with both buyers and sellers. Buying or selling a home can be very emotional for most people. Staying up to date with local market conditions such as the latest prices, buying trends, the length of time on the market, tracking what is happening in the market and researching sales prices achieved via the deeds are all essential elements. WHAT ARE SOME OF YOUR CAREER GOALS? To be the first name my residents think of when they think of property – in all aspects of the market such as proposed alterations, market information, buying, selling or investing.

agents. Then a chance came for me to begin working as an intern estate agent for Chas Everitt in my own community and now, even though my journey as a ‘rookie’ has just begun, I am looking forward to the opportunities it is already giving me to grow and develop in an industry I am passionate about. WHAT DO YOU FIND TO BE THE MOST ENJOYABLE AND THE MOST CHALLENGING ASPECTS OF THE JOB? What I find both enjoyable and challenging in my job is to ensure that my clients’ needs are fulfilled. I also think it’s important to maintain a balance between quality family and social time and work, and enjoy the fact that my job enables me to do this. And while it is a challenge to have to adapt to many different people and situations in this job, it is also wonderful because there is no room to ever be bored or in a rut. WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY? I would say that the number one requirement for estate agents is passion. Having excitement and passion for what you do every day has a positive effect and draws people to you. Having empathy with your clients and striving to really understand their needs is also important. In addition, estate agents should be knowledgeable about the community that they are providing a service to, and, of course, always conduct business in a trustworthy manner, no matter what the consequences. WHAT ARE SOME OF YOUR CAREER GOALS? My current focus is to successfully complete my NQF level 4 qualification before the end of the year while continuing to partake in other educational workshops and courses. Once I have achieved the Level 4 and PDE 4, I will be a full status estate agent and be able to move on from my intern status. Then I plan to continue to grow and further strengthen my knowledge as an estate agent within Chas Everitt and, with the support of my mentor as well as my friends and colleagues, become the agent that my clients recommend to their friends and family.

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LIEZL JOUBERT

PAUL SALE

R AW S O N P RO P ERT I ES G E O RG E

EN G EL & VÖ LK ER S S O U T H ER N S U B U R B S

WHY DID YOU DECIDE TO PURSUE A CAREER IN PROPERTY?

WHY DID YOU DECIDE TO PURSUE A CAREER IN PROPERTY? I decided to become an estate agent firstly because I enjoy working with people and also the whole selling process and ‘matchmaking’ between buyer-property-seller. And secondly because of the freedom of movement and the room for initiative that estate agency work provides. Being a mother, this is a very important factor for me. Thirdly, the possibility of earning a very high income. WHAT DO YOU FIND THE MOST ENJOYABLE AND THE MOST CHALLENGING ASPECTS OF THE JOB? The most challenging aspect of this job by far is to be able to handle the emotional stress that goes with every transaction. The saying that “there is no such thing as an easy transaction” is absolutely true! To keep an emotional distance is not easy at times. The most enjoyable (apart from the monetary value) is the interaction between people and the very interesting people you get to meet. Also the satisfaction of seeing a family settled into a new home and the new owners’ pride when buyers take occupation WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY? Optimism, diligence, honesty and being positive. A sense of service and a willingness to go the extra mile. This is by no means an easy career, but it can be a highly rewarding one, provided the agent is persevering and honest and able to keep a positive attitude despite the rejections and failed deals which are part of the job. WHAT ARE SOME OF YOUR CAREER GOALS? I aspire to have my own agency one day and to complete my NQF5 studies.

NUMBERS TO KNOW

R6-BILLION

I have always been passionate about property and the property market directly affects everyone at some point in their lives, which makes it a more interesting and personal business to be in. WHAT DO YOU FIND TO BE THE MOST ENJOYABLE AND THE MOST CHALLENGING ASPECTS OF THE JOB? I love interacting with clients. Seeing a deal come together and the joy and satisfaction that goes with it is infectious and highly rewarding. In the current market, it can be frustrating that the lending criteria are still very stringent, resulting in fewer bond approvals, disappointed buyers and, of course, fewer sales. WHAT CHARACTERISTICS, IN YOUR OPINION, MAKE FOR A GREAT ESTATE AGENT/BROKER AND WHY? • • • •

Professionalism – always be on time, have an in-depth knowledge of both the buying and selling process, the general property market and, of course, the area in which you work. Dedication – work hard. Trustworthiness and integrity – act fairly, honestly and objectively for both buyer and seller. Be empathetic – it’s an emotional business transaction!

WHAT ARE SOME OF YOUR CAREER GOALS? To have staying power – I admire agents who are consistent achievers in both tough and buoyant markets, and I hope to become one of them. To build a loyal client base – I also admire agents who have sold the same property many times, or who have brokered property transactions for the same clients again and again, depending on whether they are growing as a family or scaling down to retirement.

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Page 54: P RO P ERT Y P RO F ES S I O N A L T O P P ER F O R M I N G AG EN T S

TOP PERFORMING AGENTS

PROPERTY PROFESSIONAL

CHANTAL WILLIAMS J H I P RO P ERT I ES

WHAT ARE YOUR TOP THREE SECRETS TO SUCCESS? 1.

There is no substitute for hard work. This involves being alert and staying on top of your game at all times in order to balance people’s needs to what is required in a very competitive environment.

An agent needs to be dedicated and committed to helping people find the right property in the shortest possible time. This job is all about offering people the best possible service in a sincere and helpful manner so that they remember you and use your services again and again.

3. Be able to deal and communicate with people easily and effectively. Relationships are the key to success in this business and lasting relationships will ensure repeated business.

To be conciliatory in today’s tough market conditions and never give up no matter what obstacles are put in your way. Persistence

56%

WHAT IS THE MOST VITAL BUSINESS TOOL THAT ESTATE AGENTS SHOULD HAVE AT THEIR DISPOSAL IN TODAY’S MARKET AND WHY? • Accurate facts, in-depth knowledge and passion for the market. • Fast and efficient communication channels in the form of cell phones, email and Internet connections. • Sound relationships with landlords and tenants. • A solid reputation for getting things done in an ethical manner. DO YOU REMEMBER THE FIRST PROPERTY YOU SOLD? PLEASE TELL US ABOUT IT. Yes. My first lease was with a travel agency where I placed them on the corner of Windermere and Innes Road, Morningside, Durban, 12 years ago. I still use their services for my travel arrangements and it has taught me that long lasting relationships are the key to a broker’s success. WHAT ADVICE WOULD YOU GIVE TO NEW KIDS ON THE BLOCK ABOUT MAKING A SUCCESS OF THEIR CAREER IN PROPERTY?

WHAT IS THE ONE THING YOU WISH SOMEONE HAD TAUGHT YOU OR TOLD YOU WHEN YOU FIRST STARTED OUT IN PROPERTY AND WHY?

NUMBERS TO KNOW

is the name of the game as agents can get despondent when deals are lost. Furthermore, to bear no grudges or ill-feelings and approach every new situation with the same enthusiasm.

There will never be any substitute for hard work, knowing your properties, their landlords, their tenants, their requirements, following up leads, being attentive to changes in the market etc. To be level-headed/upfront and see every situation differently. To see success as a privilege in today’s environment.

CEOs have rated China as the world’s top destination for foreign investment. According to the survey reports, more than half (56%) of CEOs surveyed chose China above other major and emerging economies including Brazil, Russia, South Africa, India and the US. Moneyweb - China remains top destination for foreign investment

Page 55: P RO P ERT Y P RO F ES S I O N A L T O P P ER F O R M I N G AG EN T S

JANNIE WESSELS R EN P RO P CO M M ERC I A L

TIFFINY HANCOCK H A RCO U RT S G R EEN AC R ES, H OW I C K

WHAT ARE YOUR TOP THREE SECRETS TO SUCCESS?

1. Extremely hard, dedicated and consistent work. 2. The highest possible level of professional service. 3. Respect for people and the profession.

I know the industry and specifically my product extremely well; therefore I have confidence in what I am selling. I have a policy of being totally open and honest with buyers and sellers, gaining their trust and respect, even if it means sometimes losing sales that weren’t right for either party. I do my best to help buyers and sellers through the process of the sale, explaining each step along the way.

WHAT IS THE ONE THING YOU WISH SOMEONE HAD TAUGHT YOU OR TOLD YOU WHEN YOU FIRST STARTED OUT IN PROPERTY AND WHY? Don’t do it for the money, do it for the profession – don’t give the public reason to disrespect your profession by what you do and how you do it.

WHAT IS THE ONE THING YOU WISH SOMEONE HAD TAUGHT YOU OR TOLD YOU WHEN YOU FIRST STARTED OUT IN PROPERTY AND WHY?

WHAT IS THE MOST VITAL BUSINESS TOOL THAT ESTATE AGENTS SHOULD HAVE AT THEIR DISPOSAL IN TODAY’S MARKET AND WHY?

I was trained by the best and was always guided on the right path by my principles so I can’t think of anything pertinent.

The skill to match supply and demand – to know which property is the right solution for the right client. It’s all about listening, analysing and being honest in your motive (not for the money).

WHAT IS THE MOST VITAL BUSINESS TOOL THAT ESTATE AGENTS SHOULD HAVE AT THEIR DISPOSAL IN TODAY’S MARKET AND WHY? Technology. In this day and age of social media one has to be available 24 hours a day and on every available platform.

DO YOU REMEMBER THE FIRST PROPERTY YOU SOLD? PLEASE TELL US ABOUT IT. A very basic little two-bedroom house in Welkom in the early ‘90s. I was embarrassed and didn’t want people to know that I was the agent. Later I learned that that deal was the most important deal in my life – it taught me all the things I refer to above!

DO YOU REMEMBER THE FIRST PROPERTY YOU SOLD? PLEASE TELL US ABOUT IT. It was a property in Hillcrest and, strangely enough, in a retirement housing establishment, which is where I have found my niche these past 10 years. I sold it in 2002 for R400 000.

WHAT ADVICE WOULD YOU GIVE TO NEW KIDS ON THE BLOCK ABOUT MAKING A SUCCESS OF THEIR CAREER IN PROPERTY?

If you don’t like hard work and hard times, don’t even think of becoming an agent – find a job at local government. If you want to know who you are, how good you are, and what your inherent qualities are as a human being, become a property broker!

Get to know your product and always be true to yourself, your product and your clients. Be prepared to give up early rewards for long-term rewards and satisfaction, and always stay dedicated.

NUMBERS TO KNOW

4.6-MILLION

The number of unemployed increased by 100 000 people to 4.6 million between the fourth quarter of 2012 and the first quarter of 2013. This took the country’s official unemployment to 25.2% from 24.9% in the fourth quarter of 2012. Times Live - South African unemployment hits 4.6 million: Stats SA

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EUGÉNIE KEMPFF

MYRNA DUVEEN

R E A LN E T B L O EM F O N T EI N

PA M G O LD I N G CA P E T OW N

WHAT ARE YOUR TOP THREE SECRETS TO SUCCESS?

A passion for the industry, being driven to succeed and the physical energy to keep up with the demands of the job.

1. Having a calm and quiet demeanour, yet still being determined, tenacious and focused.

WHAT IS THE ONE THING YOU WISH SOMEONE HAD TAUGHT YOU OR TOLD YOU WHEN YOU FIRST STARTED OUT IN PROPERTY AND WHY?

2. Creating a symbiotic relationship between myself and the brand I work for (Pam Golding Properties).

Stick to the core business of matching motivated buyers and sellers. It’s easy to get sidetracked and waste a lot of valuable time on non-essentials.

WHAT IS THE MOST VITAL BUSINESS TOOL THAT ESTATE AGENTS SHOULD HAVE AT THEIR DISPOSAL IN TODAY’S MARKET AND WHY? Technology. With an iPad and a smartphone you can carry your office in a handbag. Technology has speeded up the pace of the industry and with the right tools you are always available, have all necessary documents on hand and can sign a contract anywhere. DO YOU REMEMBER THE FIRST PROPERTY YOU SOLD? PLEASE TELL US ABOUT IT. The very first buyer I took to view a house made an offer on the spot. Unfortunately the deal fell through – the bank would not finance it because of structural problems. It was a shaky start, but I later sold a different property to the same buyer. WHAT ADVICE WOULD YOU GIVE TO NEW KIDS ON THE BLOCK ABOUT MAKING A SUCCESS OF THEIR CAREER IN PROPERTY? Focus on your core business and take as many buyers as possible to see properties. Sell with your ears, rather than your mouth – in other words, listen to your clients’ requirements rather than engaging in sales talk. A motivated buyer will make an offer if you show him a property that meets his needs.

Being able to ‘dance with wolves’, yet remain uncompromising in integrity with a high degree of skill that, I have been told, has won me both respect and credibility in negotiating successfully leading to a profitable return on business.

WHAT IS THE ONE THING YOU WISH SOMEONE HAD TAUGHT YOU OR TOLD YOU WHEN YOU FIRST STARTED OUT IN PROPERTY AND WHY? In an industry where integrity is of key importance, I have always found that being honest, professional and maintaining my integrity has yielded the best results as well as going beyond the call of duty and being available 24/7. (This is my advice to someone entering the industry!) WHAT IS THE MOST VITAL BUSINESS TOOL THAT ESTATE AGENTS SHOULD HAVE AT THEIR DISPOSAL IN TODAY’S MARKET AND WHY? A Blackberry or smartphone to ensure you have access immediately to all forms of communication such as incoming calls, emails, etc. to enable you to respond promptly. DO YOU REMEMBER THE FIRST PROPERTY YOU SOLD? PLEASE TELL US ABOUT IT. I had just started in property and took a mandate in Wynberg, Chelsea Village. It was a three-bedroom character cottage. All the other agents had already given up on the property, but I continued to persevere and the ‘new agent on the block’ managed to sell it at full asking price! WHAT ADVICE WOULD YOU GIVE TO NEW KIDS ON THE BLOCK ABOUT MAKING A SUCCESS OF THEIR CAREER IN PROPERTY? Persevere, be hardworking and determined, set goals and do not give up.

Page 58: P RO P ERT Y P RO F ES S I O N A L T O P P ER F O R M I N G AG EN T S

JOANNA THOMAS LEW G EF F EN S O T H EB Y ’ S I N T ER N AT I O N A L R E A LT Y CO N S TA N T I A

SHIRLEY FINNEMORE PA M G O LD I N G H Y D E PA R K

WHAT ARE YOUR TOP THREE SECRETS TO SUCCESS?

Persistence is the first. The majority of people fall at the first hurdle, so if you have staying power, you will often find yourself a winner. The second is to always treat buyers and sellers as you would wish to be treated, to stay calm and reasonable and avoid conflict; and the third is to network all the time since every friend, colleague, acquaintance and relative holds a potential opportunity.

Keeping in touch with all clients on a very regular basis, giving sellers feedback on buyers’ comments after every appointment. Sitting as many show days as possible and not using sitters unless essential. Supporting our ‘Farm Area’ Residents Associations, giving financial assistance to them where possible. For example, we maintain the local library gardens and offer a full weekly landscaping team who keep it looking well cared for. The playground equipment in the garden attached to the library is painted regularly by us as well.

WHAT IS THE ONE THING YOU WISH SOMEONE HAD TAUGHT YOU OR TOLD YOU WHEN YOU FIRST STARTED OUT IN PROPERTY AND WHY? Not to force it. That desperation that you feel when trying to make sales happen is all too obvious to your buyers and sellers. It makes you seem unprofessional and them feel nervous. Take a deep breath and a step back. If your sales are going to happen, they will. WHAT IS THE MOST VITAL BUSINESS TOOL THAT ESTATE AGENTS SHOULD HAVE AT THEIR DISPOSAL IN TODAY’S MARKET AND WHY? A good phone. I use an iPhone 5 and it enables me to stay in constant contact across multiple forms of communication. Not only that, it streamlines everything so that I can manage my time and communications more effectively and efficiently. Sometimes a simple unanswered call can lead a potential buyer to call somebody else. DO YOU REMEMBER THE FIRST PROPERTY YOU SOLD? PLEASE TELL US ABOUT IT. It was a filthy, barely habitable wreck of a place, but it was beautiful to somebody and they just happened to stroll in, 200 viewings and four months after I had first listed it! WHAT ADVICE WOULD YOU GIVE TO NEW KIDS ON THE BLOCK ABOUT MAKING A SUCCESS OF A CAREER IN PROPERTY? Not to expect a smooth ride. They have to live, sleep and breathe property. Every aspect of your life becomes connected to selling property, from the people you meet at school to the places you travel to, it all comes together. Also you have to really listen to your buyers and sellers. Without them it doesn’t matter how much you know.

WHAT IS THE ONE THING YOU WISH SOMEONE HAD TAUGHT YOU OR TOLD YOU WHEN YOU FIRST STARTED OUT IN PROPERTY AND WHY? I started out as an assistant to a successful agent and learnt the ropes from her. I am sorry that I didn’t get my own farm area and get going long before I did. WHAT IS THE MOST VITAL BUSINESS TOOL THAT ESTATE AGENTS SHOULD HAVE AT THEIR DISPOSAL IN TODAY’S MARKET AND WHY? An iPad and cell phone. It speeds up communication in a highly competitive business. There are many skilled and professional agents out in the marketplace chasing the same business. Tomorrow is often too late to deal with clients’ enquiries. DO YOU REMEMBER THE FIRST PROPERTY YOU SOLD? PLEASE TELL US ABOUT IT. The first property I sold was for a young couple moving down to Cape Town. A lovely character home set in an attractive treed garden. It was quite difficult to appear the expert, having not sold anything before. I decided to mention this to them at the time of the interview, which they appreciated and my enthusiasm won the day – they gave me the mandate to market it for them. This was something I learnt very early on in my career – that there is never any valid reason for not being authentic in a negotiation. WHAT ADVICE WOULD YOU GIVE TO NEW KIDS ON THE BLOCK ABOUT MAKING A SUCCESS OF THEIR CAREER IN PROPERTY? Get to know the property market in your area and keep track of what stock has sold and at what price.

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Page 60: T E C H T O O LK I T

TECH TOOLKIT Samsonite B-Lite Fresh Foto bags and pouches AVA I L A B LE F RO M : R249 L OV E I T: The Samsonite B-Lite Fresh Foto range offers lightweight camera protection with features like comfortable neck straps, belt loops, padded panels and adjustable compartments. A wide range of bag designs means you can choose the bag that stores everything you need to keep with you, whether it is just an SD card and a spare battery, or a plethora of lenses and flash units. The range is available in charcoal and khaki, and all models, except the digital camera pouch, come with a handy rain cover for added protection. NOT SO MUCH: It’s a bit dull – it wouldn’t hurt to add some bright colours and funky designs to the range. I N A N U T S H ELL : The range is priced well and has a variety of products, suitable for all your camera needs. Cameras can be seriously pricy items and it is wise to keep them protected and out of harm’s way.

Wireless Wipes AVA I L A B LE F RO M : R50 at iStores nationwide L OV E I T: Wireless Wipes are tech-friendly wipes specifically designed to clean smartphones, tablets, laptops, keyboards, GPS units and any other electronic or wireless devices. Wireless Wipes are fast drying, nonstreaking and non-corrosive and remove harmful bacteria from your devices without damaging anything inside. They come in convenient resealable pouches of 12 and are available in three different scents: Pomegranate Citrus, Green Tea Cucumber and Rosemary Peppermint. NOT SO MUCH: What’s not to like? I N A N U T S H ELL : Studies have shown that the wireless devices we use every day are about as dirty as the bottom of your shoe … which is even dirtier than a toilet seat. So perhaps adding some Wireless Wipes to the shopping list is a good idea.

The drive features a USB 3.0 interface, which is also USB 2.0

LaCie Rugged 1TB External Hard Drive

compliant, and a transfer rate of up to 5GB/s. When it comes to RPMs, the drive functions at 5 400 rotations per minute. The LaCie Private-Public software that comes built into the drive ensures that you can keep private files private with the help of a password-protected section of the drive.

AVA I L A B LE F RO M : R2 595

NOT SO MUCH: It’s a tad on the pricy side as far as hard drives go – there are definitely cheaper options out there.

L OV E I T: The Rugged is an external hard drive with maximum reliability and durability. The orange rubber bumper surrounding the device can apparently protect the device from 1.2 metre (non-operating mode) tumbles or less and is also pressure resistant and rain resistant.

I N A N U T S H ELL : We live in a time when technology is moving and upgrading so quickly that storing your data in a safe place is key. This tough little guy looks like the best chance you have at keeping all your data safe, all the while still managing to look bright and funky!

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Private24 App AVA I L A B LE F RO M : Free to download from all Apple, Android and BlackBerry App Stores L OV E I T: The Property24 App allows house hunters to search for property while on the move. With this App, house hunters can search for properties for sale or rent based on their current location, using advanced search tools, or through an interactive map, making it ideal for finding the perfect home in the desired area. It also offers full-screen images of estate agent listings on Property24.com, and allows buyers and renters to save estate agent contact details directly to their address book, putting qualified buyers in contact with estate agents more easily. NOT SO MUCH: Having a smartphone is a must to be able to access the benefits of this App and searching for property using current location requires good connectivity to access GPS information. I N A N U T S H ELL : The App is the ultimate property search tool for the tech-savvy, on-thego South African. It includes all listings on Property24.com and is the perfect tool for connecting buyers and sellers with estate agents. ** All prices are approximate.

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DEVELOPMENT UPDATE The centre is currently anchored by a Super Spar of about 3 500m², a Virgin Active gym of approximately 3 700m2, as well as a recently opened Game store measuring about 5 000m2, with many more retailers signing up. According to a traffic study conducted in 2012, the intersection of Malibongwe and Bellairs Drive is exposed to approximately 20 000 vehicles per day and so offers a prime location for a shopping centre. Goosen concludes that Tintswalo Property Group is looking forward to growing the centre and further entrenching the development within the community. “Our ultimate goal in managing the Bel Air Shopping Centre is to create a retail centre that not only benefits the community materially, but a centre that the community can also take pride in. As such, we intend to ensure that the mall is 100% let with an excellent tenant mix, offering customers a comprehensive and well-rounded shopping experience.”

1. TINTSWALO PROPERTY GROUP TRANSFORMS BEL AIR SHOPPING CENTRE Tintswalo Property Group, a property development and management company that specialises in the retail and boutique lodge industry, has transformed the Bel Air Shopping Centre in Northriding into a world class centre with greater shopping and retail value. Located on the corner of Malibongwe and Bellairs Drive, the centre, which was acquired by Tintswalo in July 2011, has been a mainstay of the local community for a number of years. With Tintswalo’s extensive retail development experience and unique business and management strategy, the centre has been relaunched into a premier retail and shopping destination, covering 21 320 square metres. “Tintswalo’s core mission in managing a centre is to create a viable, well-planned retail development that allows tenants to thrive, but at the same time offers a shopping experience that people within the local community are looking for,” explains Tintswalo Property Group CEO, Lisa Goosen. “In line with these values, we are extremely proud of what we have accomplished thus far in the management of Bel Air Shopping Centre. We have been able to create a well maintained and secure mall environment that not only offers local consumers greater convenience and options in shopping for their daily necessities, but also enables them to enjoy an entertaining and safe evening out.”

2. BRIDGE CITY DEVELOPMENT GATHERS MOMENTUM Negotiations for the first property sales within the recently released 17-hectare Bridge City Business Estate – a prime location just 17 km from the Durban port and 23 km from King Shaka International Airport – are well underway. The entire 60-hectare Bridge City development, which includes the mixed use of commercial and residential in the Town Centre and Business Estate, is expected to attract public and private investment totalling over R10-billion. Of this, the newly released Business Estate is expected to contribute R1-billion. Cyril Gwala, Tongaat Hulett’s Development Director responsible for Bridge City, the Riverhorse Valley Business Estate and Cornubia, is confident that that the entire Bridge

Page 63: D EV EL O P M EN T U P DAT E

City Town Centre and Business Estate will be a reality within the next five years. He says the Bridge City Business Estate, which is predicated on a mixed use model similar to that of the highly successful Riverhorse Valley Business Estate, is a greenfields development that is expected to transform the surrounding communities of Inanda, Ntuzuma and KwaMashu (INK). Massive strides have already been made in the Town Centre and services have been installed. Construction began with the vibrant Bridge City Shopping Centre in 2008. This provides for 68 000 square metres of retail space and is tenanted by some of the biggest names in South African retail, including Spar, Woolworths, the Edcon Group as well as restaurants such as Spur and Chicken Licken. The Bridge City Shopping Centre is one of the anchors of the 43-hectare Bridge City Town Centre, together with the iconic regional Magistrate’s Court, which opened in May 2013. Additional key developments within the new Town Centre are expected to include a R1.2-billion, 450-bed public regional hospital, for which the piling and services have already been completed. The hospital has experienced unavoidable delays but it is expected that construction will begin within the next two years. Existing subdivided and

saleable sites are available for mixed use (retail, offices and residential development) directly across from the Bridge City Shopping Centre and along the Bridge City Boulevard, which crosses the Town Centre and Business Estate and provides opportunities for retail fronting onto the main thoroughfares. In addition to the provision of residential accommodation above the shopping centre itself, central key sites have been set aside for multistorey residential developments directly opposite the Bridge City Shopping Centre. High rise developments of between six and eight storeys that will have good city views will provide significant residential bulk as will proposed four to six storey ‘walk-up’ units. These are expected to accommodate professionals employed by the medical and legal businesses as well as other commercial and industrial operations. Gwala says both Bridge City and the Riverhorse Valley Business Estate are testament to the power of public and private sector partnerships (PPPs) to deliver on industrial development. The Bridge City Development is a joint venture between the eThekwini Municipality and Tongaat Hulett. Tongaat Hulett also plays the role of project manager responsible for implementation of the project on the ground as well as the mandated sales agent for Bridge City.

two bathroom configurations. Boasting neutral colouring and earthy tones, the open-plan apartments will include top-end finishes and fittings such as built-in vanities in the bathrooms, as well as feature walls. Residents can also enjoy the facilities of a clubhouse and rim-flow swimming pool. Designed with clean, modern lines and contemporary open-plan spaces, Manhattan caters to up-and-coming executives who want to live close to the heart of Sunninghill’s business precinct and the Sandton CBD. Priced from mid-R900 000 upwards, apartments at Manhattan are ideally suited to either buy-to-let investors or owner-occupiers.

3. RENPROP LAUNCHES MANHATTAN APARTMENT DEVELOPMENT IN SUNNINGHILL Following on from the success of its Rivonia residential apartment development, The Link, Renprop Residential is launching Manhattan, a 180-unit apartment development that is situated in the heart of Sunninghill. Russel Peach, residential sales manager at Renprop Residential, says that 90% of The Link has been sold to date and the last of the 340 units will be completed in December 2013. “There has been a strong uptick in all areas of residential property over the last 18 months, with a marked increase in enquiries from both buyers and sellers.” In response to the strong demand for sectional title property, Renprop Residential, in conjunction with development partner Space Developments and Standard Bank, is launching Sunninghill’s first and only apartment development, Manhattan, on 18 July. The five-storey Manhattan, which is set on a two-hectare plot, will provide residents with lift access to the apartments, which are available in one bedroom, one bathroom; two bedroom, one bathroom; and two bedroom,

Peach says that Manhattan is close to major arterial routes and the Rivonia Road N1 intersection. Manhattan is also proximate to a number of medical facilities, such as the Netcare Sunninghill Hospital, entertainment facilities such as Montecasino as well as shopping centres such as The Core and Sunninghill Village Shopping Centre.“There is a shortage of second-hand stock, which is currently driving the demand for well-priced sectional title units, with properties priced in the R800 000 and upward range the most active and in demand. Some of these properties turn around in less than half the average industry time of 48 days, which is a clear indication of the level of demand for quality sectional title units,” Peach explains. Debbie Justus, residential re-sales manager at Renprop Residential, says that properties that are priced right will sell in the re-sales market in the shortest time, owing to the demand for well-priced homes and value for money in certain segments. “Well-located sectional title developments in this region of northern Johannesburg are highly sought after and often provide investors who buy off plan good returns – both in terms of rental yield and capital appreciation. As such, we are anticipating a high level of interest at the launch of Manhattan,” Peach concludes.

NEDBANK AND AFD MAKE AFFORDABLE HOME OWNERSHIP IN SOUTH AFRICA HAPPEN Access to finance has been one of the biggest stumbling blocks to home ownership in South Africa, especially for entry-level buyers. Nedbank’s partnership with the French Development Agency (AFD) will help make home ownership a reality for qualifying entry-level homebuyers. AFD is a public development finance institution of the French government whose framework of intervention is defined under the Franco-South African Partnership. Development of basic infrastructures, urban development and housing have been strategic priorities for AFD. The partnership AFD has entered into with Nedbank is to develop a sustainable supply of home loans for lowincome households. Timothy Akinnusi, Head of Sales and Client Value Management for Nedbank Home Loans, says: ‘We are delighted to partner with the AFD to help make home ownership a reality for qualifying entry-level home buyers. We are confident that this will increase the pool of homeowners in South Africa, particularly within the affordable housing market. We will also focus on buyer advocacy, ownership and maintenance of a home.’ The joint commitment with AFD has the entry-level market at heart as this initiative will assist in significantly bringing down Timothy Akinnusi Head of Sales and Client Value Management Nedbank Home Loans

“The process of buying a home need not be a daunting one.” the initial cost of the bond amount for this market to help make home ownership a reality for qualifying homebuyers. Nedbank believes that through this partnership they can make a meaningful contribution to the long-term plans of the Department of Human Settlements aimed at addressing the housing backlog. This is due to the fact that AFD funding makes it possible to reduce the amount of capital borrowed by these households and to implement an education programme for borrowers. Supported by the Borrowers Education Programme – which aims to empower consumers through education and instilling financial fitness principles – this AFD initiative is available to South African citizens and first-time home buyers with a single or joint gross monthly income of up to R17 600. Upon completing the programme, participants will be granted a certificate enabling them to apply for a home loan using any one of Nedbank’s home loan sales channels, for example, the contact centre; Home Loan sales consultants; branches and the fully automated online home loan application. The successful applicants will subsequently qualify for a R17 000 grant from AFD, instantly reducing the outstanding bond amount owed by the new homeowner.

The Borrowers Education Programme is Nedbank’s latest demonstration of its ongoing commitment to improving financial literacy and making banking more accessible to all in South Africa at no cost to clients. Among many aspects of property ownership and building financial fitness, Nedbank’s Borrowers Education Programme explores: • what to look out for when buying a home; • bank requirements when applying for a home loan; and • maintaining and improving your home. The programme will also provide regular mentorship for clients from the time of application until they have moved into their new home. Participants who successfully complete the programme will receive further assistance from developers to guide them through the process of choosing a home and tabling an offer to purchase. ‘This is one of a number of innovative banking solutions Nedbank Home Loans is committed to delivering, with the aim of making home ownership easier for all South Africans’, concludes Akinnusi.

Page 66: WO R D O N T H E S T R EE T

WORD ON THE STREET “A home is supposed to be our ultimate evidence that, in America, hard work pays off and responsibility is rewarded… we have to give more hard-working Americans the chance to buy their first home.” President Obama during a speech in Phoenix (Yahoo Finance: Obama’s outdated message on homeownership)

“The most recent exchange rate movements, including today’s, are somewhat exaggerated... the local currency has been on a depreciating trend partly due to the strengthening of the dollar and the decline in commodity prices.” Reserve Bank deputy governor Daniel Mminele speaking at the 7th Annual Financial Market’s Department Cocktail Function (SA Commercial Prop-News: Rand weakening exaggerated, says Reserve Bank deputy governor)

“South African households have experienced notable pressure on their real income in recent months. Accelerating inflation has eroded their real purchase power. A more restrained credit environment has also retarded consumers’ spending ability.” Standard Bank economist Goolam Ballim (IOL: Petrol price hike ‘will fuel debt’)

NUMBERS TO KNOW

R74.7-BILLION

“Weak [local economic] growth is a factor that has kept interest rates at multi-decade lows for some time now, and which leads us to believe that interest rate hiking is some way off.” John Loos, FNB household and property sector strategist (Property24: Interest rates impact on SA consumers)

“While the sector has certainly fallen from its highs in May, it has gotten off relatively lightly on the whole, considering the level of increase in bond yields.” Evan Robins, manager of Old Mutual SA Quoted Property Fund (Finweek: Short term risk in listed property, says Old Mutual)

Gauteng departments spent 99% of their total adjusted budget for the 2012/13 financial year, which amounted to R74.7- billion. The departments of health and education were the main drivers of expenditure, accounting for 36% and 38% respectively. Fin24 - Gauteng spends 99% of budget.

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