Homeowners under strain sell and rent

The FNB report recently revealed Reasons for selling property in SA and 14 percent of sellers in the fourth quarter of 2013 were selling due to financial pressure.

A four bedroom home in Lovemore Heights inPort Elizabeth is selling for R3.395 million. Click here to view.

Estate agents surveyed in the report noted that some of those sellers either bought cheaper properties or opted to rent instead.

According to Jaco Rademeyer, principal and owner of Jaco Rademeyer Estates, in his area of operation in Port Elizabeth, most people are looking to upgrade their lifestyles or downscale.

He notes a number of homeowners under financial pressure who sell their homes and rent afterwards.

Asked what the value of homes they own are, he says most of them own homes priced in the region of R3 million and above.

“They “downscale” on price or go and rent and try to settle debt with the profit they make out of their property.”

Rademeyer says also of note is that holiday homes, because they are more of a lifestyle investment, are usually the first properties that people put on the market as these types of properties for many are underutilised and not income generating.

Located in Framesby in Port Elizabeth, this three bedroom house is priced at R1.195 million. Click here to view.

However, he is upbeat about 2014 pointing to increased residential activity in their area with more buyers qualifying for home loans and actually buying property.

What’s more, he says they are seeing a slight increase in property prices as well activity in the development of new homes – after three years of non activity in this sector.

So while others are selling because of financial pressure, he says the current low interest rate environment is ideal to buy property provided one can afford that property and has the money or can get home loan finance.

Also, he advises would-be buyers to invest in an area that offers good amenities such as schools (for those with children) and shopping centres.

Rademeyer points out that those buying currently tend to prefer estate living or freehold properties in a secure environment – security is undoubtedly essential in decision-making for many buyers.

On popular price bracket, he says in Port Elizabeth, middle income bracket properties priced around R1.5 million are snapped up as soon as they are listed. – Denise Mhlanga

Property 24 News

What does 2014 hold in for the Property game in South Africa

With 2014 set to be a milestone year for the country as we celebrate 20 years of democracy and head into an elections year that is likely to dominate the landscape, Seeff chairman Samuel Seeff says that there is much to be upbeat about.

This year may well be the year where we see the first signs of real growth since 2007 with potential double-digit price growth in the primary urban areas a real possibility, according to Seeff.

Following five years of inhibited growth and, while still a telling tale of two halves, activity in the primary urban areas has strengthened notably this year and is now at one of the healthiest levels since 2009.

“This year may well be the year where we see the first signs of real growth since 2007 with potential double-digit price growth in the primary urban areas a real possibility,” he explains.

He says they experienced one of the best winter periods with turnover of more than R2.5 billion for the June to August period in 2013 and the demand has carried into the summer months.

Seeff says their turnover for the year is up by 20 percent year-on-year (y/y) and at the best levels in almost a 50-year history, with all areas showing significant growth and similar agent numbers to last year.

He notes that primary areas in the Cape metropolitan areas have improved y/y by around 25 percent while a resurgence of activity in the Winelands/Boland and West Coast has seen turnover climb by 54 percent.

The Garden Route, Karoo and Eastern Cape continue to see sustained y/y improvement in demand, although still primarily in the residential sector.

The northern region, most notably the Gauteng metropolitan areas have seen turnover growth of 21 percent with the greater Sandton area up by 37 percent y/y on the back of strong demand.

Following two years of back-to-back 25 percent growth, the KwaZulu-Natal region’s turnover is up by 31 percent, according to Seeff.

Furthermore, he points out that their data shows improved activity in the primary urban sector with some spill-over into other sectors.

More buyers at show houses, multiple offers and better prices for sellers along with shrinking inventories all point to greater normalcy in the market, says Seeff.

Meanwhile, he says banks continue to make gains in reducing the distressed stock and this in turn should further stimulate demand in the primary sector.

While economists are increasingly pointing to a potential interest rate hike towards the last quarter of 2014, Seeff says that for now though the interest rate remains at the lowest level in more than three decades and will continue to boost home affordability.

On the back of this, there is good reason to be positive about the outlook for the housing market next year.

“While still too early to talk about a major recovery especially in view of the wider economic landscape, we are moving in the right direction and there is now more balance in the market.”

Although price gains on the whole will remain conservative, sellers could look forward to shorter selling times and good offers provided the pent up demand persists into next year.

“We may even start seeing double-digit price growth in the high demand areas,” says Seeff.

The protracted low demand in the coastal and second home markets though is likely to continue with buyers still negotiating strongly.

Although there has been some marginal easing of the mortgage loan criteria, we do not foresee any real growth in mortgage lending as the continued high levels of household indebtedness will continue to impede overall sales volumes, according to Seeff.

The sub-R1.5 million primary sector is likely to be the most robust with the trend towards smaller, more compact and cost effective housing being the primary driver of demand.

Secure complexes, gated estates and areas closer to schools, major arterials and feeder roads to business nodes are likely to see the biggest demand, says Seeff.

While economists are increasingly pointing to a potential interest rate hike towards the last quarter of 2014, Seeff says that for now though, the interest rate remains at the lowest level in more than three decades and will continue to boost home affordability.

While there are increasing pockets of excellence where the pendulum is swinging towards a sellers’ market, conditions will continue to favour buyers.

For those that can and want to buy, the time is now. Sellers looking to trade up can now also look forward to better selling prices and can in turn take advantage of the favourable buying conditions.

Seeff says the pressure on household budgets is likely to grow further given the rather uninspiring macro-economic outlook.

Although price gains on the whole will remain conservative, sellers could look forward to shorter selling times and good offers provided the pent up demand persists.

Prospective buyers are therefore cautioned to allow for potential interest and other basic living cost hikes and should buy below their means rather than stretching right now.

Now, more than ever, they should cut back on non-essentials and put their spare cash into their bonds and wherever possible and create a buffer against cost and interest rate hikes, he says.

Recovery of the market is likely to be slow and arduous with the primary, sub-R1.5 million sector picking up the bulk of the momentum as we have seen this year.

Only once we start seeing more normalised sales volumes of around 25 000 per month that would equate to an increase of about 25 percent on current volumes, can we expect to see any real uptick in prices and only then are we likely to see a real spill-over into the secondary, luxury and trophy homes sector of the market.

Although activity in 2013 has been somewhat better compared to preceding years, this sector of the market is likely to remain under pressure with buyers very particular about what they are looking for and how much they are prepared to pay.

While the low interest rate certainly supports demand, the key macro-economic indicators, most notably economic and job growth will continue to be the drivers of the housing market.

The modest economic outlook and continued uncertainty will continue to weigh on the market throughout next year, but for now at least, we can derive real encouragement from the improved activity and look forward to a somewhat more robust 2014, he adds.

Taken from Property 24 news.

Residential property activity improves

16 Jan 2014

According to the FNB Estate Agent Home Buying Survey Q4 2013, the residential property market in South Africa has strengthened.

The report reveals that 34 percent of agents expect activity to increase in the next three months, down from 61 percent in Q3, while 48 percent expect it to stay the same and only 18 percent expect a decrease in activity.

This rising trend in the activity rating through 2012 and 2013 has been more gradual than the short sharp growth surge of 2009/10 (the 2009/10 surge being driven by huge interest rate cutting at the time), which tapered off relatively quickly in 2011.

The report reveals that 34 percent of agents expect activity to increase in the next three months, down from 61 percent in Q3, while 48 percent expect it to stay the same and only 18 percent expect a decrease in activity.

Along with the gradually rising activity trend, agents also saw a broad improvement in the balance between demand and supply in 2013, explain report writers John Loos, FNB Home Loans household and property sector strategist and Theo Swanepoel, FNB Asset Finance property analyst.

Agents point to stock constraints and these are reflective of building activity, which has remained relatively weak in recent years.

According to the report, 16 percent of agents surveyed cited stock constraints as a factor influencing their near-term expectations – higher than the 15 percent in the previous quarter, noting that 2013 was more constrained than 2012.  

Loos and Swanepoel say according to the agents, it takes 15 weeks and one day to sell a house compared to 14 weeks and five days in Q3 3013.

The market still has a lot of unrealistic sellers with 85 percent having to drop their asking price in order to sell (88 percent in the third quarter) and this figure was 30 percent in early-2004.

When agents were asked to estimate the average percentage asking price drop on those properties where a price drop is required to make the sale, this remained at -9 percent (-13 percent in 2011).  

On property affordability, the percentage of agents who perceived income levels to be far behind house prices declined from 21 percent in the preceding quarter to 12 percent in Q4 2013.

Those perceiving income levels to be a little behind house price levels rose significantly from 33 percent in Q3 to 48 percent, implying that the percentage of agents believing that income levels have kept up with prices declined from 46 to 40 percent over the two quarters, say Loos and Swanepoel.

It is too early to ascertain whether the decline in those perceiving income levels to have kept up with prices in the Q4 is the start of a deteriorating affordability trend.

“Given no further interest rate cuts in 2013, weak economic and wage bill growth, and our FNB House Price Index showing accelerating growth late last year, it is entirely possible that we may be entering a period of deteriorating affordability, after an improving trend dating back to around 2009,”  according to the writers.

On average property prices over the next 12 months, 21 percent of agents reckon prices will increase by 5 percent, 15 percent of agents expect between 6 and 8 percent, 12 percent a 10 percent rise and only 6 percent anticipate over 10 percent growth. – Denise Mhlanga (Property journalist at property24.com)

Joint bond ownership pros and cons

Those who lack savings but want to buy a home for themselves should seriously consider the advantages of bringing in a partner or partners to be joint bondholders. This ‘alternative’ means of securing a bond is not frowned on or discouraged by the banks and these days is increasingly used because people are cash-strapped.

Those who lack savings but want to buy a home for themselves should seriously consider the advantages of bringing in a partner or partners to be joint bondholders.

This is according to Mike van Alphen, National Manager of the Rawson Property Group’s bond origination division, who says the banks actually quite like having joint bond debtors as this, it has been found, reduces their chances of being let down on the bond payments.

He says they will in these arrangements take into account the joint incomes of all who apply for the bond and this will in many cases help those who are actually going to live in the home to upgrade and move into a property better than they would normally have been able to afford.

Van Alphen says this is increasingly used by couples or friends who agree to live together, either because it is convenient and inexpensive or because they are now in a relationship but not yet married.

When joint applications for bonds of this kind are approved by the banks, those who are signatories to the arrangement are always assumed to be equal shareholders in the property. If this is not the case (e.g. if one partner has 50 percent of the property and the other two 25 percent), the exact shareholding of each has by law to be stated in the Deed of Sale and will be registered as such at the Deeds Office.

Furthermore, it should be realised by those entering into such agreement that joint bondholders by law have to accept that they are responsible for the total monthly bond payments. If one of their partners defaults on his monthly payments the others can and will be held responsible for covering the amount owing in addition to the sum that they themselves have to pay in.

Van Alphen says quite often, one of the partners/joint bondholders will at some stage want to sell his share, possibly because he or she is getting married or going overseas. In many partnership deeds there are stipulations that this will be done after a specified period of years, but often, an option is left for the joint owner to continue as a partner.

If the property as a whole is not being sold, a valuer or a professional estate agent will have to be brought in to estimate its value at the time the share is being sold. The partners now taking over that share will be responsible for paying the transfer duty on it as well as any outstanding rates and taxes accrued by the property.

“For example, if a share in a property worth R1.8 million with three partners is sold right now, the transfer duty would be R61 000. A third of this is R20 333. The remaining shareholders would have to pay this to legalise their taking over of the sold share.”

He says many joint buying agreements of this kind, are now operating in the buy-to-let market and have played a significant role in bringing more properties onto the market for renting purposes.

Taken from Nedbank letter.

6 tips to ensure that your new home is safe

Just moved into a new house? Then I’m sure that one of your first concerns will be protecting it.

But what do you need to do to keep burglars and other unwanted visitors away?

Lock up

Once you’ve moved in, assess all entry points to ensure that they have adequate protection. If one door or window could easily be broken into, then it will be broken into.

You should also ensure that every time you leave the house that everything is locked.

Neglecting your homes security is asking for trouble.

Don’t make it easy

Some of you out there might think it’s a good idea to leave a spare key hidden under a plant pot or beneath a mat for emergencies. But a burglar will check for that key first.  

If you’re going to leave a key to your house lying around, then you might as well not bother locking the front door at all.

The best option here is to give a spare key to a neighbour. This way, if you do need it in an emergency, you won’t have any trouble getting hold of it.

Leave them nowhere to hide

Trees and shrubs are the perfect hiding spots for criminals casing your house.

We’re not saying completely remove these things from your garden; just cut them back enough so that they don’t act as effective hidey holes for your unwanted visitors.

Get to know your neighbours

You aren’t going to be at home 24/7, but I’d bet that there’s always a neighbour around. And they’re going to be able to spot any suspicious activity.

Get to know everyone in your surrounding area. If they see someone around your property they can ring the authorities. 

Don’t advertise your belongings

It’s great that you have that huge flat screen TV and I understand that you want to show it off. But remember, if your neighbours can see it, so can a burglar.

Keep all valuable items out of site. You don’t want your house to become a shop window!

Remain vigilant

Lastly, make sure that you’re aware of what’s going on around you. If you notice suspicious behaviour in your neighbourhood don’t ignore it.

The more aware you are, the better protected your neighbourhood is.