Monthly Archives :

September 2015

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Chas Everitt

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Goodday,

Maybe it’s just me, or perhaps it’s a round of “bad news fatigue”, but the collective cloud of gloom that has been hanging over SA for many months seems to be lifting at last – with positive effects on our residential property market.

It seems to have started with the announcement that Durban is to host the Commonwealth Games in 2022. This many not seem like such a big deal, considering we have already hosted the Rugby World Cup, the Soccer World Cup and many other major international events, but it evidently rekindled some happy – and hopefully inspiring – memories of what we are able to pull off as a nation when we all work together.

Then there was the announcement of the Homo Naledi discoveries, which was once again an occasion of national pride – and a reminder of the incredible intellectual and creative resources we possess in addition to the natural beauty of SA.

On top of that, a South African is hosting the biggest daily TV show in the US, the Reserve Bank has decided to leave interest rates where they are for now, the petrol price has dropped and the Springboks have started to bounce back.

So perhaps it’s not so surprising that our trademark optimism has started to reassert itself, or that home sales and prices here continue to rise despite the current turbulence in the global economy.

Don’t get me wrong. I don’t mean for one minute to trivialise the political and economic problems we are facing – but I am saying that there seems to be more determination now to tackle those problems, and more confidence that we will succeed in doing so.

Meanwhile SA is getting a lot of positive publicity at the moment and I will hopefully be adding to that when I attend the Leading Real Estate Companies of the World (Leading RE) business leaders conference in Berlin later this month.

There I will be turning the spotlight on the outstanding real estate opportunities in SA for an audience of top brokers from around the world – and underlining the exceptional value that investors are able to find here, especially in view of the current rand exchange rate. I have no doubt they will be impressed.

Warm property regards,

BERRY EVERITT

Managing Director

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Are higher interest rates in SA’s best interests?

4661c401-3eb2-4001-a88d-5205883fc609To the relief of many, the South African Reserve Bank decided last week to keep the repo rate unchanged. Some experts however argue that the rate should be raised.

Last week, the South African Reserve Bank (SARB) chose to hold the repo rate at 6 percent. The prime rate was also left at 9.5 percent.

According to tradingeconomics.com, the interest rate in South Africa has averaged at 12.98 percent between 1998 and 2015. It reached an all-time high of 23.99 percent in June 1998 and a record low of 5 percent in July 2012.

The Central Bank revised its growth and inflation forecasts too. Inflation is down slightly at 4.7 percent while growth was revised down to 1.5 percent this year.

Lesetja Kganyago, governor of the Reserve Bank noted that growth is expected to remain constrained thanks largely to various global developments, low business and consumer confidence and electricity supply shortages.

While many breathed a sigh of relief in the wake of the rates decision, John Loos, household and property sector strategist at FNB home loans believes it would be desirable for interest rates to continue to rise gradually back up to ‘normal’ levels.

Explains Loos: “Although many bemoan rising interest rates, higher interest rates are in fact preferable as they keep the household sector and lenders cautious. What’s more is that it would keep household sector credit growth in check and should lead to a further decline in the debt-to-disposable income ratio which I think is still too high and needs to come down more.

In short, by raising rates gradually, the SARB can play a valuable role in lowering household sector vulnerability to economic shocks which stems largely from high debt levels.

Responding to whether or not the SARB will continue to hike rates, Loos replied that he thought this would be the case, albeit it very slowly to a possible prime rate of 10.5% by 2017.

As for what consumers should do, Loos says regardless of whether or not the SARB does or doesn’t hike rates, a lower level of indebtedness would be desirable for many households.

Adds Loos: “Widespread rhetoric leads many to believe that access to bank credit creates wealth. This is only true when it is used for income generating ventures or investments. Consumer credit is not wealth creating. Indeed, when used excessively, it is more likely to be ‘wealth-hampering.’

“Overall, I believe lower levels of consumer debt and primary residence debt i.e. on non-income generating properties relative to income are preferable at this stage. This would hopefully lead to higher rates of saving which creates wealth. It is crucial to build up financial buffers at this time as we are entering a stagnant economic environment which is threatening employment and income growth.”

Of course there are others who argue otherwise. Dr Andrew Golding of Pam Golding Properties stated that another interest rate hike would do little to contain price pressures and would negatively impact much needed economic growth. He added that another increase would in all likelihood dampen general consumer appetite for property acquisitions, notably those with higher debt, first time buyers and second home investors.

Meanwhile, in terms of sector specific performance, there appears to be something of a lag between what’s happening in the economy and what’s happening ‘on the ground’ so to speak says Park Village Auctions’ Jaco du Toit who explains that the office property market is still in “recovery mode”, the industrial sector appears to have reached something of an equilibrium and retail property continues to perform relatively well. As for the auction sector, Du Toit reports that things are “ticking over nicely.”

Author: Jackie Gray-Parker
Taken from: Private Property

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Witbank Property Market is White Hot

New entrants to the property market in Witbank are boosting home sales with many millions worth of transactions per month now being recorded in the booming Mpumalanga mining town.

On-going construction work on the Kusile power plant is responsible for a continuous inflow of new residents, says Riaan Kasselman, sales manager at the local Chas Everitt International franchise. “The Kusile project is set to last for the next eight years, which bodes well for sustained demand for property in the medium to longer term, especially in the more affordable price ranges.”

He reports that his agency has notched up record sales in recent weeks. “In July, for example, we concluded sales to the value of almost R52 million, and in August another R25 million. And most of those transactions were in the under-R1 million category, although there was good activity in all price brackets.”

He attributes the strong performance to spiking demand as well as the fact that the agency converted to the Chas Everitt brand earlier this year. “Joining a strong national group enabled us to more than double our sales force and afforded us the opportunity to greatly increase our market penetration.”

Demand from first-time buyers, many of whom qualify for bonds on properties costing less than R1 million, has also spurred new development and sales of these units are brisk. Kasselman says buyers are lining up for newly built units in Marelden Estate, for example, which was launched in July. A total of 70 units in the 280 unit estate were sold within two months at prices of around R799 000 per unit.

At the same time, prospective buyers who cannot afford their own homes yet are very active in the rental market and demand is further boosted by newcomers to the town who prefer to rent while sourcing homes to buy. Chas Everitt Witbank currently has more than 350 rental units in its portfolio.

Kasselman says many tenants become first-time homebuyers at the end of rental contracts and that the uptake of any units that then become available is rapid. The strong demand in this sector, especially for units with two bedrooms and a bathroom at monthly rentals of less than R6000, is stimulating new development such as the Cosmopolitan project that is attracting investors.

Kasselman says annual rental escalation has flattened slightly over the past few years but is still higher than most SA rental markets at around 10% a year.

Top rentals of around R60 000 a month are being achieved for large upmarket properties in the town, but these are usually guest houses with multiple rooms and bathrooms with upmarket features that are rented by companies for professional staff working at Kusile or the surrounding mines.

Author: Barry Davies
Taken from Chas Everitt

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