Freehold property enclosed by boundary walls are referred to as “cluster homes” in South Africa. Cluster homes are commonly governed by a homeowners associations. Over the last few years this type of property development has seen an increase and their is some confusion over the legal status of cluster homes among South Africans.
In South Africa their is two ways in which you can own a property namely freehold and sectional title. With freehold the property is registered in your own name and you are free to manage the property independently. In the case of a sectional title you buy not only your unit but also an interest in common property such as gardens, swimming pools and security. you are responsible for the upkeep of your own unit but the administration and maintenance of the complex and common property are the responsibility of the body corporate and you are subject to the rules of the body corporate.
Cluster homes property are sold as freehold in south Africa. This means you gain individual title to your unit and garden and are entitled to use other parts of the property such as roads. Cluster homes are governed by a homeowners’ association with a constitution drawn up by elected Trustees and approved by a percentage of the owners. Because cluster homes are bought as freehold many owners believe that they are in no way tied to any association and that there is no legal link between them and their neighbours. The reality is that although the cluster home is bought as freehold property their is a clause in the offer to purchase and the title deed outlining that all purchasers acknowledged that they would automatically belong to the homeowners’ association.
The rules in a cluster development would encompass operational management issues and common area payments and as an owner you will be bound by a levy payment. In addition, a well-drafted set of rules will include architectural guidelines and will impose conditions on homeowners disallowing certain action.
Despite difficult times in the property market in South Africa, fundamentals of commercial and industrial property remain strong.
“From an equity point of view, we are currently in an exciting space in the property market. Current market conditions provide property investors with good value for quality properties and auspicious investment opportunities in this sector,” said Rob Wesselo, head of equity investments at Absa Commercial Property Finance on Wednesday.
He said the rental market was particularly buoyant in industrial and commercial markets, showing strong rental growth and high tenant demand.
According to Wesselo, rising development costs, shortage of serviced land has slowed the supply of new developments, leading to spike in rental income.
“In the last 12 months construction costs of building office blocks have increased by approximately 30% and developers are also faced with increased financing costs due to sustained interest rate rises,” he said.
In addition, ten consecutive interest rate increases since June 2006 have caused commercial property prices to soften, resulting in repricing of assets.
“High interest rates and low property yields have forced many buyers out of the market in recent months resulting in a shortage of property investors. These factors, in turn, have provided equity opportunities for equity investors,” .
Authored By: Wesselo
Published By: I-Net Bridge
The much-discussed low point in house sales and house prices could now be far closer than most people realise.
Analysing the Residential Property Price Ranger’s (RPPR) latest figures for the Cape Peninsula, Bill Rawson, chairman of Rawson Properties, said that these show that, despite much negative comment from the public and media, prices have held up remarkably well.
“The average house price in the Cape Peninsula from March 2008 to June 2008 was R1,998,874. While this was well down on the R2,565,866 average for the same period in 2006, it was significantly up on the R1,689,617 average for 2007 and also up on the 2005 average of R1,892,220. These figures are not discouraging.”
Why then does Rawson suspect that the low point (which could also be the turning point before better times begin) could be approaching?
“If we look at the RPPR unit sales, these show that the numbers sold could now have hit rock bottom – only 404 homes in the Cape Peninsula were sold in June 2008. This is less than half the 1106 units sold in June 1998, when interest rates were at 20% and many were saying that the market could hardly be worse.”
Unit sales for the last month, added Rawson, were 60% down on the same period last year – another indicator that we could be nearing the bottom of the graph.
“We are now very definitely in a new economic territory,” said Rawson.
“This, I believe, is because we are now more part of the global scene which previously did not affect South Africa so closely. In 36 years of property dealing I have never seen quite such massive fall-offs in unit sales. The consumers, many of whom are newly empowered and possibly over committed, are struggling as never before to pay their way because of rapidly rising food, fuel and other prices, all of which have hit record highs.”
In the circumstances, said Rawson, the economy, already “more or less killed off”, in his view very definitely does not need a further brake put upon on it through another interest rate hike.
He repeated, however, that now is the time to buy because unit sales are highly unlikely to go much lower than their current level and, once they begin improving house prices will respond.
“Either way, if you need to sell or buy, stay in the market as it would be a real gamble and very unwise to sell and then wait for prices to fall further before buying again.”
Authored By: Bill Rawson
Published By: Property24
If you own a property worth more than R1,2m that you have to sell now, be prepared to wait at least four and a half months to flog it. There is also an 85% chance that you will not get your asking price.
These and other statistics released earlier this week by FNB again underline just how difficult trading conditions in the SA housing market have become. According to FNB’s Residential Property Barometer for second quarter 2008, more than 80% of all properties now remain on the market for an average four months, up from an average three months in first quarter 2008. At the height of the property boom towards the middle of 2004 it took only six weeks for the average property to sell.
Lower priced properties of less than R700 000 are still finding buyers within an average 11 weeks. However, more expensive homes are becoming increasingly difficult to sell, with homes priced above R1,2m sitting on the market for 18 weeks on average.
FNB’s research, which is conducted on a quarterly basis among 150 estate agents, also shows that the percentage of properties sold at less than asking price rose markedly over the past year – from 70% in second quarter 2007 to 85% a year later.
FNB’s data supports the general view that now is not a good time to sell. As Ronald Ennik, an executive director of Pam Golding Properties, puts it: “If you can avoid putting your property on the market, don’t sell at this stage. It’s simply a market you don’t want to be in right now, unless you are forced by circumstances to be there.”
Ennik says homes bought in the last two to three years will probably not yield a profit if they were to be put back on the market this year. Absa Home Loans senior property analyst Jacques du Toit has a similar view. “A property owner who has bought during the past two years is set to make no profit, or even a loss, if he sells now.”
Buy-to-let investors, in particular, are advised to hold on to their properties if they can afford to. Du Toit says the increase in demand for rental property, means that investors could achieve higher income returns over the next 12 to 18 months. “Investors should therefore look through the current downward cycle and focus on income returns, with a view of achieving real capital appreciation again from 2010 onwards.”
Authored By: Joan Muller
Published By: Property24
The scales have tipped in favour of those looking to purchase property, and buyers looking for good returns and value will find opportunities a plenty in established property.
Carlos Moreira, principal of the new Homenet Olympic branches in Alberton and Rosettenville, says prevailing market conditions are making life difficult for developers. High land and material costs as well as a shortage of skills have resulted in many planned developments being put on hold or in unit prices being increased to try to make ends meet.
“As a result, we are witnessing a buyer shift towards established homes as they offer greater value for money. It is practically impossible for developers to build quality homes for under R1m. Comparatively, buyers can obtain an existing three-bedroom sectional title unit in Rosettenville for R450k. A similar full title home can be bought in Alberton for around R1m.
“Most of those buying existing property in our areas are first-time buyers and we encourage them to go in this direction as such homes represent great investment opportunities. For example, semi-detached houses in the ‘Old South’ of Johannesburg can be bought for between R700k and R800k, refurbished and resold for over R1m.
“Alternatively, buyers can live in one half and lease the other for around R3,500 a month to assist with the bond.”
Meanwhile, he says, the time is ripe for entry-level and middle-income homeowners to upgrade. “Properties at the top end of the market in areas such as Glenvista and Oakdene have stagnated to some extent with many sellers dropping their prices, which means real bargains for those looking to move up in the world.”
Authored By: Carlos Moreira
Published By: Property24
The increased cost of cement and soaring fuel prices mean the delivery of low-cost houses “is becoming impossible”, housing associations say.
Rising building costs would not only mean fewer houses would be built to ease the city’s housing backlog, but they could also affect the quality of the homes provided.
Bheki Nkonyane, of the Cape Town Community Housing Company, said steep building costs meant there was “no way people could afford structures that would not compromise on quality”.
The issue of quality was more serious in the Western Cape because of such environmental factors as flooding and strong winds, he said.
The auditor-general’s report on the administration of low cost-housing projects in the Western Cape has said most of the units inspected are “of a poor quality”. Of 110 houses inspected, more than 60 were found to be sub-standard.
Nkonyane said housing companies needed to work with “policymakers” such as the government and municipalities to find ways of dealing with rising costs.
Johan Snyman, of the Bureau for Economic Research, said the rises in cement prices had exceeded the inflation rate since 1999.
One reason was that the energy-intensive production of cement made it vulnerable to fuel price hikes.
Retail cement prices had risen more than 8 percent since last year, Snyman said.
The building sector was “transport-intensive” as labour and materials had to be transported long distances to construction sites.
The prices of cement and bricks have each increased by about 140 percent since 2000.
With the 96 percent increase in the price of diesel in the past year, builders have been hit hard by rising costs and lower profits.
Thubelisha Homes, a section 21 company that undertakes low-cost housing projects for the national Department of Housing, said amounts tendered for developments were beginning to reflect the price increases in materials.
The most recent study by the Economic Bureau for Research found that amounts tendered last year were on average 15 percent higher than those in the year before.
The bureau predicted the amounts tendered this year would be on average 12 percent higher than those last year.
Nkonyane said the average 42 square metre house would cost about R120 000, half of which would be subsidised by the government.
The government needed to increase subsidy amounts to take rising prices into account, otherwise affordable housing would be “an illusion”, he said.
A survey by the University of the Witwatersrand’s School of Construction Economics and Management has found, however, that cement accounts for only a small percentage of residential building costs.
Authored By: AnÉl Powell
Published By: www.iol.co.za
It is anticipated that the residential property market, which is experiencing a real low according to the banks, will remain inactive for the rest of 2008.
Despite this state-of-affairs, the right residential stock quickly finds a buyer.
The Standard Bank median house price fell to R530k in April from R550k in March. The April median house price of R530k translates into a growth rate of negative 8,6% year-on-year (y/y) when compared to the median house price recorded in April 2007. The five-month moving average growth rate declined to –2,8% y/y in April.
However, recent point estimates for house price growth should not be taken at face value and should be interpreted with caution as they are subject to certain distortions.
The latest First National Bank (FNB) Residential Property Barometer has accorded the residential property sector an activity ratio of 4,96 on a scale of 1 to 10.
This is because affordability, which is key to the performance of the residential property sector, is lacking due to an increase in house prices, interest rate hikes, rising inflation and the National Credit Act (NCA). This situation is exacerbated by negative sentiment as many homeowners prepare to emigrate.
The percentage of first-time buyers in the residential sector has dropped to 14% from 32% in 2005 as first-time buyers contend with rejected mortgage applications. In addition, people who have already purchased homes are selling and renting in order to make ends meet.
It must be noted though that different sectors within the residential property sector as well as residential properties in different geographical locations have been impacted to different degrees by the residential market slump, with some not being affected at all, revealing that statistics on house price inflation do not divulge information on areas outside the norm.
And this is evident in the fact that there is constant demand for certain types of residential property that are appropriately priced.
The Rode Report for the last quarter of 2007 records that since 2006 lower-priced houses have been doing better than their more pricey counterparts. Property economist Francois Viruly says that houses within the R1m to R2m market will become more affordable within the next two years “with the rise in property prices expected to keep fairly close to the inflation rate”.
He points to the demand for residential houses/units under R1m from people relocating from former black townships predominantly, and feels there could still be price growth above the inflation rate in this sector of the housing market. He also says price growth may even drop to below the inflation rate in some segments of the residential market.
According to Rael Levitt, CEO of The Alliance Group, there is currently much demand for single residential houses under R750k rather than apartments and for houses going from R15m upwards.
He further says that houses in the R2m to R5m bracket are especially unpopular and that overall leisure homes, especially in coastal areas, have been the most impacted by the slump.
According to John Loos, FNB Home Loans property strategist, the lack of affordability in the residential sector has and will continue to result in a noticeable amount of new residential development falling into the lower-priced category of the market, which entails more basic and smaller houses, whereas before it would have been in the more middle stream of the market. In addition, more people are being forced to purchase more basic houses with the intention of upgrading them when finances permit.
Location is also an important factor when it comes to desirability of residential stock. This is manifested in the example of Realty 1 International Property Group announcing that Mafikeng is going against the grain with people wanting to buy houses and a shortage of stock there.
The Rode Report for the last quarter of 2007 also shows that nominal house price growth in Johannesburg, Pretoria and Port Elizabeth has decreased from previous growth rates while nominal house price growth in Durban and Cape Town has increased.
Authored By: Kara Michaels
Published By: Property24.com
South African property owners are setting asking prices at about 10 percent below their peak.
According to The Alliance Group, a large auction and valuation group, the supply of houses up for sale has outstripped demand in the past three months — the first time this has happened in the past six years.
In its first quarter review road show to financial institutions and property funds, Alliance has confirmed that the residential property market has cooled off across the board including the very top end of the market which has been impervious to market changes and interest rate fluctuations.
The market above R15-million and below R500 000 seem to be having the least impact, “but they are certainly not immune to local and international value re-pricing,” explains Chief Executive, Rael Levitt.
The newly appointed Alliance research department picked up the property slowdown in the third quarter of 2007 through decreased bidding activity on its auction floors. “There is no doubt that sellers are rapidly becoming far more flexible and realistic due to a flood of stock hitting the market with less and less buyer uptake,” explains Levitt. “It’s a classic case of supply exceeding demand and despite South African residential real estate experiencing growth of 300 percent in a relatively short time frame, reality is now dawning on homeowners that values don’t only go upwards but are in fact now decreasing.”
Signs of negative equity are emerging
“For struggling property owners and their financiers this presents a real problem particularly to home loans granted in 2007 where there are now signs of negative equity emerging, which may be widespread,” says Levitt. Alliance is cautioning banks that property valuations conducted in 2007 should be treated with great caution and must not be completely relied upon when assessing their asset based securities.
“We are far away from the 2001 period where certain properties had negative equity of up to 20 percent. However, for the first time in six years a flat and now a decelerating market is putting pressure on new homeowners who are getting caught in a debt trap where they cannot quickly sell and settle their full outstanding mortgage bond debt.”
Published By: iafrica.com
Sunninghill falls under the ever-growing Sandton, and is a very convenient locale to enjoy the promising future of a new CBD in the Greater Johannesburg area.
In addition, the following amenities are within easy reach of Sunninghill: Sunninghill Hospital, the Vodacom World of Golf, Montecasino, Fourways Crossing and Mall.
Month-on-month, Sunninghill has seen consistent transactions in the market, having transferred properties every month since January 2005 for both the free hold as well as the sectional title market. The market dropped to record lows of five transactions for free hold. Interestingly, this figure fell in January 2008 the latest recorded amount for the Sunninghill area.
Anne Mendelsohn, Seeff property agent for the Sunninghill area, says the market in Sunninghill is busy from a seller’s perspective, “as we have double the amount of properties to sell in the area compared to the number we had last year”.
Sectional title has performed marginally better having recorded 13 transactions for the month of January 2008, yet still the current state of the market is applicable to a trend seen throughout Johannesburg’s higher-priced suburbs, as sellers are stuck on the market for longer periods than desired. This is due to a buyer’s market that is hesitant in view higher interest rates and a post-National Credit Act (NCA) buying environment.
“There are buyers around but they are more particular and with more stock on the market it is taking longer to get an offer. Also, the offers are about 20% below asking price,” adds Mendelsohn.
The average amount of transactions, taken on a monthly basis, was 14,54 for free hold and 34,83 for sectional title; these averages were recorded from Deeds Office data over a two-year period. More recent figures show that the number of transactions taking place in both markets are under two-year averages.
Yet the area remains popular with “younger yuppie buyers who either work as accountants or doctors/nurses”, says Mendelsohn.
The rolling average, two-year price for free hold amounted to R1,400,278, and the average sectional title unit offering over a similar period was R693,647. The average free hold price can be seen to represent an almost doubling up on sectional title offerings.
In terms of sales revenue, the highest return was in August 2007, which witnessed R54,770,884 in total sales.
Authored By: James Monteiro
Published By: Property 24
The residential property market is moving strongly to the black buyer, according to Kura Chihota, the executive director of Leapfrog Property Group. Chihota said the growing buying power of South Africa’s black middle class was “dramatically” shaping the country’s economy and society.
This was being felt not only in the retail sector, vehicle sales and financial services, but also especially in the property sector, where statistics from the FNB Property Barometer showed that in some markets 49% of buyers of residential property were black. Chihota said real estate agencies who had anticipated the changes would be best placed to guide new buyers.
“Besides the obvious challenges such as a shortage of talented black agents within the industry, agencies will also need to review their marketing, advertising and media usage to meet this evolving need.”
Leapfrog said that the report also estimated that since 2005, about 50 000 people a month had moved out of the townships into more affluent suburbs where almost half of the 2.6 million black diamonds now lived. “And yet despite all the research and evidence of the change, the property industry is still lagging dramatically on the transformation front and currently, of the 72 000 estate agents registered with the Estate Agents Affairs Board, only 5 000 are black and only approximately 3% of transactions are handled by black agents,” said Chihota.
Leapfrog Property Group has pledged to grow the number of black agents, but with one provision – this growth was not designed to promote black estate agents selling only to black people and only in certain areas.
Published By: IOL property