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JULY 2012 #80


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Homeowners sell and opt to rent by STAFF REPORTER Tough economic times seem to be causing some homeowners to sell their houses and opt to rent instead, as consumers fight to keep the home fires going. And with about 15% of the population partly depending on rental income, the immediate future income looks strained as the smoothed year-on-year increase in rental income, according to the latest PayProp Rental Index, is the lowest in more than two years at 4.9% – below the projected inflation rate of around 6%. Currently most developing economies seem to be propped up by low interest rates that are unlikely to rise anytime soon – perhaps not even until 2014, says Mike Schüssler, chief economist at In South Africa, the Treasury expects inflation to rise to 6.2% and GDP growth to slow to 2.7%. Schüssler’s expected figure for inflation is around 6% and GDP growth 2.4%. He


SA house prices grew by 8.9% in June by DENISE MHLANGA South African house prices grew by 8.9% year-on-year (y/y) in June from 8.6% yearon-year in May, according to the June FNB House Price Index. The report notes that this is the highest y/y growth since June 2010. Writing in the report, FNB Home Loans property strategist John Loos explains that in real terms, as at May the index showed a mild increase to the tune of +2.7% y/y with consumer price inflation in that month having come in at 5.7%. This means that since the real “boom-period” house price peak reached in February 2008, real house prices (house prices adjusted for CPI inflation over the period) were 12.6% lower at May 2012, although in nominal


terms they were 15% higher than February 2008 as at June 2012, he says. Loos notes that compared to July 2000, real prices were 70.2% higher as at May 2012 and nominal price were 236.6% higher as at June 2012. The recent mild resurgence in house price growth comes largely as a result of a late2011 strengthening in the domestic economy after two weak winter quarters in 2011, he says. Loos says on a month-onmonth basis, the index shows that from a peak of 1.65% in January, seasonally-adjusted house price growth slowed to 0.82% by June. Loos went on to say that, “This slowing month-onmonth growth trend suggests that a peak in the year-onyear house price growth rate

should be reached soon.” Loos says the recent monthon-month house price growth slowing also appears to be reflective of a housing market that is tracking short-term fluctuations in the economy, and signs that economic growth in South Africa is slowing. Economic growth slowed mildly in the first quarter of 2012 and various global and domestic data point towards further slowing in the current quarter, says Loos. FNB says with a weakening economic environment, coupled with no new interest rate stimulus to date suggests that the recent slowing trend in month-on-month house price growth will continue in the near term translating into slowing y/y house price growth. -

says they expect interest rates to stay low for the whole year. “We are fighting a hard battle against a possible recession. We are likely to win, but at a higher debt cost,” he explains. Over 2.9 million households rent, of which 1.6 million rent formal structures. Of this number, about 700, 000 households rent properties in the formal (suburban) market, up from 675,000 in 2010. More than 62% of all South African households currently own their lodgings – but this percentage has dropped in the last few years and is significantly lower than earlier in the decade when it was around 70%. This indicates that more and more former homeowners are now entering the rental market, says PayProp CEO Louw Liebenberg. To complicate matters further, nearly 10% of all South African households rely on rent for their bread and butter. About 5% use rent as supplementary income, adding up to around 15% of South Africans getting some form of income from rent. “On the one hand, tough economic times are making times tougher for tenants as they have to cope with increasing fuel, electricity and services costs, which has put pressure on landlords to limit rent increases to below inflation in order to retain paying tenants who are struggling with affordability.” On the other hand, landlords, for whom rental income is not necessarily a luxury, are biting the bullet as their income is not growing with their expenses, says Liebenberg.

Considering that around 77% of these landlords receive less than R3,000 per month for their properties, it is clear that not only the top end of the property market is affected. Generally, he says one could argue that the lower end of some of the formal rental market starts at about R1,000 per month. However, as it is unlikely that RDP house rentals can be advertised by estate agents, it is being estimated that, other than the 400,000 houses that rent for more than R3,001 per month, there are only about another 275,000 houses for rent in the formal market. About 26% of all households have a second home, but a large number of these are in rural areas and are generally not rentable. The average rent in South Africa was R5,178 per month, which is slightly more than the February figure of R5,172 per month. Using nominal rental income of R5,178 per month, the gross returns on a medium house (using Absa medium price of R968,600) would be 6.42%. Using Absa’s average small house price (currently R666,900), the gross return is 9.32%. This means the average gross rental return between medium and small houses is 7.6%. This average drops to under 6.3% when estimated municipal charges and other minor factors are taken into account. “This is at least a little higher than leaving money in the bank, and rents do improve slowly over time, and one could also get a capital gain,” says Schüssler. -

JULY 2012


Interest cut would help home market by STAFF REPORTER With the cost price index (and inflation in general) likely to continue to stay below the 6% upper limit (it is already at 5.7%) and with South Africa’s economy now feeling the effects of significant reductions in exports to Europe, the South African Reserve Bank’s Monetary Policy Committee (MPC) will ‘almost inevitably’ find itself able to reduce its interest rates so as to stimulate economic growth, says Bill Rawson, Chairman of the Rawson Property Group. “A cautious move by the MPC would be to cut the rate by 0.25% in the very near future but as I read the signs now Gill Marcus is likely to be a lot bolder,” says Rawson. “Certainly in the housing development and marketing sectors we are hoping for an initial 0.5% cut followed by a further 0.5% cut before the end of year.” In residential property such a move is now sorely needed, says Rawson, especially as one now sometimes gets the impression that the government is not aware of how severely the National Credit Act has hit homebuyers, particularly those at the lower end of the scale struggling to get bonds. “The state’s repeated statements about creating a home-owning nation are beginning to ring a little hollow.” Just how serious the

situation is, says Rawson, has been shown by the latest Korbitec figures on bonds: the number awarded in May 2006 was just over 60,000. In recent months that figure dropped to an average of around 17,000, with an all-time low of 9,000 in May. There are, he adds, as yet no signs of a pick-up on the horizon. “The truth is that if even one bank was able to operate without such strict observance of the National Credit Act regulations, it could double its bond awards overnight and in my view this could be done without seriously affecting its risk profile.” Instead of going for longterm loans, says Rawson, the banks are currently focusing on short-term, unsecured loans - which he and others regard as a dangerous tactic. “This policy was at one stage adopted in the UK but proved too risky.” Rawson also comments that among South Africa’s businessmen, most are highly socially aware. There is now genuine concern as to the lack of accountability that state and provincial authorities have in spending hard-earned tax money. “This is typical of many emerging countries where the newly elected politicians, having never been involved in work creation, are only too adept at wealth distribution – to no good effect.” -

Property News Highlights

Durban housing market on the up

House prices continue to grow

The greater Durban metropolitan housing market is showing signs of stability and steady growth says Samuel Seeff.

South African home prices grew by 6.5% year-on-year in May, according to the latest statistics released by ooba.

Seeff says over the past two years, they have seen some stability in both sales volumes and prices -

The report reveals that the average house price rose to R869, 088 from R816, 317 a year ago. -

STOP PRESS: New London Office: Call Jeff Watts 0207 224 4455 m: 07767 862608 e:

JULY 2012



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Creating a luxury spa bathroom

Follow our tips to create a luxurious spa bathroom in the comfort of your own home. Photo by Unique Hotels Group.

by ANTONELLA DESI Are you in desperate need of some me time so that you can recharge your energy levels? Perhaps transforming your bathroom into a serene spa is the answer.

Declutter To create a sense of serenity, it is imperative that your bathroom be well organised and that there is sufficient storage space for all your sanitaryware essentials – this will not only lessen

your anxiety, but it will help create an instant calming effect. You can clear out your clutter by installing a vanity that offers ample storage space or use beautiful wicker baskets to create extra storage facilities. Another way to take care of a messy bathroom is to create various storage solutions for different bathroom functions. For example, instead of having towel racks and hooks located around your bathroom, rather install a heated towel rail – this will not only store your towels in one neat spot, but it will also dry them and ensure that you have lusciously, warm towels on hand whenever you need them. Clever and attractive storage solutions contribute to a chic and practical space where you can relax and focus on the things that matter, says Kate van Niekerk of Tile Africa. Get inspired by nature Take your inspiration from nature by bringing natural elements into your bathroom to help you restore your sense of serenity. For example, if you like the seaside, why not create a colour combination of turquoise, white and beige – colours inspired by the beach. For a more dramatic effect, choose a ladybird-inspired colour palette comprising black and red. Your fixtures and accessories can also resemble nature – use a wooden vanity or freestanding bath on a wooden base, sandstone cladding used as a feature wall, a stone basin, or choose natural stone listelli as an interesting choice of border. Alternatively, you can add natureinspired images in the design of your


bathroom, such as printed glass splashbacks or shower screens. If you’re looking for a slightly simpler way to include nature in your spa bathroom, increase the green factor with the inclusion of plants, both large and small. Indoor plants contribute to making a space appear airy and bright. When it comes to placement, try to protect your plants from the shower spray and direct streams of water as this can damage their leaves. Appeal to all the senses Spas don’t just appeal to your sight and touch; they also soothe you with sounds. Keep a CD player in your bathroom and play calming music whenever you dip into a relaxing bath. Another great addition to any spa bathroom is to ensure that it smells wonderful – burn incense, include some pot pourri, scented candles, or fragrant oil burners to ensure your spa bathroom smells as good as it looks. You could also include some sumptuous soaps, creams, bath salts and bubble bath for added luxury to truly complete the in-house spa experience. Light the way Melissa Davidson from The Lighting Warehouse says different forms of lighting can be used to completely transform the look and ambience of a bathroom – from a bright and functional area to a softly lit, relaxing spa-like space. In fact, a cleverly designed lighting design can offer you the best of both worlds. If you are completely redoing your bathroom, you will need to plan your lighting so that the electrical work can be done during the building stage. Walls may need chasing, to allow wires to be concealed. However, if you are working with existing electrics, you can still use them to your advantage by changing the types of light fittings you have. Added luxury And of course, what would any spa-style bathroom be without a spa bath? Jasmin Kraneveldt from Bathroom Bizarre says no longer just a utilitarian space, today’s bathroom can be a place of luxury and convenience – and installing a sumptuous spa bath is the best way to achieve this. Kraneveldt says today’s spa and jetted baths use the healing power of hydrotherapy to revitalise tired muscles, and maintain and restore health and well-being. Spa baths are a great stress reliever – their jets gently massage tired muscles as you soak in the tub, allowing you to get out of the bath feeling refreshed and rejuvenated, she says. -

JULY 2012


Legal rights for liquidated property development I

s a purchaser bound to pay for a property if the developer is liquidated?


o answer this question it must be established at what stage the development is at the time of liquidation. If the land is not yet registrable Section 26 of the Alienation of Land Act 1981 prohibits a seller (developer) from receiving any payment until the property is capable of being registered. There are however two exceptions. Firstly, a purchaser can pay the purchase price to an attorney or an estate agent who

Nicola Strydom, Seeff Tzaneen

must retain the moneys in his trust account until the property becomes registrable. Secondly, if the purchaser is given an irrevocable and unconditional guarantee by a registered bank or insurer in terms of which the bank or insurer undertakes to repay the amount paid by the

purchaser if the property is not registrable. Should the seller become insolvent, any amount the purchaser has paid to an attorney or an estate agent in trust, or which was guaranteed by a bank or insurer, is immediately repayable to the purchaser. The rights of the purchaser are therefore protected. If the land is registrable As a general rule, liquidation does terminate a contract. The trustee of the insolvent’s estate however has a choice to either repudiate or enforce the contract, whichever is more beneficial to the creditors. If the trustee repudiates the contract, the purchaser has a concurrent claim for any payments that he has made. He will share in the proceeds of the sale of the assets of the insolvent estate. If the trustee elects to enforce the contract, the purchaser will be liable to pay the purchase price against transfer of the property in his name. Chapter II of the Alienation of Land Act however provides that, if the purchase price is payable in two or more instalments over a period exceeding one year, the trustee does not have the choice whether to repudiate or enforce the contract. The purchaser must decide whether he wishes to enforce

Transferring a UK mortgage C an you transfer a UK mortgage to South Africa, in other words: take out a loan here and buy in SA?


he short answer is no. I can’t see a UK bank being willing to mortgage a property in SA, except perhaps if it has an operation / branch in SA that would handle the whole transaction locally. An option might be to secure another type of loan in the UK – or perhaps take out a home loan on a UK property - and then bring the money into SA through the Reserve Bank in order to buy a property here outright. However to do that you will need to have funds in the UK to keep up the monthly repayments on your loan or you could risk losing the UK

JULY 2012

property and / or having a judgment taken against you for unpaid debt. So before you make any decisions about this, I would strongly recommend that you consult the international finance expert at your own bank.

the contract. If the purchaser proceeds with the contract, the trustee must transfer the property to the purchaser against payment of all amounts still owing by the purchaser. If the purchaser elects not to

enforce the contract, the trustee can sell the property and the purchaser is entitled to be compensated before any other creditor out of the proceeds of the sale of the property. The contract must however have

been registered in the Deeds office. If the contract was not registered, the purchaser is merely a concurrent creditor. Nicola Strydom Licensee: Seeff Tzaneen

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South African Property Monthly – July Issue  

Homeowners sell and opt to rent; SA house prices grew by 8.9% in June; Ask the Expert: Transferring a UK mortgage

South African Property Monthly – July Issue  

Homeowners sell and opt to rent; SA house prices grew by 8.9% in June; Ask the Expert: Transferring a UK mortgage