The bubble inflated, then burst, then inflated again. Now finally it looks as if property prices are seemingly slowing or even decreasing. According to Robyn Farrell, director of 1 st for Women, “Now could be the right time for South African women to take a page out of celebrity property moguls such as Britney Spears, Angelina Jolie and Catherine Zeta-Jones’s book, and invest in the booming South African property market.”

“An article on the website cyberprop.com reported earlier this year that, on a month-on-month basis, nominal growth in house prices was 0.6% in April this year, compared with 0.8% in March. According to ABSA, the current declining trend in month-on-month growth started in January 2004. While the growth is still continuing, it has definitely slowed. This does not however mean that prices are coming down – at this stage, prices are remaining at the same levels rather than increasing. This is good news for those looking for independence, empowerment and an excellent investment opportunity,” said Farrell.

According to the Absa House Price Index, in a statement released on 3 November 2005 , “Nominal house price growth, declined further in October 2005 to 15,8% year-on-year. Absa said that this was the lowest year-on-year growth since August 2002 when it was 15,9%. The current declining trend in house price growth is expected to continue into 2006, largely driven by higher interest rates during the course of the next twelve months. As a result, nominal house price growth of between 5% and 10% is projected for next year. This implies that nominal house prices may decline on a month-on-month basis at some stage in 2006.”

“Women are an economic force in the country today and it is said that women tend to make excellent property investors because they were often better able to visualise the potential of a house . Moving into your own home only when you’re married is a thing of the past, women should be shifting social norms and traditions and take advantage of this optimistic period in the property market,” says Farrell.

While the time might be ripe for buyers who can afford to purchase a house at the current prices, potential homeowners must bear in mind that there are a number of hidden costs associated with buying a home. These include costs such as transfer fees, bond costs, home loan initiation fees and deeds office registration fees, as well as the expense of moving and connecting water and electricity. In addition, a homeowner is required legally to have homeowners’ insurance, which protects the actual structure, thereby protecting the investment of the financial institution with whom you have your bond. All of these add up to a very expensive exercise that is not for the financially unstable. According to Iona Minton and Dave Welmans in their book, “The Property Game: A Guide to Property Ownership in South Africa ”, there are two main reasons for homeowners’ insurance, namely protecting your house and other structures; and protecting your personal property. They also remind homeowners that, while your monthly insurance premiums aren’t buying a tangible product, you are buying peace of mind.

Farrell concludes, “Buyers must remember that the choice of who to take out homeowners insurance with is always yours. While the financial institution who grants you your bond can give you suggestions on who to use for your insurance needs, you are not obliged to opt for their suggestions. As always with any financial decision, it is terribly important to shop around for the insurance product that best suits your particular budget and needs.”

1 st for Women Insurance offers women “Cover with Care”. For more information on 1 st for Women Insurance Brokers, visit www.firstforwomen.co.za

The recent revelation by the Department of Housing that banks have to date advanced R16bn of the R42bn they agreed two years ago to lend to low-income earners has once again focused attention on SA’s need for more affordable new homes.

“Families are getting smaller, but the new homes that are being built seem to be getting bigger and bigger and more luxurious which, contrary to what many people think, is a bad sign for our housing market,” says Berry Everitt, MD of the Chas Everitt International property group.

“For home values to keep rising, demand has to keep exceeding supply across the board, and to achieve that, one has to enlarge the pool of people not only keen to buy and get their foot on the first rung of the property ladder, but financially able to do so.

“And this is the market criterion which government and banks were no doubt addressing through their agreement to ensure improved access to home loans for low income earners. However, housing director-general Itumeleng Kotsoane says a major obstacle now to the faster implementation of this agreement is a serious shortage of suitable housing stock.

“In short, although they can now obtain loans more easily, there is very little that low-income earners can afford to buy, and very little new stock being delivered in this market sector.”

This is not surprising, Everitt notes, since high land and building costs mean that the profit incentive currently for the development of affordable housing units is low, and is often further eroded by high holding costs as a result of unwieldy local building regulations or rezoning red tape.

“However, a concerted effort is now needed to resolve this problem because affordable homes are key to the future of the property market in SA.

“If such homes are well-built and well-located they will, in time, appreciate in value, enabling owners to build equity and increase their personal wealth and buying power as well as their ability to scale the property ladder – and, ultimately, to sustain the demand for the mansions that developers love to build.”

(Chas Everitt International, Oct 2006)

The industry should absorb negative effects of interest-rate hikes, reports David Jackson. The South African property market remains in a relatively buoyant and upbeat phase, despite underlying concerns about rising inflation and a new round of interest-rate hikes.

The property and related construction industry is gearing up for four years of heightened activity in the build-up to the 2010 Soccer World Cup and the Gautrain project. And the buying power of first-time black home-owners in the residential property market is being recognised.

Neil Gopal, CEO of commercial property organisation Sapoa, says the rising interest-rate environment as a result of increasing inflation and consumer debt levels wilI no doubt have certain implications, but certain segments of the market may be affected more than others. He says township retail developments will probably be affected as the target market will feel the effects of the rate increases.

“I believe if rates continue to increase then it will have an effect on property values. However, I don’t foresee any significant increase in rates immediately and believe an increase will be absorbed by the market.”

Gopal says that international issues such as the Iranian-US standoff could have more of a negative effect on the economy as a whole due to the effect on oil prices. Mike Lomas, CEO of Group Five, says a notable trend in the residential property sector is the number of first-time black buyers entering the market for houses in the R400000 to R700000 category, showing the long-predicted arrival of the emerging black middle class is a reality.

“This segment of the market has changed, and it is driven and underpinned by black economic empowerment. There are a lot of people reaching this level of affordability who were not in the market before.” He says the property market is also set to reap beneficial spin-offs from mega projects such as the Gautrain rapid-rail link in Gauteng and the construction and infrastructure build-up to the 2010 Soccer world Cup.

Lomas says that if construction work goes ahead to the tune of the reported R300bn to R400bn “the money will find its way into the pockets of people who will want to buy
assets, and it would underpin another phase of growth in the residential market.”

There are potential spin-offs in property development from the Gautrain project, for example at stations, says Lornas. He says that although demand may vary and flatten out a little after 2010, the impetus of World Cup-related projects is likely to see investment sustained to about 2014. Group Five, which has a strong focus on industrial and commercial segments of the market, is fmding there is a lot of demand for industrial land. Group Five Property Development Services has launched the Woodmead Business Park in Gauteng as part of a wider development known as Waterfall City. Waterfall City will cover about 2200ha.

Development plans include a residential golf estate, a retirement village, retail shopping, an equestrian estate, office and commercial parks, a clinic and a school, all to be developed on a large-scale leasehold basis. Meanwhile, there are signs of a revival in demand for office space that could slow down the rate of conversion of redundant office blocks to residential apartments, notably in Cape Town.

Keen demand for office space in central Cape Town has been spurred by both demand-side and supply side factors, says Gavin Klerck, development director of CBS Property Group. Market fundamentals have swung back in favour of the office sector and demand is on the rise, he says.

“We haven’t seen this volume of demand for offices in the Cape Town city centre in more than a decade.” Allister Long, MD of Powerhouse, says that with a growth rate of more than 12%, the property market is still a sound place in which to invest.

(Businessday, 16 Oct 2006)