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| Summing Up The Economic Forecast |
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Attendance at the 2007 Annual Rode Conference held last month in Cape Town and Johannesburg broke all previous records
Attendance at the 2007 Annual Rode Conference held last month in Cape Town and Johannesburg “broke all previous records”, according to property economist and conference organizer, Erwin Rode of Rode & Associates.
“For the first time in the history of the conference, we had to turn delegates away,” comments Rode, who once again presented his annual Prognosis for Property.
The popularity of the conference is due in no small part to the calibre of speakers, among them at this year’s event being John Loos (property strategist at First National Bank’s Home Loans Division), Dr Cees Bruggemans (chief economist of First National Bank), Prof Andre Roux (director of the Institute of Futures Research at the University of Stellenbosch), Dries du Toit (of Dries du Toit Consult CC), attorney John Gilchrist (editor of My Mortgage magazine), and Chris Bosch (of Rural Maintenance [Pty] Ltd).
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| Negotiating The National Credit Act |
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Commenting further on the new legislation, Gilchrist was of the opinion that the Act would have no real, long-term effect on the property market
At the recent Rode Annual Conference held last month, John Gilchrist (editor of My Mortgage magazine) described the new National Credit Act as a vehicle with which to “save South Africans from themselves”.
Commenting further on the new legislation, Gilchrist was of the opinion that the Act would have no real, long-term effect on the property market but rather just a short-term period of adjustment and could even work to the advantage of those who had found themselves being turned away from banks in the past.
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| Social Drivers Affect South African Property |
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Last week Prof Francois Viruly of Viruly Consulting gave his opinion on the impact of economic drivers on SA's property market, this week he explores how social drivers affect it
Last week Prof Francois Viruly of Viruly Consulting gave his opinion on the impact of economic drivers on SA's property market, this week he explores how social drivers affect it.
This brings to the fore the question of whether we are going to see more high or low-income areas in townships," he says.
Viruly says that many years ago he confidently divided people into those associated with commercial property and those associated with residential property. "Increasingly these markets are getting closer and closer. The Melrose Arches of this world are examples of where these components are integrating.
"The next issue we have to ask ourselves is how will we start with this in townships? Are we going to move into the next frontier which is going to see townships with swimming pools and more amenities? I believe that we will see a middle class in the township environment and I wouldn't be surprised if we move into that particular direction, i.e. a complex with a swimming pool."
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| New Hotel Developers have to Get Up Early to Catch 2010 Visitors |
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Mega-Billion-Rand hotel developments and resorts are taking shape across South Africa. Most of the developments under construction, range from ultra-luxury five- star hotels to exclusive spa resorts.
Protea Hotels has at least three developments worth over R520-million under construction; and a joint venture with the Extreme Group, founded by Alistair Gosling, opened its first Extreme Hotel in Cape Town in November last year. The partnership plans to invest more than R2.8-billion to roll out a chain of Extreme hotels, which are aimed at the backpacker market.
The UK and Dubai-led consortium, Istithmar, that bought Cape Town’s landmark Victoria & Alfred (V&A) Waterfront for R7-billion last year is investigating new five- star hotel and resort developments on “Africa’s Riviera” ahead of the 2010 Soccer World Cup. Istithmar plans to splash out another R7-billion on marinas, new shopping developments, apartment blocks, offices and a 250 bedroom luxury hotel and resort hotel.
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| South African Property Feels Economic Drivers |
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Economic drivers seem to have a big impact on South Africa's property market
So says Prof Francois Viruly of Viruly Consulting, who adds that we have a changing environment around us from a property perspective.
"Our inflation rate is 6% and our gross domestic product (GDP) growth is 4% to 5%. But that's not that interesting. Stoep talk is interesting or anything you can't find on Google."
On an economic level, Viruly says a few large institutional investors previously determined what happened in the property market but that that has changed fundamentally.
He also points out that the new cities of gold are not places that people would normally associate with a booming property market, but that that is where they go wrong. "With the way the platinum market and commodity prices are going at the moment, the cities of gold are critical and do matter."
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| Residential Property Prices Outrun Rentals |
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Residential rentals have not remotely kept up with house-price growth over the last few years
According to surveys conducted by Rode & Associates, rentals of flats, townhouses, and houses generally grew at a compound rate of roughly 4–8% over the last three years. This should be contrasted with a compounded national house-price growth rate of 19,3% p.a. over the same period. The result of this divergence in growth rates is, of course, the low net-income yields of 4-6% that residential investors currently face.
On the positive side, however, residential rentals did generally beat consumer inflation, which averaged about 4,5% p.a.
Some of the better-performing markets included the Durban house market where rentals grew by 12,9% p.a., Port Elizabeth’s flats (11,2%), and Bloemfontein’s townhouses (10,4%).
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| Foreign Property Buyers Do Not Influence Affordable House Prices |
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Sales to foreign investors of free market properties can influence top end property prices, but have no effect on the affordable end of the market
So says Barak Geffen, Executive Director of Sotheby’s International Realty South Africa who says statistics from South America’s property market shows despite high average house prices, foreign investors do not affect the price of affordable homes in that market.
Figures show Brazil’s shortage of affordable housing is far worse than SA and growing.
“Brazil has government legislated financial mechanisms in place to relieve pressure and build more affordable housing.
“About 20% of its wage bill is put into a UIF fund and of which 65% must be spent on housing either directly by providing home loans or by lending to developers.
“Brazil’s population is about 185 million and the shortage of formal housing stock is about 8-million housing units or 14% of the total market requirement. In South Africa where the population is about 44 million we have a shortage in this segment of 2,6, which is acute but not as bad as the Brazil model.”
| Sotheby’s International Realty, 13-08-2007 |
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| Major Facelift for Johannesburg |
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Plans in pipeline for high-rise blocks in posh neighbourhoods
The plans, tabled in three proposals before the Joburg council late last month, under the Urban Development Framework document, have been put in place to ensure the success of Gautrain and the city's R2-billion Bus Rapid Transport System.
The documents contain the council's vision for Sandton, Rosebank and Marlboro, all of which will have Gautrain stations. The plans, which were passed by the council, will now be subject to a public-participation process at a council sitting on July 26.
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| Durban Property Shows Healthy Capital Gains |
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The average selling price in the greater Durban area has increased across the board and is showing healthy capital gains
Latest sales results show that the number of units sold in many zones were down in the second quarter of 2007 compared to the same time period last year. This drop in units sold is attributed to a series of market-impacting events that started with an upturn in the interest rate in mid-2006. Rising house prices, additional rate increases, the public sector strike of June this year, the implementation of the new credit legislation and fears of an additional rate increase have all visibly affected buyer confidence and affordability, he says.
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| Longer Delays For Property Developers |
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Developers could face longer authorisation delays following a court judgement that emphasises socio-economic factors and gives ammunition to objectors
John Loos, property strategist for FNB Property Finance, is of the opinion though that this judgement will not have much effect on developers.
A recent Constitutional Court judgement, the Fuel Retailers Association of Southern Africa case, has highlighted the need to separate town planning criteria from environmental decision making dealing with the "sustainability" of a development and its impact on social and economic factors.
"In addition, the judgement looked at the legitimacy or otherwise of the practice of trade competitors who tend to lengthen the authorisation process by raising environmental objections for other than ecological motives," comments Glendyr Nel of Shepstone & Wylie Attorneys' environmental law department.
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