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| What are your offshore options? |
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Many South African property investors are now looking overseas to diversify their property portfolios while others are looking for emigration options.
Mariana Tolken, managing director of offshore property investment specialists, Gas Properties, provides an overview of five international property investment destinations.
Busy and bustling, wealth is largely on display in the vibrant city of New York. Not in the form of big expensive cars (only 20% of New Yorkers have such), top villas or over-the-top jewelled older ladies.
The wealth here is wealth of generations of investment tradition and the wealth of financial planning and preservation. For such people, the difficult financial situation in America of the moment is holding up and they are actually benefiting from this chaotic credit time.
Different destinations offer very different opportunities for property investment. And it is really important to know what it is you want from an offshore property investment.
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| Property Developers Offer Cheap Deals |
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Bargain buying opportunities are starting to appear on the market, particularly in new sectional title projects, as it becomes increasingly expensive for developers to keep unsold stock on their balance sheets.
For instance, in the northern suburbs of Johannesburg well-established sectional title developer Summercon is now advertising new studio, one and two bedroom apartments at average selling prices of R10,500/m2.
A search on real estate portals such as Landsdowne Investment Properties and Property Bargain Finder shows a number of new Johannesburg developments with asking prices of less than R10,000/m2.
That is significantly lower than the R15,000/m2 to R30,000/m2 that new sectional title stock was generally selling for in the northern suburbs of Johannesburg 12 to 18 months ago.
Summercon sales director Peter Blanckenberg confirms that pricing has become increasingly competitive, with the substantial slowdown in sales activity forcing developers to absorb building cost increases.
In fact, developers have not been able to pass building cost increases on to buyers for the past two years, says Blanckenberg. He notes this has created great pricing for investors and makes it a good time to increase one's exposure to the buy-to-let market.
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| Changes to Landlords Tax Allowance |
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The new Revenue Laws Amendment Bill, issued 1 August 2008, includes a proposal to revamp the allowance which applies to residential housing units let out by the taxpayer.
The new Revenue Laws Amendment Bill, issued 1 August 2008, proposes a number of interesting, but fairly complicated amendments to our Income Tax Act. Among them is a proposal to revamp the current section 13ter allowance which applies to residential housing units let out by the taxpayer, or occupied by full-time employees of the taxpayer. Tax Partner at Cameron & Prentice Chartered Accountants, David Warneke, examines the proposal.
The proposal is that, in place of the current write off 12% of the cost in the first year and 2% for the following 44 years i.e. a total write off period of 45 years with an upfront loading of deductions, the write off will be at the uniform rate of 5% over 20 years.
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| Property and Economy Not Strong Yet |
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The fact that the economy took a marked upward swing in the second quarter of this year (growing quarter on quarter by 4,9% after the first quarter's growth of only 2,1%) should not be taken as an indication that we are now into a strong economic period.
All of us in the residential sector have been watching the economic indicators closely because it is an historic fact that an upturn in the economy ushers in a rise in property prices and, while we all desperately want that, it is still, in my view, not yet here, says Tony Clarke, managing director of Rawson Properties.
Clarke said the improved second quarter growth figures had to be seen in comparison with those of the first quarter, in which mining and manufacturing had been hard hit by power shortages and the exceptionally high fuel prices.
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| How to Qualify for a Bond? |
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Before the introduction of National Credit Act (NCA), a buyer's affordability was based on 30% of his gross income without taking liabilities into account.
Where this may have been a far simpler procedure than the process used today, it often led to buyers being over indebted. Today, much more weight is placed on the client's surplus income.
"The first thing to do is check the client's gross income and make sure he qualifies for the purchase price of the property. Once the expendable amount required to qualify is determined, the next step is to minus the client's expenses from his gross income to see whether he has the required surplus available. We require the client to sign a declaration for us to undertake a credit bureau check. Information is also acquired by conducting an expenditure interview," says Deon Lessing, marketing director of Betterbond.
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| Turning Point in Property Market is Close |
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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."
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| How Municipal Rates Will be Working |
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Have you heard of the Municipal Rates Act? What does it all mean? Everyone is speaking about valuers, and rates and taxes going up.
It's not enough to have load shedding and xenophobia issues, one may think to oneself, but another rates hike seems like overkill under the current economic circumstances. To be fair, we have to look at the facts.
Rates and taxes have traditionally been charged on municipal valuations – these have been extremely low, and undoubtedly the council had serious catching up to do to reach market values. You should be paying rates and taxes on the market value of your land and improvements on land. This is what the Municipal Rates Act has remedied.
| Biccari Bollo Mariano Attorneys, 27-07-2008 |
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| Rental Property Market will Boom Now - Buy To Let Way To Go |
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Today’s interest rate hike of 50 basis points, resulting in a prime of 15,5 percent, will further heavy South African home-owners’ debt burden, and increases the repayments on mortgages
This development, however, now sets the scene for a booming rental market with excellent prospects for certain investors, reports RE/MAX of Southern Africa and BetterBond.
The price boom of the last decade pumped up the capital values of property, outstripping the rises in rent which is typical of a bull market in house prices.
Because of affordability issues now faced in the current market climate, this driven by today’s interest rate hike, increased food and fuel costs, and banks tightening credit criteria (the unavailability of 100 percent bonds), rental properties will be in greater demand, as a proxy for homes, which are becoming more difficult to obtain.
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| Factors When Buying Property Offshore |
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If you are contemplating buying an offshore property – as a small percentage of South Africans do each year with a view to spreading their investment base and/or securing themselves a holiday home – which destinations, right now, offer the best prospects?
Lanice Steward, managing director of Anne Porter Knight Frank (APKF), has drawn attention to a survey, Knight Frank's (KF) Annual Wealth Report, in which one section sets out to assess the ten fastest up-and-coming residential markets worldwide.
These, in KF's view, are Portugal's Silver Coast, Singapore, Bahia (in Brazil), Morocco, The Seychelles, Croatia, the Italian Riviera, Granada, Mauritius and perhaps surprisingly, the USA – where recent falls in price values have made many buys good value and where certain rural destinations, says Knight Frank, are still competitively priced.
| Knight Frank Annual Wealth Report, 09-06-2008 |
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| More Rate Hikes Would Be Perilous |
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Reserve Bank Governor Tito Mboweni's recent signal that interest rates would rise again this year because inflation pressures had spread far beyond food and fuel, is already having an impact on the residential property market
The combination of a decreasing property values with increasing interest rates has put the residential property market in a precarious position this year. Anecdotal reports of rising repossessions and a surge in forced sales is now spreading to various parts of the property market, particularly those in the R2m to R5m valuation range.
"Mortgage stress is spreading across all cities, suburbs and demographics. Over-extended middle income families are obviously the most vulnerable but wealthier South Africans are now also being affected by a slowing residential property market,' says Alliance Group's chief executive, Rael Levitt.
| Alliance Group Research, 06-06-2008 |
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