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| South Africa Property: 2008 Year in Review |
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Personalities, trends, opinions that captured attention in one of the toughest trading years many have experienced.
The year got off to a gloomy start, thanks to power cuts and politics. In January, Samuel Seeff, chairman of Seeff Properties, was quick to caution buyers and sellers that the market was unlikely to improve anytime soon. Read the full article on making and losing money in 2008. Meanwhile Gari Dombo, managing director of Alexander Forbes Insurance, urged home owners to review their insurance policies as most insurers do not cover power surges.
In February, emigration talk picked up dramatically. With an abundance of sellers, it was clear that property prices were under pressure. That month, international expert Richard Daskam wrote an article on how to survive the declining property prices. In his article, property tips for declining market, he tells estate agents how to make a killing in the sellers’ or buyers’ markets - pricing, of course, always a key consideration.
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| Houses Outperform Listed Property |
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South Africa's housing market may well be in the midst of the worst slump experienced in 16 years, but residential property as an asset class has delivered better returns to investors this year than JSE-listed commercial property funds.
Latest figures from Cape-based Catalyst Fund Managers show that share prices of the 22 property stocks that make up the JSE's R90bn real estate sector, fell more than 15% for the year-to-date (January to November). Share prices of some counters including the likes of Madison Property Fund Managers and SA Corporate Real Estate Fund have tumbled more than 30%.
Even if the income yield of around 9% offered by listed property is added to the equation, listed property investors still made a loss this year. According to Catalyst Fund Managers, listed property delivered a total return (capital and income growth) for the year-to-date of -8,91%.
In contrast, latest figures from Absa show that house prices are still rising, albeit it only marginally. Prices were up 0,3% in November year-on-year, the lowest growth recorded by Absa since 1992. Absa Home Loans senior property analyst Jacques du Toit expects house price growth for the full 2008 to average 4%.
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| CBD Gets New Tenant Profiles |
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The changing tenant profile within the country's inner city residents reflects a greater degree of stability in this market segment.
But it also calls on owners and building management to reconsider their investment to take cognisance of shifting requirements.
Andrew Schaefer, MD of residential letting and property management group Trafalgar, says inner city dwellers have shifted from transient single-entity tenancies to family units now considering the area as home for the medium- to long-term.
This change prompted a pilot investment into the Helderberg block of flats within the Johannesburg inner city to overhaul a deteriorating building.
The focus with this project was on the family element of the changing inner city profile, meaning the renovations and upgrades incorporated facilities – jungle gyms, a playground, race track and two trampolines – that encourage outdoor activities.
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| Property Investors Now Hunting for Bargains |
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Prospects for the property market in the next six to 12 months are uncertain – yet investors are starting to hunt for bargains.
Tjaart van der Walt, CEO of the RealNet estate agency group, says the group's agents and franchises countrywide are reporting that investors are very keen to enter the property market before the new year.
"And, as the old saying goes, the smart money buys when the market is at or near its turning point." He adds that most investors are paying cash.
He expects further growth in prices in the low-cost and affordable housing sectors in 2009. "There is an insatiable demand in this sector, which is likely to push prices upwards for the next six months at least. Prices in townships, in particular, seem set to show healthy growth.
"The current discounting in value in the middle segment of the market, where property is changing hands in the range between R700k and R2m, is likely to continue. I expect nominal growth to stay the same or fall slightly for the next few months. At the moment some properties in this price range are selling at anything between 20% and 30% below asking price – and that fact has not escaped seasoned investors."
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| Listed Property Shines in South Africa’s Top Ranking Companies |
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This as calculated by I-Net Bridge and being pitched against companies which are foreign-based, with a secondary listing on the JSE, such as SABMiller, Anglo American, BHP Billiton and Old Mutual. The results were recently published in the Top 100 Companies survey carried out by the Business Times.
Property Loan Stock Association of SA (PLSA) has welcomed the news. Brian Azizollahoff, who heads up the Property Loan Stock Association (PLSA) marketing committee and is CEO of Redefine Income Fund commented: “The Top 100 survey results are a testament to the excellent performance of listed property, particularly during the last year which has presented the industry with its fair share of challenges.” He added that listed property continues to make a positive impression on the South African investment landscape and that the results of the survey are encouraging at a time when sentiment has been uncertain. “Investors can be assured that the fundamentals in listed property are still strong,” he said.
The survey acknowledges those companies that have delivered the most wealth for their shareholders. The rankings are determined as follows: the share price performance of every company listed on the JSE is measured on the basis of R10,000 invested over five years (from October 2003 to September 2008). Companies are then ranked according to their share price growth.
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Growth in flat rentals, in areas such as Johannesburg, Pretoria and Cape Town, has for the past three years remained roughly in line with consumer price inflation (+9% p.a.) while in Durban (+12% p.a.) and Port Elizabeth (+11% p.a.) rentals even managed to marginally outperform inflation.
According to the latest Rode’s Report, Durban continued to perform on the industrial front, and is the only city whose rentals (+21%) outperformed the growth in building-cost inflation (+12%). Growth in rentals in the other major industrial centres has cooled somewhat, with the Central Witwatersrand, the Cape Peninsula and Port Elizabeth showing rental growth of 12%, 10% and 9% respectively.
The building industry is experiencing its own slow-down in the form of ‘stagflation’ in that building-input-cost inflation in recent quarters has been accelerating while building-contract inflation has been decelerating. According to Erwin Rode of Rode & Associates: ‘In the third quarter of 2008, for example, building-input-cost inflation (according to the Haylett index) is expected to have grown by about 16%, while building-contract-cost inflation (according to the BER Building Cost Index) is expected to have recorded growth of roughly 12%.
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| Coastal Land Values Still Firm |
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Undeveloped land in popular coastal areas appears to be the one sector of the residential property market that is still experiencing double-digit price growth.
Latest figures from Absa show that prices of vacant stands along South Africa's coastline were still rising at 16,1% in third quarter 2008 year-on-year. That brought the price of the average coastal plot to R607,400. The 16,1% growth in coastal land values in the third quarter compares to average house price growth of only 2,1%, as measured by Absa over the same time.
Estate agents confirm that beach front and sea view plots continue to set new price records, as the scarcity value of well-located land continues to place upward pressure on prices.
For instance, a plot in Clifton was recently sold for a whopping R16,5m to a Gauteng businessman. That is believed to be the highest price ever achieved for an undeveloped stand in SA. The previous record for a vacant plot was set in early 2007 when a stand in Clifton's prestigious Nettleton Road was sold for R13,5m.
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| Property Ownership’s Big Leap |
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Rising number of black entrepreneurs entering market, establishing sustainable estate agencies.
Strong growth in the black property market, with black first-time home buyers fast catching white first-time property owners in terms of volumes, points to a rising number of black entrepreneurs entering the property market and establishing sustainable, black-owned and staffed estate agencies, says Leapfrog Property Group executive director Kura Chihota.
A case in point is the recent opening of the black-owned and staffed Rondebosch East and Khayelitsha Leapfrog agencies, which notched up sales in the region of R3m in their first two months of operation.
“If anyone takes a long-term view and is looking for growth, surely the growing and increasingly affluent black middle class has to be the driver of most future real estate sales?,” Chihota asks.
| Leapfrog Property Group, 03-12-2008 |
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| What is a Prime Location? |
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Anyone in the property industry will tell you the key to property investment is location, location, location.
This is generally interpreted as the property being in a "prime" location for it to be highly rated.
Which begs the question – how does one define "prime" location?
Is Sandton prime? Most people would argue it is. Why? It is an upmarket area in the heart of Johannesburg's central business district.
Therefore, a good area to invest in.
Is Germiston prime? Situated in Gauteng's East Rand, nowhere near the financial capital of South Africa, serving a predominantly lower and middle class market, Germiston is hardly a "prime" destination. Yet it is here that ApexHi's flagship shopping centre, Golden Walk, is located. Attracting almost one million shoppers per month, this 36,000m2 fully let retail centre is currently undergoing a significant R110,5m refurbishment to accommodate the demand for more space in the centre - a demand created by retailers and shoppers alike, which has resulted in increased rentals being achieved when leases expire and are renewed.
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| Obama Election Holds Promise for South Africa |
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The runaway election of Barack Obama as President of the USA could be good news for the South African economy and South African property investors.
"Those of us who have watched this election campaign have been encouraged by a whole number of factors," said Greeff. "Firstly, Obama appears to understand more clearly than his predecessors the causes of the USA's economic woes and he gives the impression of having worked out the drastic reform measures needed to put matters right. That in turn means that by 2010 - if not sooner - the USA economy should be into a full-scale recovery based on far sounder save first - spend later principles.
"Secondly, Obama is very definitely more aware of Africa and of the Third World's predicament than any previous president. This, I believe, will result in greater global awareness, particularly of poverty, AIDS and the dangers of insurrection throughout Africa and will lead to increased involvement by all First World countries in this area once the present global economic problems are behind us.
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