Weekly Newsletter
Friday, 04 July, 2008
Property Search | Estate Agents | List your property

Edition 25 of 2008, Friday, 04 July 2008

Dear Reader

May 2008 and the mortgage market is slowing down with a year-to-year growth in the value of total mortgage loans outstanding from 21.9% in April 2008 to 20.6% in May 2008.

Vehicle sales in June 2007 showed a 21.9% decrease when compared to sales of June 2007. On a month-on-month there was also a decrease of 1.15% with less vehicles sold in June 2008 than in May 2008 leaving the month with the lowest sales rate in over four years.

What I cannot understand is that the prices of houses are coming down but the prices of vehicles are not. Can you understand this? Standard Bank's median house price, the middle price on the group's home loans portfolio has dropped from R 620 000 in June 2007 to R 550 000 in June 2008. The drop in the price of houses is not only applicable to South Africa but to other countries also with the UK suffering currently suffering the most. Standard Bank Property Gauge: Sizwe Nxedlana – property economist, Standard Bank

According to Luke Doig, senior economist at Credit Guarantee South Africa has seen a near 3% drop in total business liquidations for May year-to-year with May 2008 showing fewer liquidations than the same period last year. “Our claims against bad debts have risen 30 percent, so I’m puzzled by Stats SA’s figures. The drop could be due to a distortion caused by financiers opting for voluntary liquidation because of the National Credit Act last year. Most of these businesses were probably real estate agencies forced out of business by the slump in home sales." Indeed not good news for the real estate industry.

Maria Ganhao, General Manager of AA Finance, warns: "Many people perceive car finance through their bonds as affordable credit. Home loan not for cars

You will always find the wise amongst us. It is those that does not get carried away by the falling of house prices, the downturns or the property booms. It is those who predicts them, await and then exploit. If you are not one of them the National Credit Act has made provision for debt counsellors who have the systems and the authority to help an over-indebted person through his difficulties. If you are struggling to pay your bond consider contacting the NCA Debt Council by Rawson Properties

News from - iafrica.com - SA's priciest properties, Sought-after by those at the very pinnacle of the social hierarchy, South Africa's most expensive properties are everything you'd expect — extremely luxurious and very private. Personal lifts, scurrying housekeepers, a butler or three, spas and fully equipped home gyms are just some of the humble pleasures that the distinguished owners of these homes have come to expect.

Lets take a look at some of the most expensive properties listed on www.cyberprop.com

And this is what dreams are made of!

The Gem of the Overberg Region, world renowned for the natural hot mineral water springs, but also a historically and agriculturally the hub of the area, surrounded by magnificent natural beauty and fynbos, Focus on Caledon, Western Cape, South Africa by

Don't forget to visit our CyberProp Blog for more property news and views.

Enjoy!
The editor


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>> Property news - U.K. Property Stocks Post Worst Returns in 20 Years (Update3)

July 1 (Bloomberg) -- UK real-estate stocks had their worst performance in more than 20 years in the second quarter as property values dropped and rents for new office leases fell for the first time in more than four years.

The FTSE 350 Real Estate Index of 23 stocks slumped about 24 percent in the second quarter to the lowest since August 2004. The biggest decliner was Quintain Estates and Development Plc, which plunged 58 percent. The index fell 1.1 percent today...

>> ‘Too soon’ to buy UK property

Prices have further to fall, experts say.

WITH reports of further significant residential property price declines expected in the UK, South African investors may wonder if this will present an excellent opportunity to buy property offshore.

Ultimately that depends on whether the investor is taking a short- or long-term view on the residential property market there...

>> Standard Bank Property Gauge: Sizwe Nxedlana – property economist, Standard Bank

MONEYWEB: Sizwe Nxedlana is a property economist at Standard Bank. Man, you've got bad news for us. It's not just South Africa where house prices are tumbling.

SIZWE NXEDLANA: No, no. We saw the median house price come down by -11.3% year-on-year.

MONEYWEB: What's a "median" house price...

>> May Mortgage numbers and mortgage market overview - John Loos FNB
John Loos - FNB

The Mortgage market continued its slowdown in May, with year-on-year growth in the value of total mortgage loans outstanding slowing once again from 21.9% in April to 20.6% in May. Whilst it used to be fashionable to attribute the slowdown to the residential component of the mortgage market, these days it must be said that the slowdown is more broad-based.

Indeed the residential mortgage market has the dominant influence on the overall weakening trend because of its sheer size, with residential mortgage loans accounting for about 80% of the total value of the country’s mortgage book. In April, year-on-year growth in residential loans recorded 20.8%, two percentage points down on the 22.9% of the previous month...

>> Home loan not for cars

In South Africa's current economic climate — interest rate and petrol price hikes, rises in inflation and the basic cost of living increasing — consumers need to focus on managing their debt in order to stay financially sound.

Many consumers are making judgement errors when it comes to incurring debt and financing a car through your bond will only add to your woes...

>> Housing "Crash" reports are not realistic

Another senior executive in the residential property development, marketing and financing sector, Anthony Smook, MD of A Mortgage Loan, has come out with a statement that he is “mystified” by the negativity and pessimism of recent media reports on the industry.

“I, for one, simply cannot understand on what facts the current gloomy outlook is based,” said Smook. “It seems to me that most people’s opinions on housing are the result of rumour and dinner talk...

>> If you are struggling to pay your bond consider contacting an NCA Debt Counsel

The vast majority of bond payers do not as yet know that the National Credit Act has made provision for debt counsellors who have the systems and the authority to help an over-indebted person (i.e. someone whose expenses are higher than his income) through his difficulties...

>> How to spot an ethical real estate company

Training in the real estate industry has come a long way and business ethics is now firmly entrenched as a core value but candidate agents who want to become successful and productive agents while maintaining a high ethical standard may still need to look below the surface when they decide which company to join.

So says Barry Davies, CEO of Chas Everitt International Franchising, who notes: “Most industry practitioners profess strict adherence to sound business ethics – and one would hardly expect less – but candidates may find it difficult to establish from a vision and mission statement whether a company will really match their own ethical standards...

>> Dreamworld film venture will catalyse property market

The R430m Dreamworld film studio development at Faure near Cape Town will give the property market in surrounding areas a shot in the arm.

So says Marius Pretorius, principal of the ERA real estate franchise in Strand, who notes that all environmental, legal and financial arrangements for the venture have been completed and that civil works for the project are now under way...

>> “One and only” Kerzner Hotel takes shape at Cape Town

Construction work on the Kerzner One and Only R1 billion Waterfront hotel and urban resort, on which work began in June last year, is now 45% and the focus is now moving from the concrete structure to the “vast number” of finishing trades, the co-ordination of which will be an extremely challenging task, says a spokesman for the architects, Dennis Fabian Berman Architects. The anticipated completion date is June 2009...

>> Bruce Lee’s home not for sale

Hong Kong - The owner of Bruce Lee’s family mansion in Hong Kong has abandoned his plan to sell the property and will consider turning it into a museum celebrating the kung fu film legend, a report said.

Millionaire philanthropist Yu Panglin, who bought the house for 850,000 Hong Kong dollars (109,000 US) in the 1960s, had invited bidders for the property, the South China Morning Post said...

>> News from - iafrica.com - SA's priciest properties

Sought-after by those at the very pinnacle of the social hierarchy, South Africa's most expensive properties are everything you'd expect — extremely luxurious and very private. Personal lifts, scurrying housekeepers, a butler or three, spas and fully equipped home gyms are just some of the humble pleasures that the distinguished owners of these homes have come to expect.

Offering panoramic views of Table Mountain or overlooking the beautifully bronzed bodies lying on the white, sandy beaches of Clifton, these homes inspire envy and admiration in equal parts...

>> Letters to the editor

HOW TO CALCULATE CGT ON THE SALE OF A PROPERTY
Capital gains tax (or CGT) arises on the disposal of an asset. As the definition of ‘asset’ includes rights or interests of whatever nature in fixed property, it is clear that CGT will arise not only on the outright sale of a property but also when limited interests in property, such as usufructs and bare dominiums are sold. Tax Partner at Cameron & Prentice, David Warneke, explains CGT and how to calculate it for yourself.

In the case of an interest in fixed property situated in South Africa, residents and non-residents are liable to CGT. Non-residents are also liable to CGT on the disposal of rights in property-owning companies, close corporations and trusts, in certain circumstances. The definition of ‘disposal’ includes not only sales but also various deemed disposals, the most important of which is the death of a natural person. When a taxpayer dies, he or she is deemed to have disposed of all assets at market value, thus triggering a potential capital gain. Exclusions include property left to a surviving spouse or to a qualifying Public Benefit Organisation. Where property is donated, capital gains tax arises, using the full market value as ‘proceeds’, unless the donation is to the taxpayer’s spouse or a qualifying Public Benefit Organisation.

CGT is in reality not a separate tax, but forms part of normal income tax. The taxpayer’s capital gain is determined by deducting the base cost of the asset from its proceeds. ‘Proceeds’ is the gross selling price of the property. ‘Base cost’ is the cost of the property or, alternatively, the value of the property at 1 October 2001 (where the asset was owned by the taxpayer as at this date – see below), plus various other costs, the most common of which are: the cost of improvements, transfer duty on purchase, valuation costs, conveyancer’s fees and advertising costs (to find a buyer). Contrary to popular belief, the cost of bond interest cannot be claimed where the property is sold, unless the property was used exclusively for business purposes and the interest was not claimed as a normal tax deduction.

Once the capital gain has been determined, the taxpayer deducts the primary residence exclusion (only where the taxpayer is a natural person and where the property was the taxpayer’s primary residence) of R 1.5 million (2009 amount) and the annual exclusion of R 16 000 (only where the taxpayer is a natural person – 2009 amount).

The result is multiplied by the taxpayer’s inclusion rate and included with the taxpayer’s other taxable income for the year. This gives rise to the following maximum effective rates of CGT:

Rate Inclusion rate Maximum Effective
Individuals 25 % 10 %
Companies (incl CCs) 50 % 14 %
Trusts 50 % 20 %

Where the asset was owned by the taxpayer at 1 October 2001 (known as the ‘valuation date’), the value of the property at the valuation date can be determined in one of three ways: using an actual valuation as at this date, using the time-apportionment base cost formula or using 20 % of the proceeds as the value at valuation date. The taxpayer is free to choose whichever method gives the best result (where there is a capital gain).

A simple example of an application of the time apportionment formula is as follows:

EXAMPLE

Say a property cost R 500 000 in September 1996 and was sold for R 2 million in June 2007. Selling costs amounted to R 100 000.

One takes the R 500 000 plus [(R 2 million less R 100 000) less R 500 000] * 6 / 12 = R 1.2 million. This is the valuation date value according to the time apportionment method. The ‘base cost’ of the property is then R 1.2 million plus the selling costs of R 100 000 equals R 1.3 million. It should be noted that in applying this formula, part of a year (before or after 1 October 2001) is treated as a full year.

If the seller is a non-resident, a withholdings tax is applied to the proceeds, at rates of either 5, 7.5 or 10 % of the proceeds, depending on whether the seller is a natural person, company (or CC) or trust, respectively.

About David Warneke

A true academic with entrepreneurial flair, David Warneke graduated with an Honours degree in Financial Accounting from the University of Cape Town. He also has a Graduate Diploma in Taxation and a Masters degree in Tax Law.

After completion of his training contract, he opened his own practice in 1994. He joined Cameron & Prentice as Partner in 2007. His experience and expertise as a tax professional is of enormous value to the Cameron & Prentice team, staff and clients alike.

David continues to uphold his interest in academia. He is currently Senior Lecturer in Taxation at the University of Cape Town and co-author of a text on taxation that is prescribed at most leading universities in South Africa.

>> Focus on Caledon, Western Cape, South Africa

Caledon, capital of the Overberg, and one of the seven oldest towns in South Africa, lies at the foot of the Klein Swartberg. It is known for its natural mineral waters, hot springs and wild flower show...

>> View Properties in Caledon
>> View Properties in the Western Cape

>> Property of the week

Western Cape, Caledon, Tesselaarsdal

This is a magnificent farm which has buckets full to offer: -18.5 Hectars of land. -1 x 15,000 Cubic Litre dam. -Pumping rights from river. -3 bedroom, 2 bathrooms (One on suite/main), guest toilet, open plan lounge, kitchen and dinning room. Cellar below house...

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>> BetterBond's tips to home buyers and sellers

Simple garden tips to improve the sale of your property

You’ve decided to put your house on the market, you’ve followed all the tips to improve the sale – you’ve de-cluttered all the rooms, the walls are painted in neutral colours and you’ve packed those personal photos and nick-knacks away. The outside of the house has been fixed up, all broken windows replaced and the gutters are clean. You’re almost ready for that first showhouse, but something still seems to be missing.

Now you need to look at what you can do to improve the appeal of your garden. You can make your garden very attractive in a matter of a weekend, by creating an almost instant flowering garden and it doesn’t have to cost a fortune either. Visit your local nursery and buy some plants that are already flowering.

No matter the season, keep the property free from litter. Take a look at the shrubbery; it should be neatly trimmed especially if it is blocking a clear view of the house. Walkways and driveways should be clean, the grass cut and the edges trimmed. Rake up the leaves and remove weeds from the plant or flower beds. Remove any tree limbs that are near or touching the roof.

Right by your front door, use plants as a visual “welcome” sign. If your front door has an overhang, you could add some hanging baskets at eye level. Try to keep the colour arrangement identical on each side for a balancing and aesthetic effect. If you have steps in front of your entrance, place a small pot plant on each step at each end.

Add a garden ornament or two. It’s easy to make your own attractive (and tasteful) garden ornaments. A weathered old bucket, basket, or half-barrel tilted on one side with flowers spilling out is a delightful way to decorate your garden. Petunias or other trailing flowers are especially pretty when planted this way. You can even create a planter from the kids’ old red wagon or small wheelbarrow.

Put away your garden equipment and tools, or store them to one side as neatly as possible.

Article by: Cheryl Marais – Direct Marketing Manager - Betterbond

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