Weekly Newsletter
Friday, 13 June, 2008
Property Search | Estate Agents | List your property

Edition 22 of 2008, Friday, 13 June 2008

Dear Reader

The decision of the SA Reserve Bank to hike the repo rate by 50 basis points to 12 percent with the result of a prime lending rate of 15.5 percent was not well accepted and criticised by various companies and organisations although it was a big relief for many South Africans as an increase of up to 200 base points was expected. However most people felt that it was "A big mistake".

Trade Union Solidarity - The bank's decision will cause thousands of South Africans to lose their cars and houses in the coming months,". This union is planning a campaign to give South Africans the opportunity to opposed against the higher interest rate.

In the property industry the general feeling is that higher interest rate is setting a scene for a booming rental market as debt burden have been made heavier and that the prices of houses will definitely come down in 2008.

Jeanne van Jaarsveldt, RE/MAX believes that the group is expecting the housing market to bottom out in 2008 with gradually pricing increasing again in 2009 and 2010 with lower inflation and interest rates.

Eskel Jawitz, Jawitz Properties feels that in general the economy and property market is under siege. He said people who bought property two years ago were going to have to pay about 35 percent more on their bond instalments.

Samuel Seeff, Seeff Properties, "The number of sales will now begin to decline as the market, which was flat up until now, begins to come off," This means that the prices of property will come down.

Kevin Lancaster, Betterbond, "We can and should find comfort in the fact that a similar trend has been noted in interest rates cycles over the past years, and with reference to history, we could be near the peak in the current cycle. Homeowners should however, during these tough times, exercise caution and restraint in terms of spending. Make wise financial decisions so as to keep up with home loan repayments,”

Pat Jewell, CyberProp.com, "House prices are slowing down and if homeowners are desperate to sell their properties they will have to come down with their prices. Homeowner has never been realistic in their prices, not in good times and not in bad times and this has been one of the major problems real estate agents had to face for many years. For those not so serious sellers it would be best to rather do the math's, to try and hold onto their properties by joining the upcoming rental market"

This week we saw a public row between Saul Geffen, CEO of Ooba and dad Lew Geffen, head of Lew Geffen Sotheby's International Realty. Lew Geffen last week in an internal memo warned his group of a 40% drop in house prices at the top end of the market from last year's highs. His remarks was the result of numerous of articles in national newspapers that caused panic among buyers and sellers. According to Geffen he was being realistic. Saul, the son, issued a media statement in which he said that "recent alarmist forecasts by the property market commentators, many of which are unsubstantiated by facts, have caused homeowners undue concern". Our question to you last week was "Are the prices of houses dropping or not?" The general answer was YES! Read one of our readers comment in Letters to the editor

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

The editor


>> Property news - SA housing price bubble bursts

Recent newspaper headlines said that South African house prices are set to drop by 40 percent. The bubble has burst. I have argued that South Africa had a house price bubble. Alan Greenspan, former US Fed chief, famously commented that one can only tell if there is bubble after it bursts.

I do not agree with Greenspan's view. It allowed him to let the dotcom bubble grow and to ignore the US subprime bubble...

>> Tito's interest rate shocker

Today's interest rate decision by the Reserve Bank is likely to rip thousands of rands more from your hands each month.

Bank governor Tito Mboweni recently suggested his next interest rate increase could be as much as 2% added to the current 15% prime, but some analysts think the figure is more likely to be 1%.

Whether Mboweni decides on a half-a-percent interest rate increase, as he has become accustomed to doing, or making good on his threat of 2%, the effect on your bank balance is going to be ugly...

>> Near perfect storm in housing

The combination in South Africa of rising interest rates and tightening financial liquidity is creating a near "perfect storm" in the housing market, with hard-pressed consumers being the major casualty, says Simon Stockley, CEO of home loan provider Integer.

Stockley explains that it is becoming more expensive to raise capital in response to the global credit crunch, and as a result local banks have to pay more to attract more liquidity...

>> The next seven biblical years

This time last year, things looked rosy for South Africa; the country’s top economic experts were forecasting robust growth of around 5% per annum. In their own, December 2007, forecasting publication, property economists Rode & Associates forecast great potential in real office and industrial rents over the next few years, predicting robust demand for office and industrial space that was expected to keep vacancies low and nominal market rentals growing in excess of building-cost inflation. Now things are looking less optimistic: so what’s happened?

>> Light at the end of the tunnel / what goes up, must come down

Pertinent to the recent interest rate hike, bringing the prime lending rate to 15.5%, Kevin Lancaster, CEO of Betterbond, sheds some light on the subject of interest rate hikes, assuring that there is a glimmer of hope on the horizon.

Interest rates are cyclical, meaning over each period interest rates will rise; reach a peak and then decline. "What South Africa is experiencing with the rise of home loan interest rates is part of a normal property cycle which can be found anywhere in the world. When comparing the various cycles over the past two decades one will find that the total percentage by which rates have hiked per cycle, has been approximately 6% on average," says Kevin Lancaster, CEO of Betterbond...

>> Rates – Absa expects housing market to slow further

JOHANNESBURG (June 12) - The Reserve Bank’s Monetary Policy Committee (MPC) today hiked the key policy rate, the repo rate, by 50 basis points to 12%, prompting banks to raise their prime and mortgage rates to 15,5%.

Interest rates have been hiked by a cumulative 500 basis points since mid-2006.
CPIX inflation rose to 10,4% in April—its highest level since the 10,8% recorded in December 2002, and well above the 6% upper limit of the inflation target range...

>> Wife gambles house away...

Lynne Foord was lucky. Once she bet R10 on the horses and won R9 500. When her daughter Morgen matriculated, Lynne wagered R12 and walked away with R14 000. On another occasion she won R7 000 off a R10 bet.

However, when the pension fund administrator died last September of a heart attack, a month before her 50th birthday, her husband Trevor, 55, and daughter Morgen, 22, made a shocking discovery...

>> Property still in demand

BIDDING was brisk at the well-attended Alliance Group multiproperty auction on Wednesday where sales of half of the 24 properties on offer were confirmed on the floor. “It was a great turnout and shows that the property people aren’t panicking about what they see as a price adjustment,” Norman Raad of the Alliance Group said afterwards.

“The prices we achieved were very good seeing the market has come off its peak. Last year we saw a 10% yield; this year we have a 12,5% yield. Also, those dealers sitting on cash are looking for investment prospects.”

>> Alternative materials make building sense

Building packages that offer buyers homes built with alternatives to traditional bricks and mortar are gaining popularity because of cost savings.

Chris van der Nest, manager of the local Homenet Trio office in Grootbrak on the Garden Route, says alternative materials limit building costs to around R3800/sqm depending on inside finishes, as opposed to R4500 to R5500/sqm for traditional brick and mortar homes...

>> Voetstoots as it is

'Voetstoots' describes in just one word the action of buying something ‘as is’.

Ultimately a voetstoots clause frees the seller from liability for all patent and certain latent defects. Understanding the clause when selling or purchasing a property can help all parties ensure that the sales transaction runs smoothly. Linda Erasmus, CEO of Fine & Country, provides useful insight into what the term 'voetstoots' entails...

>> Aida set to go extra mile for the Comrades

The Aida real estate offices in KwaZulu-Natal are going to take their motto of excellent service a step further during the annual Comrades Marathon.

The seven offices will be fielding 100 agents and helpers to man stand number 19 at Botha’s Hill during this year’s up run, says organiser Jean Liversedge of Aida Amanzimtoti.

“Aida’s sponsorship of the watering hole forms part of our group’s 50th anniversary celebrations and we plan to bring the same dedication to excellent service that marks our dealings in the real estate industry to our ministrations to the marathon athletes,” she says...

>> News from - Chas Everitt International Property Group

There are positives in every market, says Everitt

It’s time for consumers to stop focusing on the immediate problems in the real estate sector and start focusing on the bigger picture.

So says Berry Everitt, MD of the Chas Everitt International property group, who notes: “Homeowners and sellers are currently preoccupied with a possible decline in prices but they need to realise that this is part of the perpetual economic cycle, in which the prices of all commodities – including property - go up, go down and then go up again.

>> Letters to the editor

Yes the price of houses are dropping. It is becoming seemingly difficult for property owners to sell the property at a higher price as were the case a year ago. Estate Agents make it a point to negotiate the selling price down. It is not viable to market a property at a high price for a longer period where you can advertise it for a lower price for a shorter period. I will not market a property where the asking price is too high as I am going to loose in the long run on advertising costs.

Home owners are getting less dividends out on their property investments due to buyers not qualifying for the high prices.

Leon Coetzee
Proplist Soshanguve VV
email: lcoetzee@proplist.co.za

>> Focus on Soweto, Gauteng, South Africa

Soweto is a former township from the times of Apartheid. Starting about 15 km away from the centre of Johannesburg, it comprises some 63 sq. km, where an estimated three million people live.

Originally there were only temporary living quarters for the mine workers, before Soweto was declared a ghetto for the black population of Johannesburg by the infamous "Urban Areas Act" in 1923...

>> View Properties in Soweto
>> View Properties in Gauteng

>> Property of the week

Gauteng, Soweto, Diepkloof

Bedrooms: 4
Bathrooms: 2.5
Garages: 2

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>> BetterBond's tips to home buyers and sellers

How to prepare the extra bedrooms for highest appeal to home buyers

Not all homebuyers will have children, so it is important to make a child's bedroom somewhat 'adult-friendly'. If a buyer walks into a bedroom that is painted with pink polka dots and is strewn with toys, they might have a difficult time envisioning the room as an office or a guest bedroom. Since you are planning to move anyway, consider returning the room to a neutral paint colour. If the room is already painted in a neutral colour, make sure all dirty marks are washed off the walls. If there are any grubby marks on the cupboard doors or on the door handles, clean them off.

De-personalize and de-clutter your child’s room, remove the wild posters from the walls, take the stickers off the mirror and cupboards, and pack away the toys. Remove decorations which might not appeal to most people, from hanging beads in doorways to sport pictures stuck on the wall to loads of trophies. Replace the posters with one or two framed pictures in colours that complement the room.

The bed is likely to be the biggest piece of furniture in the room, so you want to position it so it takes up as little room visually as possible, as the extra bedrooms in a home are normally smaller. However, double bedrooms are worth more money than singles. It sounds obvious but if the room is large enough, make sure you have a double bed in it - leave buyers in no doubt! Ideally you should position the bed so you can get in from both sides. This arrangement makes a room feel larger and more balanced and is far better than having the bed wedged in a corner, up against two walls.

Potential buyers are confused by extra rooms that have multiple uses. If you only have one extra room and your home is advertised as a two-bedroom home, then make sure the second room looks like a bedroom. Home buyers need to see the room as it was originally intended.

Article by: Cheryl Marais – Direct Marketing Manager - Betterbond

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