Weekly Newsletter
Friday, 20 June, 2008
Property Search | Estate Agents | List your property

Edition 23 of 2008, Friday, 20 June 2008

Dear Reader

How can there be an up and down in the real estate industry at the same time? I am sure that this is a question that many of our readers has asked over the last few months. In our own country, South Africa, we read about areas where the price of properties is still on the rise and yet the overall market shows that there is a definite decline in property prices. The same for the International property market.

Real estate prospects for the UK has taken a turn for the worse and at the same time The Knight Frank Global House Price Index found that their are still countries where property prices are on the rise; Bulgaria, Singapore, Hong Kong, Jersey, Russian, Iceland and Australia.

Then on the other hand property prices might be on the rise in Australia but yet one of the areas that showed the weakest growth over 2007 was also from Australia;

Key Highlights from the 2008 Annual Wealth Report, Knight Frank:

  • Global prime property prices rose by 11% during 2007
  • The highest price growth achieved by prime residential properties was in Antigua (40%); St Jean Cap Ferrat, France (39%) and St Petersburg, Russia (38%)
  • The areas with the weakest growth over 2007 were Dublin (-15%); Ibiza (-13%) and Noosa Heads, Australia (-7%)
  • London is the most expensive location for prime residential property with an average price of £3,025 per sq ft, Monaco is second at £2,877 per sq ft and St Jean Cap Ferrat third at £2,860 per sq ft

Looking at the above I can tell you that there is never one dull moment in the property industry for home owners, investors and developers.

Berry Everitt, managing director of Chas Everitt International Property gave some good advice to the consumer; "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. It is a time to be looking at the bigger picture and finding ways to maximise the opportunities it always presents"

Welcome to the real world Mr. President. IFP President Mangosuthu Buthelezi reported that his guest house in Ulundi was broken into on Father's Day. Valuable of R100 000 was stolen and this while his house was under 24-hour guard.

There is still plenty of activity in the upper end of the property market. "Old houses are being upgraded and modernised and the asking prices are R1.8-million and more. The properties are close to schools and shopping areas and the stand sizes are over 1300m². The upper end is also active in Coltshill (Whiter River)where two years ago the highest price reached was R1.15-million, but asking prices now range from R1.3-million to around R1.7-million." Good times still rollin'

"My house is going to fall down. I can't think straight. I don't know what to pack," said Moreen Neethling. This was one of the cries heard this week from the South Coast of KwaZulu Natal where houses and businesses were flooded after heavy rainfalls.

 

White River lies just north of Nelspruit not far from the border of the Kruger National Park. It is not a large town but there are some stunning establishments in the fertile surrounding area of scenic beauty. White River is well placed for visiting the rest of the Panorama Route or Kruger National Park, Focus on White River, Mpumalanga, South Africa

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

Enjoy!
The editor


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>> Property news - Australia hot property in real estate game

AUSTRALIAN house prices rose the seventh fastest in a worldwide study of property prices.

Only Bulgaria, Singapore, Hong Kong, Jersey, Russia and Iceland beat Australia in the study of 34 countries.

The Knight Frank Global House Price Index found that while property price growth in the world's prime markets was slowing, growth and demand in Australia was above average...

>> Higher rates to weigh on building

The latest increase in interest rates, combined with another expected increase in August, will see the outlook for the residential building sector remaining negative for the remainder of this year and into 2009.

The latest building figures - and particularly the year-on-year (y/y) growth in total building plans passed - highlight that building plans passed for the residential sector - despite a slight improvement in April - continue to be affected by the rising level of interest rates, slowing consumer demand, high input costs, slower growth in house prices, as well as an excess in buy-to-let accommodation...

>> Rental market a hive of activity

Potential buyers ‘sit on sidelines’ as higher interest rates make property too pricey for many

THE South African residential rental market is experiencing intensified activity as prospective first-time buyers and struggling homeowners opt to rent instead of buy. The residential property market has taken a battering since the beginning of the year thanks to higher interest rates, which have made property too expensive for many.

The National Credit Act, which came into being in June last year, has also made it increasingly difficult to qualify for mortgage bonds...

>> Market realism beginning to prevail

CAPE TOWN (June 19) - The more realistic attitude that real estate agents have for some time now been pleading for with both sellers and buyers is at last becoming evident, says Tony Clarke, MD of Rawson Properties.

Among buyers in particular, he said, despite “disheartening stories we read from time-to-time in the property and financial press”, it is now clear that the majority still end up being homeowners, in the process accepting that they can no longer afford what they had originally had in mind...

>> Clarke explains reason behind market 'panic'

Another high profile figure in the real estate sector, Tony Clarke, MD of Rawson Properties, has reacted strongly to recent media statements suggesting that the South African property market is in serious trouble.

Clarke said that a recent statement from a leading estate agency to the effect that house prices could fall by 40%, although later withdrawn, had caused a massive loss of confidence in property and had done untold harm. It was, he said, based on no verifiable data and had been completely unjustified...

>> Gen-Y buyers will create next property wave

The South African real estate industry should sit up and take notice of ‘Generation Y’ because that’s where the next big burst of property market growth will come from.

Gerhard Kotzé, CEO of the ERA South Africa property group, says Generation Y – made up of consumers currently aged between 18 and about 30 - is attracting the attention of marketers worldwide, and will arguably supplant in importance the Baby Boomers born between 1946 and 1964...

>> Sellers should back their agents

Most home sellers prefer to let the experts take care of advertising and marketing their properties – and estate agents are, indeed, trained for exactly that.

However, says Martin Schultheiss, CEO of the giant Homenet estate agency group, sellers who hand the whole affair over to their chosen agent and then sit back may in fact delay or even scupper a potential transaction...

>> Affordable housing gets R2.5bn boost

Affordable housing in the country received a major boost on Wednesday when the sod turning ceremonies for the Kagiso and Droogeheuwel/Middelvlei integrated housing projects on the West Rand took place.

The Kagiso project will cost 1.27 billion rand and the Droogeheuwel/Middelvlei project 1.24 billion rand to develop...

>> Organised thieves strip vacant houses

An organised group appears to be responsible for a series of break-ins at unoccupied homes and others displaying "for sale" or "sold" signs in Pietermaritzburg.

The thieves stole geysers, taps, copper wire, airconditioners, sinks and other items.

The crime has been taking place in all residential areas of the city...

>> Good times still rollin'

Over the past few years Mpumalanga has drawn interest from investors as well as buyers looking for a quieter environment.

The town of White River with its laid-back lifestyle is getting a fair share of residents who commute to the mines in the area or to office jobs in Nelspruit and other nearby centres. The town, which has retained its village character, is just 35 kilometres from the Kruger National Park and enjoys a much cooler climate than nearby Nelspruit. It has all the conveniences of a big city in terms of shopping centres as well as quaint local specialty shops...

>> 'My house is going to fall down'

Hibiscus Coast protection services worked frantically on Wednesday, searching for people swept away in flooding brought on by heavy rains and aiding people who had been displaced.

The region has been declared a disaster area and is reported to be in a "critical state"...

>> News from - Chas Everitt International Property Group

What to do about hidden defects

Defects in the structure of a home that become apparent only after a sales agreement has been concluded can scupper the whole transaction. They can also lead to much legal wrangling, litigation and naturally, additional costs.

But, says Berry Everitt, MD of the Chas Everitt International property group, there are ways to overcome such problems, which will save the buyer the effort of starting his house hunting afresh, and the seller the bother of fixing the defect and marketing the property all over again...

>> Letters to the editor

Is SA property market also taking a huge slump like UK and US
I am thinking of moving back to SA but I will be taking a 30% hit on the sale of my London house as a result of the recession. I had 5 of the biggest agents in the area look at it and all said that the any realistic chance of selling it will mean a real drop on the price and they have actually quoted examples were they have sold properties for up to 35% below the original asking price.

I was thinking to hold on but on the other hand if the trend is global I will be able to buy a property 30% cheaper in SA-now?

Is this a fair assessment and should I buy in SA or should I just rent for a while?

Thanks

Rohith Pale

Editor - Rohith, it all depends in which area in South Africa you would like to buy. There are areas where the prices of property are still rising. Overall the price of property has not yet drop with 30%. If you have no rush to buy I would suggest you first rent and keep an eye on the property industry yourself.


WHAT IS THE MOST APPROPRIATE VEHICLE IN WHICH TO HOLD RESIDENTIAL INVESTMENT PROPERTY?

The question of which vehicle is the most appropriate for holding fixed property has to be one of the most frequently encountered in practice as a tax consultant. Tax Partner at Cameron & Prentice Chartered Accountants, Dave Warneke explains why there is no ‘one size fits all’ answer to this question.

The correct answer depends entirely on the circumstances of the investor. However, having said that, we find that the most common recommendation we make where the investor is a private individual and the property is a residential investment property i.e. not a primary residence, is for the property to be bought into a trust. Where the property is to be a primary residence, then by holding the property in a juristic vehicle such as a trust, the R 1.5 million primary residence exclusion for CGT will be lost when the property is disposed of. This can make this option less attractive, as the primary residence exclusion results in a maximum saving of R 150 000 in CGT.

The advantages and disadvantages of trust as vehicles for holding residential investment property are as follows

Advantages

1. Compared to holding the property in the hands of an individual, Estate Duty is saved -at the rate of 20 % of the market value of the property at the date of death. Although an exemption from Estate Duty applies where the property is left to a surviving spouse, this in effect amounts to a deferral of the Estate Duty problem rather than a true saving, as Estate Duty is payable on the death of the surviving spouse.

2. Compared to holding the property in the hands of an individual, CGT on death is saved -at a maximum rate of 10 % of the market value of the property at the date of death less base cost. Although roll-over relief exists where the property is left to the surviving spouse, this amounts to a deferral of the capital gain rather than a true saving, as CGT is payable on the death of the surviving spouse.

3. Growth in the value of the property is protected from creditors of the investor.

4. Relatively low compliance costs: trusts are not subject to statutory audit.

5. Flexibility: a discretionary trust allows the trustees to allocate rental profits from the property to whichever beneficiaries they choose. The same applies to distribution of capital gains if the property is sold. This can achieve income tax savings and give effect to the wishes of the founder.

Disadvantages

1. Although Estate Duty at 20 % and CGT at 10 % on the death of an individual are saved by holding the property in a trust, if the trust disposes of the property and does not distribute the resulting capital gain, CGT is payable at the rate of 20 % of the capital gain, compared to a maximum CGT rate of 10 % for an individual investor.

2. If rental profits are retained in the trust and not distributed to beneficiaries, the rate of tax in a trust is a flat 40 %, compared to a sliding scale for individuals that only peaks at a rate of 40 % on taxable income above R 490 000 per annum.

3. Transfer Duty is at a flat rate of 8 % on the value of the property purchased by a trust. This compares with a sliding scale for individuals that only peaks at a rate of 8 % (on so much of the value of property as exceeds R 1 million.)

4. There are some compliance issues which also involve costs. The trust has to be set up, annual financial statements and income tax returns (annual and provisional) need to be submitted and meetings of trustees need to be held.

5. An element of control over the property can be lost as the investor has to abide by the wishes of the trustees. However, most trusts are so-called ‘dog-collar’ trusts in that the trustees are initially selected by the investor from persons that he /she trusts (and the investor would usually be one of the trustees).

6. Since a trust cannot enter into a pre-incorporation contact, the trust must first be set up (average time taken one month), before the offer to purchase document is signed.

7. The primary residence exclusion from CGT will be lost. This amounts to a maximum saving of R 150 000 in CGT on disposal of the primary residence.

It’s imperative to weigh up the pros and cons, and talk to a professional who understands your unique circumstances.


Note to the editor

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 Whiter River, Mpumalanga, South Africa

The farming tradition of the community that settled here after the Anglo-Boer War has remained virtually unchanged to this day. Lord Milner, administrator of the defeated Transvaal, demarcated land on the 'Emansimhlope' - a tributary of the Crocodile River whose name translates from the Swazi as 'White Waters' - to demobilised Boer and British Anglo-Boer War soldiers...

>> View Properties in White River
>> View Properties in Mpumalanga

>> Property of the week

Mpumalanga, White River

Bedrooms: 3
Bathrooms: 3
Garages: 3

Beautiful woodwork and built-ins throughout this unique, double storey home. Antique inlaid tiles on oxide floors, throughout. 11m long kitchen with scullery, gas stove and imported Norwegian coal/wood burning stove...

Search for property in your area

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>> BetterBond's tips to home buyers and sellers

The role of smell when selling a property

Smell plays a very important role when selling a property. Smell often triggers memory which triggers emotion. You should aim to trigger positive emotions through smell and eliminate the potential to trigger any negative emotions.

I was recently house hunting and came across a property that was well worth the asking price in terms of the structure and location. However, I just couldn’t get past the smell of the dogs in the main bedroom. We get accustomed to the smells in our personal space and, as much as we love our pets, we need to ensure they leave no offensive smells. If there are any odours in your home caused by pets, you may want to consider having your carpets professionally cleaned, or at the very least clean them with a product that contains a neutraliser and try sprinkling carpet freshener on the carpet on a periodic basis.

For those with cats, be sure to empty the kitty litter boxes daily and on the day of the showhouse, rather take the kitty litter box outside. If you have any pet toys or blankets inside, remove them as well. On the day of the showhouse, try to put your dogs in a safe enclosed area outside or have a neighbour take care of them for the day. You cannot predict how they will behave with strangers coming into your home.

If there are any smokers in your household and you are serious about selling your home, then they are going to have to smoke outside. Open the windows and let fresh air in, as it is going to take a while to get the smell of smoke out of the house.

Empty the dustbin and make sure the laundry basket is also empty on the day of the showhouse. It is also better not to cook foods that leave a lingering smell the day after – like fish or curry.

Once you have done all the hard work and your home smells neutral, you can then consider adding some natural, inoffensive aromas. I love scented candles, especially Lavender and Vanilla. Even without being lit this can add a subtle scent to the air. Add some fresh flowers or potpourri in your home. If your potpourri has lost some of its fragrance, you can add a few drops of essential oils, like Lavender or Sandalwood that is relaxing and calming to the emotions. Bergamot oil has a delightful citrus aroma and is uplifting to the emotions. Using the essential oils leaves a very light fresh scent that lingers much better than any room freshener I've sprayed around.

Article by: Cheryl Marais – Direct Marketing Manager - Betterbond

>> Software at its best!

Cell Phone enquiries from the public

Buyers driving past your advertising boards will be able to see an unique Internet Number allocated to the specific property. They will then SMS that number to 35476 and will receive an SMS back with all the details of the property. At the same time the agent / agency will also be informed of a potential buyer. How's that for technology working for you! The cost - mahala! Free to all CyberAgent subscribers.

Here's a diagram on the way this process will work...

  1. Agent captures the details of the property and pictures into CyberAgent
  2. Agent updates the property to the Internet
  3. The Internet server sends back a unique number for that property
  4. Agent puts up his "For Sale" board together with our SMS board
  5. Potential buyer sees the "SMS" board and SMS's the unique number to the Internet server
  6. The Internet server sends back an SMS with all the property details and a link to the website where he/she can view pictures on the propert

If you would like to know more about the above features and benefits that CyberAgent offer, visit: www.cyberagent.co.za or email: sales@cyberprop.com

For Sale Property:
Eastern Cape Freestate Gauteng Kwazulu Natal Mpumalanga North West Northern Cape Limpopo
Western Cape

To Rent Property:
Eastern Cape
Gauteng Kwazulu Natal North West Western Cape


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