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| Housing Review 1st Quarter 2008 |
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Property Trends - Housing Review
The South African economy expanded by 5,1% in real terms in 2007,
mainly as a result of strong growth in the financial, real estate and
business services sector.
During the course of 2007 the household sector was affected by rising
inflation, higher interest rates and the implementation of the National
Credit Act (NCA). The cost of servicing household debt increased to
above 10% of disposable income, real disposable income growth
slowed towards the end of the year, and real consumption expenditure
growth tapered off to lower levels.
Nominal and real house price growth slowed down further towards the
end of 2007, largely as a result of the tightening of monetary policy
since mid-2006, stricter requirements for credit extension implemented
in the second half of last year, and housing having become less
affordable, putting pressure on household finances.
| Absa Group Economic Research, 29-02-2008 |
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| New Focus on Green Building |
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The electricity supply crisis is giving developers an incentive to adopt “green building” principles in their new property developments
The newly established Green Building Council of SA says it believes that the electricity supply crisis is probably the “biggest promotion for green building that we can get”.
The City of Johannesburg also announced this week that it was introducing new requirements to ensure greater energy efficiency in new developments.
Philip Harrison, executive director: development planning and urban management, said new developments would need to include alternative energy sources or energy-saving devices. Building plans would be evaluated in terms of these measures.
Europe has in the past embraced “green building” concepts far more readily than SA because of high base energy costs.
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| How will the Electricity Crisis Affect Property? |
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Prior to the recent paralysis of the mining industry, most South Africans probably did not fully appreciate the extent of the country’s electricity problems and the implications they hold for the economy — and hence the property market
Commenting on the relationship between economic growth and electricity consumption, property economist Erwin Rode, from Rode & Associates, notes: “We built a simple statistical model using data for the past 10 years, which shows that a 1% increase in economic growth was accompanied by an increase in electricity consumption of roughly 0,8%. This shows that in a modern economy growth in economic activity is highly dependent on the availability of electricity – in case we needed any reminding.”
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| Property Prices to Increase by 60 Percent in Next 5 Years |
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However, the strong growth of the economy and low interest rates also made it easier for prospective buyers to own their own property, which put the buy-to-let-market under pressure against the background of a surge in supply of rental properties coming onto the market
This caused rental yields to dip to as low as 0,5% in recent times," says Gavin Opperman, Managing Executive of Absa Home Loans.
Opperman says the rental market is, however, starting to pick up in view of rising interest rates, uncertainty of where rates might peak, and the National Credit Act (NCA). These developments impact on buyers' ability to qualify for a mortgage loan to buy property, while prices are still increasing, although at a much slower pace.
"The rental market is expected to pick up further taking into account the current conditions, as well as the possible negative impact the electricity crisis may have on economic growth, employment, household income and consumption. These developments may force many households to rent."
| Absa Group Economic Research, 12-02-2008 |
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| Estate Living Where to From Here? |
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John Loos, Property Strategist, FNB Commercial and Andrew Watt, Business Development Director, Lightstone, put together this report on Estate Living. The report covers the reasons for the rising popularity of complex life and considers what the future is for this type of lifestyle
Estate living is a global trend that has been particularly popular in South Africa where a variety of residential, golf, and leisure estates have been developed over the past decade. The trend shows no signs of slowing and according to Lightstone's proprietary Freehold Estates database, South Africa now has 1,435 registered Walled Estates containing 140,000 properties. These Estates primarily provide a secure lifestyle which has been particularly important in South Africa as a result of the crime situation. Other advantages include having access to high quality recreational facilities, increasing the sense of community (which is limited by the high walls outside Estates) and having more control over community expenditure and development.
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| Property Outlook for 2008 |
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Although the property market is currently experiencing a downturn, the forecast for next year is positive, according to industry leaders, with strong growth predicted in the lower end of the market as well as the commercial and retail property classes and a recovery expected by 2009
"At double-digit house price inflation, it's still a pretty good situation for a downturn, and 2008 is expected to bring the turning point."
So says John Loos, property strategist at FNB, who released his outlook for the market in 2008 this week, in which he evaluated the underlying strength of the market during the current downturn.
In his report Loos states that when the downturn began the prospect of a market collapse similar to the mid-1980s (where house price deflation plunged to -9% around mid-1985) may have loomed large in some minds, following a boom significantly greater than that of 2 decades ago.
However, he notes that although on a declining trend, we are still experiencing real house price inflation above 12% (i.e. double-digit nominal house price inflation exceeding consumer price inflation by a significant margin), and theorizes that the possibility exists that we may be approaching the bottom of the cycle.
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| Holiday House is not a Home |
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Holiday home owners might wish their coastal pads were where they lived 365 days of the year, but the reality is that many are absentee landlords who visit infrequently or rent out their property for most of the year
But whether this means that these properties can legally be referred to as homes – and the implications of this for the rights of landlords and their tenants – was raised by a recent Supreme Court of Appeal judgement.
In the September judgement, Judge F.D.J. Brand, in Barnett v Minister of Land Affairs [2007] SCA 95 (RSA), stated that holiday houses or cottages were not "homes" covered by the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act 19 of 1998 (the Pie Act).
The Pie Act provides for the prohibition of unlawful eviction and for procedures for the eviction of unlawful occupiers.
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| Coastal Sales Prospects Look Good |
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The coastal property market has been languishing in the doldrums for the past 18 months but indications are that it may have turned the corner and with the peak holiday season coming up, expectations are that it will be a good sales period
The latest FNB residential property barometer highlights the fact that coastal property buying is holiday home-driven and is therefore subject to cyclical trends that depend very much on economic conditions," says CEO of the ERA property group, Gerhard Kotzé.
"It shows that the inland areas have done better than the three major coastal markets since early 2005. Up until that point, coastal property had out-performed inland areas for years. Pent up demand for coastal homes may now be coming through."
A straw poll of ERA coastal offices lends support to Kotzé's view, despite this month's interest rate increase. Nick Hill of ERA Atlantic Seaboard in Cape Town says all agents are extremely busy and there are plenty of good, qualified buyers in the market.
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| Record Price Growth for Golf Estate |
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Despite the recent down-turn in the property market, an exclusive Stellenbosch golf estate is achieving record prices, with values expected to increase further in 2008
The 300 hectare De Zalze Winelands Estate, neighbour of the Spier Estate, was launched in late 2002. Approximately 400 individual homes, designed and built to owners’ specifications, form small residential villages built amongst the working vineyards and golfing greens of the estate.
“Ground prices at De Zalze have increased by an average of 350% over the past five years. Recently, we saw a 900m˛ stand which was originally sold for R1 million, achieve a selling price of R4.5 million,” says Chris Cilliers, Golf Estate Specialist of Lew Geffen Sotheby’s International Realty, Winelands.
| Lew Geffen Sotheby\'s International Realty, 06-12-2007 |
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| Wave of Opportunity as Jeffreys Bay Development Takes Shape |
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Construction has begun on the R3,5 billion Fountains Estate commercial and residential development in Jeffreys Bay that is revolutionizing South Africa’s fastest growing coastal town
A R2 billion plan becomes a R3,5 billion reality as commercial demand far outstrips researched planning.
The extent of market demand was under estimated when the Fountains Estate was in planning, and what was announced in 2005 as a R2 billion neighbourhood development has materialized into a R3.5billion mega project.
The 600ha mixed use development, among the largest in South Africa has virtually doubled in size and scope following aggressive demand for business opportunities on the Garden Route over a period of just 24 months.
Demand for a commercial node was originally identified by Oswald Buchner the then owner of the Fountains Farm in 1985 and it was acknowledged by the Planning Authorities.
Now, 20 years later demand is no longer for a local node but for a regional all embracing commercial, retail, industrial and residential new town that will inject R3,5 billion into the Jeffreys Bay economy.
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