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| Prices of Luxury Houses Buck Downward Trend |
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Luxury houses have been partly insulated from the residential property market slump.
Absa's latest housing review, released yesterday, showed that the affordable and luxury segments of the housing market experienced nominal growth in prices in the second quarter while middle segment houses were bearing the brunt of the price decline.
Jacques du Toit, a senior property analyst at Absa Home Loans, yesterday said prices in the luxury segment had performed better than the middle segment in recent quarters.
"This may be the result of the upper end of the market to some extent being less affected by trends in economic indicators such as inflation, interest rates, employment and income," he said.
The review revealed that the average nominal price of luxury housing, defined as houses valued at between R1.3 million and R11.5m, continued to rise in the second quarter.
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| New Report Shows Power of Cash |
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Cash sales - defined as transactions where no bond is registered at the time of transfer - have been on the rise since 2007 and now account for fully one third of all home sales in South Africa.
That is according to a report on changing buyer trends recently released by the South African Property Transfer Guide (SAPTG) and based on Deeds Office statistics and data.
The report shows that, having declined as a percentage of total sales between 2003 and 2007, cash sales then began to rise again and reached 33%of all sales by the 2008/ 2009 reporting period. On breakdown, cash sales now account for 35% of full-title sales and 30% of sectional title sales.
What is more, they account for 35% of the rand value of all sales, says Dieter Deppisch, national manager of property data research for the Knowledge Factory.
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| Bank Lending The Problem, Not Interest Rate, Say Experts |
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This week's decision by the Reserve Bank to leave the interest rate unchanged has been described by property experts as "expected", but not entirely bad news.
Andrew Golding, chief executive of the Pam Golding Property group, said the interest rate reductions since December had lessened the financial burden on homeowners.
"What we are currently seeing in the marketplace is that where aspirant purchasers are able to obtain mortgage finance, there is greater activity between willing sellers and serious buyers.
"However, the market remains underpinned by cash buyers at virtually all levels.
"At present they form the bulk of the market and are capitalising on the good buying opportunities currently available."
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| What Determines The Price of a Property? |
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Find out what determines price.
Tony Clarke, managing director of Rawson Properties, says a property should sell for what a willing and able purchaser is prepared to pay and a willing and able seller is prepared to accept after both have compared their figures with those achieved very recently on similar properties in the same area. He says that among home sellers, there will always be a tendency to think that the valuation given by the selling agent on the property is unrealistically low.
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| VAT of Fixed Immovable Property |
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Where seller and /or purchaser are VAT vendors in respect of the immovable (fixed) property being sold.
The subject of VAT is complex and this only as a guide and is not comprehensive. Always seek professional advice before committing yourself to a purchase or sale of immovable property where there is a possibility of VAT implications. This deals with VAT where the Seller and/or Purchaser are VAT Vendors in respect of the immovable property being sold. See our Transfer and Bond Costs Tables where neither Seller or Purchaser are VAT Vendors in respect of the immovable property being sold.
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| Luxury Housing Still in the Money |
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Upper end housing priced above R3,1m is the only sector of the South African residential property market that is still showing positive growth.
According to data released earlier this week by Absa, luxury house prices valued at between R3,1m and R11,5m rose 4,5% in first quarter 2009 year-on-year (y/y). That is in stark contrast to house price movements in the market priced below R3,1m, which saw a drop of 0,3% over the same time. First quarter 2009 was the first time in 23 years that Absa has recorded an annualised drop in middle-segment house prices.
Jacques du Toit, senior property analyst at Absa Home Loans, says the luxury segment end of the residential property market is holding up visibly better than the middle end where prices are now dropping over a wide front. "This may be because the upper end of the market is to some extent being less affected by trends in economic factors such as inflation, interest rates and employment."
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| Commercial Property Index Shows Extremes in Returns |
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Capital value and currency swings produce contrasting global returns, says IPD, a global information business, dedicated to the objective measurement of commercial property performance.
The local currencies spread of movement in underlying capital values across 23 of the world's most mature property markets was 42 percentage points from best to worst through 2008, according to IPD Global Property Index.
Despite some severe capital falls, the estimated size of the professionally-managed global property investment market still topped the $4.6 trillion (R36 trillion) mark.
At the two extremes were Ireland, at -37.2 percent, and South Africa which produced +4.4 percent, this positive capital growth albeit reflecting domestic inflation of 11.5 percent.
Although three national property markets produced positive capital returns over last year, all markets suffered significant reductions on the previous year.
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| Benefits for Property in High-Speed Broadband |
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The advent of faster, cheaper broadband services to South Africa when it is connected to the world via the Seacom undersea cable will undoubtedly benefit the property market.
So says Gerhard Kotzé, CEO of the ERA South Africa property group, who notes that South Africans are only just beginning to grasp how far-reaching the impact of the coming communications revolution will be.
Referring to the commissioning of new undersea cables connecting South Africa to the rest of the world in time for the Soccer World Cup next year, Kotzé says there will be huge spinoffs, such as being able to provide schools across the country with less expensive access to the Internet, and significantly lowering the cost of doing business.
“In addition, the reduced cost of Internet and related communication services will benefit many households by lowering their monthly outgoings – and enable more households to have an at-home Internet connection. We expect this to give rise to a new wave of home-based businesses, and demand for properties with additional space to accommodate these enterprises.
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The current slower property market, characterised by high levels of supply and low levels of demand, offers keen opportunities for investors, but they must target the sectors that are likely to yield the best returns when the market recovers.
And, says Dr Willie Marais, national president of the Institute of Estate Agents (IEASA), several sectors deserve attention, including the student housing sector.
"This is one sector where demand is unlikely to falter. Tertiary institutions are drawing increasing student numbers while, at the same time, budgets are under increasing pressure. It is thus likely that students of the future will have to rent private accommodation near campuses since institutions are unlikely to be in a financial position to offer more on-campus housing."
Tracts of undeveloped land are other potential good buys. Marais says this holds especially true for developers who can afford holding costs on land while they wait for demand to recover.
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| South Africa Down in Global Home Price Ranking |
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South Africa now ranks 16th among 46 countries in terms of global house price performance, figures released this week by UK property group Knight Frank show.
In 2005/2006, when SA house prices were still racing ahead at 30% plus/annum, SA was rated by Knight Frank as the world's best-performing housing market. However, in first quarter 2009, SA for the first time joined the ranks of 31 other countries where house prices are now falling.
The Knight Frank Global House Price index, which uses Absa's data for SA, shows that SA house prices slipped into negative growth territory for the first time since 1986. But SA's dip of -0,3% in first quarter 2009 (y/y) is nowhere near the falls of between -16% and -36% recorded in places like the UK, US, Singapore, Dubai and Latvia over the same time.
According to Knight Frank 15 out of the 46 countries tracked in its housing index were still recording increases in first quarter 2009. Israel led the pack with prices up 10,9%, followed by the Czech Republic (9,9%), Jersey (6,9%), Switzerland (5,6%) and India (5,1%).
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