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The rising trend that's seeing people opt for virtual offices or changing working hours to save on travel time and increase productivity has resulted in greater demand from home-seekers for additional space for a home office or an additional room which can be converted into office space.
The markets have been influenced by this trend in such a big way, that the infrastructure of the suburb of choice plays a big factor when deciding where you are to call home. Areas where optic fibre is already available have seen an increase in property values. This also plays a vital role in the value of your property when looking to sell at a later stage.
Most people have a natural fear of change and tend to be sceptical of new trends, especially considering the innovative technology we need to learn and keep up with regularly. However, once we embrace it and actually see how we benefit from these concepts, we move forward wondering how we ever got on without them. The next big change which it will bring, and has already in some cases, is ‘smart homes’. Although we have all heard the term, it is still fairly a new concept in SA homes with only a few having fully implemented its features and benefits.
Buyers are seeking homes with built-in cost-saving features and they are prepared to pay a premium, knowing that their new home is equipped with modern, energy saving appliances. Property owners are advised to consider the options available in such devices and implement changes which would financially benefit them immediately, and should their home go on the market, it will be all the more attractive and assure them of a quick sale.
Home automation is fast becoming one of the biggest trends in making our homes smarter. You can command virtually any system and device at anytime from anywhere, automating any item that uses electrical power. Managing your home from your smartphone or tablet with one touch will become the norm and it is worthwhile investigating for any future changes you make.
In many cases, automating your home requires no modifications to its infrastructure, not even a single hole needs to be drilled and is completely wireless. To start the process you’ll need to look at what you want to automate and choose your level of automation, from basic lighting or security systems and as your budget allows, the addition of other areas which your lifestyle might require.
Although some of these smart home features are luxuries which many homeowners might deem unnecessary, times have changed and more and more people are working from home – which means that some features have become a necessity. Automating your home can benefit your business or working environment.
The most common smart home features on the market currently include security systems, automated sprinklers, entertainment and music centres and, of course, heating and cooling systems. Imagine a fridge creating its own shopping list, a washing machine which can be turned on or off whilst at the office or even kitchen counter tops which could give you a list of recipes depending on the ingredients taken out – although this sounds like a dream, it is already a reality.
Online property seller PropertyFox, has compiled its predictions for the top five factors expected to change the way people buy and sell property in 2017.
This is according to online property seller PropertyFox, which has compiled its predictions for the top five factors expected to change the way people buy and sell property in 2017.
The Cape Town based company said after many decades of very little movement, things are starting to shift rapidly in South Africa’s residential property market.
“We anticipate 2017 will be a time when the industry disruption which has been gathering steam this year, really takes hold. And when consumers look for creative ways to make their properties work for them,” said Ashley James, co-founder of PropertyFox.
Here are five of the key changes Propertyfox expects to see in 2017:
Now that autumn has hit Cape Town, with a breath of winter to come, it’s time to think of keeping warm and keeping down those electricity bills. We all know that good insulation is key to reducing heat loss and beating the cold winter nights, but rather than starting a major project, let’s look at a small, very do-able DIY measure to keep warmer this winter – keeping out those sneaky draughts, which chill feet and ankles and persuade us to turn up the heater another notch.
Tips for making a draught excluder
Once you have a few draught excluders positioned at the base of all your outside doors you should find that your toes stay warmer and that there is less need to turn up the heating on windy winter nights.
“My wife and I recently moved into a sectional title unit. We used to have an outdoor spa at our previous house and would like to put one in again, but we are not sure what the rules of sectional titles schemes are when it comes to installing spa baths? Do I need permission or can I just continue?”
Before installing a spa bath or Jacuzzi in your sectional title unit, you should consider the following. Firstly, it is important to distinguish whether the area you wish to install the spa bath on forms part of the common property of the sectional title scheme or forms part of your section. A sectional title unit is defined as a section together with its undivided share in the common property.
The common property is owned jointly by all the sectional owners within the scheme, is controlled by the body corporate and is made freely accessible to all the sectional title owners. A sectional owner who has a right to the exclusive use of a demarcated area of the common property, may however exclude other sectional owners from exercising rights on that part of the common property. Improvements to such an exclusive use area require the consent of the trustees, which may not be withheld without good reason.
Should your spa be placed inside your section, then, subject to any scheme rules that may require such consent to be obtained, there is no general requirement to obtain consent from the body corporate. Should the spa however affect the electrical or water supply or require alterations to the plumbing or electrical installations of the scheme or possibly have an impact on other sections, the consent of the body corporate will probably be needed.
The following two points should also be considered, namely nuisance and maintenance.
With regards to nuisance, it must be considered whether the spa bath may cause a disturbance or nuisance to the other sectional title owners. Spa baths can be noisy and even visually cause a nuisance to other owners which may result in the body corporate requiring the removal of the spa bath. Additionally, such a spa bath will require maintenance and cleaning. Failure to do so may affect the cleanliness and hygiene of your unit and potentially result in the body corporate requiring its removal.
It is important that the above factors be carefully considered before you install a spa bath, and rather obtain the necessary consents beforehand to avoid later disputes. It is also wise to scrutinize the rules of your sectional title scheme to check for any prohibitions or specific consents required for such an installation.
If you are looking for a neighbourhood with a trendy street café culture, then look no further than the small neighbourhood of Hazelwood which is fast becoming one of the hippest in the east of Pretoria, attracting people from surrounding areas to its hot hangouts and foodie delights. The suburb is home to a busy commercial centre and at its heart, is ‘The Club’, an upmarket lifestyle shopping centre that offers open-air restaurants for a relaxed meal. Hot new restaurants and eateries along with the Hazelwood Food Market, held every Saturday, have made the area quite popular. The suburb sits in the heart of Pretoria East, flanked by areas such as Menlo Park and Brooklyn on the one side and Waterkloof and surrounds on the other side. It offers quick access to the N1 as well as other main arterials into and out of the city. About a quarter of all recent buyers are millennials (under 35 years old) heading here over the last year. Part of the attraction is the mix of older homes and new apartments, but there is very little stock on the market as owners tend to hold on. A typical three-bedroom house sells for around R2.68m and fetches a rental of about R19 500/month.
With millennial buyers comprising almost a third of recent activity in the suburb, Constantia Park with its close proximity to the attractions of Menlyn, is a second hip option. The biggest attraction, is the affordability and it is popular for student accommodation while young professionals and young families are also drawn to the suburb. It is it is very central and offers quick access to the N1 and N4 arterials and is also close to the trendy new Menlyn Maine development. There are excellent schools in the area along with amenities for residents. The average sectional title price is around R1.2m while full title homes sell for around R1.85m on average. Rental rates average around R11 500-R16 000/month.
A third hot spot where millennial buyers make up some 41% of recent activity, is Equestria. It is popular with a mix of young professionals and families and offers a broad mix of sectional title options, from apartments to townhouses and clusters along with full title properties. It is especially attractive to first time home buyers as it is affordably priced with sectional title property at around R1.05m and full title around R1.93m on average. Rental rates start at around R6 000/month and range to about R18 000/month for a top end home, often with four bedrooms. The suburb is not short on facilities which includes the Grove Mall with a large offering of retail and restaurant brands and leisure facilities. There is also an ice rink and an Imax theatre. It remains a good time to invest in the area. Regardless of the state of the economy, bricks and mortar, especially in popular suburbs such as these, remain a good investment.
Although there has been reduced activity in the market recently, there are signs of recovery.
While the residential property market in general has been experiencing a reduction in activity over the past two years, there are definite signs of a positive shift in the marketplace, with heightened activity notable in the residential developments market in key nodes around the country and a strong drive towards value for money fuelling the lower to middle price bands.
While location and ease of access to the workplace within key nodes remains paramount for home buyers, we are seeing good activity and sales at every level of the market, with positive indications of the possibility of modestly improved house price growth during the course of the current year. The requirement for value for money is also a discernible trend across all sectors of the market.
There are a number of noteworthy trends evident in the marketplace, not least of which is that the Western Cape remains the top performing market in respect of house price inflation, albeit at a slightly more modest pace.
Reflecting the downsizing trend and growing first-time buyer market, smaller sectional title prices remain resilient, with smaller apartments showing robust growth.
Developer confidence is running higher than ever with a number of new development projects in the pipeline with virtually the only constraint being space or availability of property for redevelopment.
Although the uptake in developments in Gauteng is not as feverish as in the Cape, buyers are acquiring units in a number of developments in key growth nodes such as Rosebank, Melrose Arch, and Menlyn Maine in Pretoria. Ongoing infrastructure upgrades, commercial and retail developments are proving a catalyst for further residential development projects, with eager developers ready to bring product to the market.
An interesting new trend is demand from Capetonians, who live and work in the Mother City, looking to buy properties in Gauteng as a buy to let investment, while enquiries for properties close to the Gautrain Station for commuter convenience are running high.
South Africans held their collective breath when President Jacob Zuma fired former finance minister Pravin Gordhan and replaced him with the former minister of Home Affairs, Malusi Gigaba. The repercussions were not long in coming, and although Standard and Poor’s (S&P) only released a public statement on Monday, 31 March, it came to light that it, one of the world's largest credit rating agencies, had notified the new minister that it was downgrading the country’s sovereign credit rating to junk status just hours after his appointment. The rand also reacted immediately, going into free fall in the days after the announcement was made.
It's obvious that we are in for a rough ride. It generally takes years to reverse an adverse credit rating and the consequences of such a rating cost everyone more. Interest rates will go up and food and petrol prices are going to increase. The cost of owning and renting property is also going to increase, putting additional pressure on people from all walks of life.
With consumer and business confidence already at low levels, South Africa’s downgrade to junk status by S&P Global will put more pressure on the economy as a whole, sending it further into negative territory, with a natural ripple effect on the residential property market. Already, many South Africans are over indebted, and this latest development is likely to lead to further pressure on households in the short to medium term. The rand has depreciated significantly, and downward pressure on our currency will lead to inflationary pressure which will impact on potential interest rate increases.
The threat of a downgrade has been looming for the past 18 months and although the latest political and economic shifts have been negative, the downgrade has, in many ways, already been priced into the current trading markets. We therefore expect the property market to remain stable for the time being with any real effects only filtering through later in the year. That said, one cannot ignore that the actual realisation that 'junk status' sends a major blow to consumer confidence and will have a longer-term negative impact on the economy. We again emphasise the need for political and economic stability. For now though, there is no need to panic and it is not all doom and gloom. We expect business as usual for the property market.
We posed various questions to Real Estate Agencies in order to gauge overall sentiment on the downgrade and to offer advice on how to best deal with the current challenges.
In your view how will the downgrade affect the average South African homeowner?
There’s little doubt that this level of uncertainty is unsettling, and it’s likely to make everybody second guess everything. But South Africans are used to a high level of ‘noise’, and clear thinkers will know that it’s too soon for anybody to know the specific implications of this rating. Other than the exchange rate, which has been reacting negatively for the past week and a half due to the uncertainty – albeit off a very strong base of R12.30 to the dollar - it’ll take three to six months for the knock-on effects to be felt. Historically, the SA Reserve Bank has utilised an inflation target band of three to six percent to assist in making interest rate decisions, and with time, we will see how inflation reacts to the increased likelihood of the cost of borrowing.
What steps can homeowners take to soften the blow in the short term?
The downgrade will increase the cost of credit as well as that of imported goods, making them more expensive. It will also slow the economy which may impact jobs. Cut down short-term debt immediately and consolidate long-term debt where possible. Interest rates will increase - consumers with high debt levels will be hit the hardest.
How will the downgrade affect those looking to invest in property and do you believe the decision could impact on first-time homeowners?
We believe it will impact on first-time homeowners purely because they are so reliant on finance, and if the cost of finance is going to increase, they will need to come up with larger deposits. For savvy investors whose decisions aren’t affected by heightened emotions, the state of flux in which we find ourselves can present good investment opportunities.
Investors with cash will benefit because house prices will be under pressure and may come down. The higher cost of credit, along with the increased cost of living will make it very difficult for first-time buyers to get their foot in the door. Banks are also more likely to expect a higher deposit in return for a loan grant.
Do you believe banks will tighten up on the number of bonds it grants to would-be homeowners?
Most definitely. It will cost more for banks to hold money, so they will be more stringent with their lending criteria. The stricter lending criteria may result in fewer bonds granted. Banks won’t clamp down on the number of bonds, their focus will be on the quality of applicant and their ability to service the debt – if the interest rate is higher, so, too, will be the debt. It's always a question of an applicant meeting the affordability criteria.
Do you foresee interest rates rising over the course of 2017?
The Reserve Bank had come to the end of its hiking cycle, but I do foresee that the downgrade will increase inflation which in turn will place pressure on interest rates. As a result we will likely see further hikes. None of us has a crystal ball, but should inflation rise due to the increased cost of raising finance, then it would be prudent to expect a chance of rate increases.
Could the rating decision affect those looking for 100 percent loans?
Yes, the banks' appetite for risk will be dampened which will result in them asking buyers for higher deposit amounts to secure finance. It would be fair to say that a large number of South Africans are panicking over the recent developments – how would you reassure homeowners in order to quell their fears? People will always need to buy and sell regardless of the economy. There are always people scaling up, scaling down, people with specific needs, etc. I would certainly not 'panic sell'. A marginal mitigating factor is that to some degree financial institutions have already made provision and priced in the effects that a downgrade would have on credit costs. [Because of this] the effect, we hope, won't be as radical as some make it out to be but a savvy homeowner would be well advised to reduce their debt levels as quickly as possible. It’s unnerving, but it’s too soon to panic. This scenario has not fully played itself out yet, and we need that to happen before we can analyse and react. A frenzied, un-thought-through reaction with regards to major decisions such as property is certainly financially unwise.
Some commentators call our recent downgrades a “catastrophe” or a “disaster”. That’s wrong of course. The downgrades simply confirm the disaster that has been unfolding in South Africa (SA), particularly during the Zuma years. We are not now going to experience hardships: we have been experiencing hardships for quite some time.
That is the reason why the financial markets reacted surprisingly mildly to the downgrade, they were already suppressed. State finances were already in slow collapse, most of the parastatals were already wrecked, the economy was already at a standstill, unemployment and poverty were already at heart breaking levels. The rating agencies simply told us what we already know, and – yes – it will take many years to regain an investment rating.
That is why those that argue for the establishment of another (BRICS) rating agency are delusional. It’s like hoping another scale will not show that you are fat and overweight; as if it were the scale that was responsible for your weight.
It will take a long time before we regain our investment grade – if we ever do – because we need first to understand what the route to recovery requires. Firstly, we need to recognise what is wrong, and secondly, we need to introduce policies to fix it. But for that, you need honest and competent leadership. And we lack both, hopelessly so!
The problem is that the state is too big, and that there are too many civil servants and that they are mostly completely overpaid. The result is a growing tax burden and record and rising, state debt levels. This stifles economic growth and discourages risk taking and investments.
The parastatals, which are part of the state but which pretend to be “companies” with “boards”, “directors” and “chairpersons”, are a complete mess. Not only do they require continuous bail outs by the overburdened tax payer, they also cause immense damage to the economy – Eskom is a shining example. And this all adds to the woes of the fiscus.
Labour legislation, labour relations and skills shortages are all adding to our misery. Misplaced policies rub salt into the open wounds, and there are many other obstacles that hinder growth: BEE, procurement manipulation, competition, protection of all sorts- and other policies that cause confusion, that undermine SA as an investment destination, and that add to the cost of doing business in the country. And then, of course, there is the endemic problem of crime, and it says something about our current plight that this problem is now dwarfed by our other economic woes and has slipped off the national agenda.
But most of all our reputation has been shattered. Our image as a stable and safe investment destination has been demolished, our dreams have been turned into nightmares.
We need to recognise these things; we need to call these things by name and we need to be honest about these things – for that you need a leader!
But that is only the first step. Thereafter we need to devise and implement policies to fix these problems. We need to cut the civil service, we need to privatise the state-owned enterprises, we need to be liberated from the burden of BEE, distortive procurement, land restitution, trade and labour policies, and much more. And we need to create a world class skills development system. All this will take a very long time – and all this requires a leader!
Don’t blame the rating agencies and don’t blame Zuma. Although there are many corrupt and incompetent leaders to choose from, there must also be many good and competent leaders to choose from. The ANC, however, chooses Zuma and those that have the power to get rid of him now elect not to do so. Should we blame Zuma or should we blame all those complicit in his continued leadership?
Eventually we will get the chance to be the masters of our destiny again. Who knows how much damage to our lives will have been done by then. But if we want the free and prosperous nation that so many of us wish for, we will need to make sure we choose somebody that will be honest in identifying our problems, and honest in fixing them.
But remember one thing: this will be a hard and difficult journey but the alternative will be worse.
Chief Economist of the Efficient Group
So, we got downgraded, as expected. In fact, the rating agencies gave us plenty of leeway to correct our sinful ways; to repent. But wickedness, rent seeking, dishonesty and plain evil lead to the inevitable.
But the markets expected a downgrade which lead to this surprisingly mooted reaction on the financial markets. This means, that we have been paying a very dear price for this destructive government for quite some time! We all expected a downgrade and once it happened, little happened! This point cannot be over-emphasised; the fact that the markets reacted very little to the announcement of a downgrade only proves the point that Zuma etal have been hugely damaging to our country for quite some time.
And the other rating agencies are likely to follow suit.
But what does it mean for us?
It probably means that if little does change on the political front, then the rand, the bond market, the economy, employment, poverty..., will all remain suppressed. It means that the bad times will be with us for longer.
But that is the good news! We have already paid the price for our awful political leadership. Sure, things can get worse but Zuma probably played his ace. All that’s left for him is more destruction and more isolation from the rest of his support base. Zuma is a spent force!
We have a massively undervalued currency, we have amazingly attractive yields on our bond market, we have fantastic companies to invest in. South Africa is a screaming buy! Yet, despite all of this, we probably need at the very least two years to regain our investment status; probably five.
All we need now is to change our political leadership and for that we need at least 50 ANC MP’S!!
This is enough, now it’s your conscience, not your careers that matter.
Chief Economist of the Efficient Group
The property industry weathered a very difficult year in 2016. Declining sales have mauled the industry, hitting agents and homeowners alike. But there may be some good news on the horizon.
This is according to Richard Gray, Harcourts Africa Chief Executive Officer, who says FNB’s latest Property Barometer - one of South Africa’s most reliable measures of South Africa’s property market - points out that property transfers experienced some scary declines. In 2016 there was a 9.3% decline in the volume of property transfers made through bonds. The value of such transfers fell by some 5.3% over this period.
Gray says these figures represent transfers undertaken by individuals (‘natural persons’), and are mostly accounted for by residential properties.
“In other words, noticeably fewer South African households invested in property during 2016 than in the previous year, and a lot less money was flowing through the industry. This mirrors the restrained performance of the economy as a whole,” he says.
“Indeed, in our experience, it seems that a large slice of the sales that took places were probably accounted for by the top end of the market. The more affluent are far less exposed to financial pressures than their less affluent counterparts.”
Gray says this is supported by research that shows that many households are having to halt payments of saving instruments or liquidate them entirely to meet their obligations.
“The Barometer, however, has some positive news,” he says.
“A global economic upturn, matched by a domestic one, especially after the drought, could see better times coming.”
In 2017, Gray says the volume of transactions is projected to grow by 0.7%, and the value by 2.25%. This would accelerate somewhat in 2018, with volumes growing by 3% and values by 5.6%.
“These are positive if unspectacular numbers,” says Gray.
“They illustrate the resilience of the property market - but they also highlight that buyers are likely to remain cautious, and demand exactly the right property at the right price.”
South African Prime Minister of Finance, Pravin Gordhan, announced the new budget for the 2017/18 financial year at parliament on 22 February 2017 which will effect property transactions in the following ways:
1. Transfer Duty
Good news – the only change in transfer duty from the previous year is a reduction in transfer duty. In the previous year, the threshold for imposition of transfer duty started at R750,000.
It will now only start at R900,000 which will certainly help purchasers at the lower end of the market. Effective from 1 March 2017.
The new transfer duty scales are the following:
|Value of the Property (R)||Rate|
|0 - 900,000||0%|
|900,001 - 1,250,000||3% of the value above R900,000|
|1,250,001 - 1,750,000||R10,500 + 6% of the value above R1,250,000|
|1,750,001 - 2,250,000||R40,500 + 8% of the value above above R1,750,000|
|2,250,001 - 10,000,000||R80,500 + 11% of the value above R2,250,000|
|10,000,001 and above||R933,000 + 13% of the value above R10,000,000|
2. Capital Gains Tax
It is important to remember that Capital gains tax (CGT) is not a separate tax, but forms part of income tax. A capi-gain arises when you dispose of an asset for proceeds that exceed its base cost unless excluded by specific provisions.
CGT applies to individuals, trusts and companies. The maximum rate threshold for income tax for companies remains unchanged at 28%. In the case of individuals (and special trusts) as well as other trusts the maximum rate threshold changed from 41% to 45% which will also have an effect on the calculation of CGT.
Therefore, the maximum effective rate of CGT payable on the disposal of properties from 1 March 2017 is as follows:
|Individual and Special Trusts||18%|
3. Dividends Tax
The rate for dividends tax is increased from 16% to 20% for the 2017/18 financial year.