Tenant's rights above the lease

Property24.com reports that investment property owners, especially those who are the landlords of low cost residential property in high density urban areas, may be deeply affected by the outcome of a trial in the Constitutional Court. According to Gunstons Attorneys' commercial director Trudie Broekmann, the trial is likely to be 'groundbreaking' as it could permanently alter traditional landlords' rights.

At the same time, community and human rights organisations representing indigent tenants hope that the judgement will provide extended security of tenure for the urban poor, who often "fall between the cracks" because housing law does not protect their situation.

In the case, a developer who has bought a scruffy Braamfontein apartment block so as to be able to renovate it, has been refusing to renew tenants' leases once they have expired. Broekmann told Property24.com that the landlord's plan is to empty the building gradually and then upgrade all the units in it so that he is able to increase his rentals in line with the much needed urban renewal of central Johannesburg. "On the other hand, we have the eighteen tenants in the block, some of whom have been there as long as 17 years (the shortest occupation is four years), who have been paying rent regularly, and who now argue before the court that they have nowhere suitable to go," Broekmann says.

The tenants are relying on section 26 of the Constitution, which guarantees each person's right to have access to adequate housing. The Constitutional Court will be aiming at balancing the interests of landlords and tenants, says Broekmann, adding that the precise implications of the constitutional right of 'access to adequate housing' are still being defined in our courts. She says if the Constitutional Court comes to the conclusion that it will advance access to adequate housing to grant tenants housing rights which extend even after their leases have elapsed, this case will certainly set a precedent and make landlords' obligations more onerous. Such a decision would have far-reaching implications for South African property.

 

MORE investment is being poured into the CBD

MORE investment is being poured into Jewel City, the diamond trading precinct on the eastern edge of the inner city.

The new developments will change the face of Jewel City This comes after private companies and the Johannesburg Development Agency (JDA) undertook upgrades to the area some four years ago.

Jewel City takes up four blocks, bounded by Commissioner and Main streets in the north and south, and Berea and Phillip streets in the east and west. In the latest work, R40-million is being spent on refurbishments, anchored by Redefine Properties Limited, a Johannesburg Stock Exchange listed company. Work is scheduled to be completed by the end of the month.

It involves the restoration of an old warehouse into new head offices for the Diamond Board and State Trader Association, as well as a new sign-on station, a new entrance and exit, and additional parking. Once work is finished, tenants will have their own staff parking with a separate entrance.

There will also be X-ray scanners at the photograph identification entry point for visitors. They will have to pass through here to get into the secure precinct.

This small corner of the city houses workshops and offices for about 300 diamond dealers – about R7-billion changes hands each year in the precinct. Gems are received and processed at Jewel City from Angola, Democratic Republic of Congo and Botswana.

Polished diamonds

It attracts more the 400 daily visitors interested in buying cut and polished diamonds. It’s also home to the regulatory Diamond Board and State Trader Association.

To encourage trade in Jewel City, the property company has reconfigured some of the existing space to create a new 76m² retail shop, the first of many more retail outlets planned for the precinct.

Redefine Properties has already completed a R30-million extension to the new head office of the Diamond Board and the State Trader. Its development manager, Mike Ruttell, says the upgrades form part of the critical inner city renewal project.

It has also created a parking bay area for about 137 vehicles. Apart from that, Redefine will be spending an additional R10-million.

Ruttell explains that the Diamond Board has moved into Regulator House, which has been increased in size from 1 630m² to 2 480m². The expansion includes the provision of a secure loading bay. More space has been created for the State Trader, which occupies 600m².

Jewel City, the entrance to which is on Main Street, has also increased its security.

Melrose Arch

The precinct has existed for 21 years. In 2006, it was on the brink of moving north to Melrose Arch, but the JDA stepped in to revamp the entire area. The first phase was to clean up the precinct, and in 2007 the agency spent R14-million on giving it an identity of its own.

The revamp involved street upgrades; artwork; new lighting; street furniture like benches, paving and kerbing; trees; and gateways at its entrances.

The four-block area, consisting of a number of buildings, was once divided down the middle by a high wall and owned by two parties: Apex Hi and a private stakeholder, who wishes to remain anonymous.

At the time of the JDA refurbishment, David Rice, the managing director of Apex Hi, said that he expected to clean up and expand Jewel City by buying up properties on Phillip Street and creating more parking.

It is surrounded by tall metal gates and high security electric fences, as well as floor-to-floor security clearance. It is neatly positioned between the M2 Highway’s on- and off-ramps. Three blocks of Fox Street and two blocks each of Phillips and Greene streets are inside the precinct.

Its neighbours are motor industry workshops and the Fashion District.

Gapp Architects and Urban Designers were called in for the JDA revamp. Architect Mbongeni Ngulube said at the time that the company had tried to accommodate pedestrians and traffic in the redesign.

 

MORE investment is being poured into the CBD

MORE investment is being poured into Jewel City, the diamond trading precinct on the eastern edge of the inner city.

The new developments will change the face of Jewel City This comes after private companies and the Johannesburg Development Agency (JDA) undertook upgrades to the area some four years ago.

Jewel City takes up four blocks, bounded by Commissioner and Main streets in the north and south, and Berea and Phillip streets in the east and west. In the latest work, R40-million is being spent on refurbishments, anchored by Redefine Properties Limited, a Johannesburg Stock Exchange listed company. Work is scheduled to be completed by the end of the month.

It involves the restoration of an old warehouse into new head offices for the Diamond Board and State Trader Association, as well as a new sign-on station, a new entrance and exit, and additional parking. Once work is finished, tenants will have their own staff parking with a separate entrance.

There will also be X-ray scanners at the photograph identification entry point for visitors. They will have to pass through here to get into the secure precinct.

This small corner of the city houses workshops and offices for about 300 diamond dealers – about R7-billion changes hands each year in the precinct. Gems are received and processed at Jewel City from Angola, Democratic Republic of Congo and Botswana.

Polished diamonds

It attracts more the 400 daily visitors interested in buying cut and polished diamonds. It’s also home to the regulatory Diamond Board and State Trader Association.

To encourage trade in Jewel City, the property company has reconfigured some of the existing space to create a new 76m² retail shop, the first of many more retail outlets planned for the precinct.

Redefine Properties has already completed a R30-million extension to the new head office of the Diamond Board and the State Trader. Its development manager, Mike Ruttell, says the upgrades form part of the critical inner city renewal project.

It has also created a parking bay area for about 137 vehicles. Apart from that, Redefine will be spending an additional R10-million.

Ruttell explains that the Diamond Board has moved into Regulator House, which has been increased in size from 1 630m² to 2 480m². The expansion includes the provision of a secure loading bay. More space has been created for the State Trader, which occupies 600m².

Jewel City, the entrance to which is on Main Street, has also increased its security.

Melrose Arch

The precinct has existed for 21 years. In 2006, it was on the brink of moving north to Melrose Arch, but the JDA stepped in to revamp the entire area. The first phase was to clean up the precinct, and in 2007 the agency spent R14-million on giving it an identity of its own.

The revamp involved street upgrades; artwork; new lighting; street furniture like benches, paving and kerbing; trees; and gateways at its entrances.

The four-block area, consisting of a number of buildings, was once divided down the middle by a high wall and owned by two parties: Apex Hi and a private stakeholder, who wishes to remain anonymous.

At the time of the JDA refurbishment, David Rice, the managing director of Apex Hi, said that he expected to clean up and expand Jewel City by buying up properties on Phillip Street and creating more parking.

It is surrounded by tall metal gates and high security electric fences, as well as floor-to-floor security clearance. It is neatly positioned between the M2 Highway’s on- and off-ramps. Three blocks of Fox Street and two blocks each of Phillips and Greene streets are inside the precinct.

Its neighbours are motor industry workshops and the Fashion District.

Gapp Architects and Urban Designers were called in for the JDA revamp. Architect Mbongeni Ngulube said at the time that the company had tried to accommodate pedestrians and traffic in the redesign.

 

Estate agents are reporting an increased interest in property in South Africa due to the weakling Rand. The rand has declined sharply since May making property in the country more attractive to overseas buyers.

Luxury homes in South Africa selling well

Property Abroad reports that ‘South Africa is seen as being a safe haven in which to invest; its stable banking system and growing economy a world away from the Eurozone crumbling under debt.’

Luxury homes in South Africa are proving particularly popular with foreign buyers.  The website reports that sellers of luxury homes are often prepared to be patient when selling, meaning that high value homes have tended to retain their values, particularly as buyers tend to put down a large deposit.

Johannesburg is currently one of the most popular locations with buyers, partly because the cost of luxury homes in the city is relatively low compared to similar properties in other major global cities.

Both foreign and domestic demand for property in South Africa increasing

In addition to overseas buyers tempted by the weakness of the rand, domestic demand for luxury homes is also on the increase.  Research from Credit Suisse has estimated that the number of dollar millionaires in South Africa will more than treble over the next five years, from 71,000 to almost 250,000.  This increase in wealth will also drive the demand for high end homes.

However, while there remains high demand for luxury homes from both overseas and domestic buyers, the low to medium end of the property market in South Africa is picking up more slowly.  A recent survey found that there was a rise in demand for property in the country as well as an improved level of confidence amongst estate agents, although the increases were slight.

 

The Johannesburg central business district is showing a strong revival, with several companies and professionals moving back there from the suburbs.

The Johannesburg city centre could see seven new rejuvenation projects should Urban Genesis’s negotiations be successful.

Such projects felt the backlash of the 2008 meltdown as both government and the private sectors tightened their belts but efforts are now back to refurbish the Johannesburg city centre in the form of City Improvement Districts (CIDs). The approach is a holistic one whereby the private and public sectors come together in joint ventures to rejuvenate demarcated areas in the central business district.

CEO of Urban Genesis, Shrivaar Singh, says recent developments have seen retailers like Ackermans and other chain stores returning to the city. What is key is management and the strict enforcement of formal services like cleaning and maintenance, security, marketing and promotions. This is in addition to services provided by the local authority.

A tour of the Main Street Mall and the Newtown Improvement District has revealed a stark contrast between nodes being formally managed and those where only basic services are provided. What is also taking shape is the mixed use development, incorporating hawkers and retail by day while residents occupy space in former office high rises converted into residential units. Singh says around 8 000 families have made the inner city their home over the past five or so years. The revamping of the mall area cost around R100m, and included the costly process of redoing the roads in the vicinity.

This relocation brought with it the need for recreational facilities, prompting the renovation and greening of the former derelict and crime ridden Bokkie Park. After a year-long effort involving the Johannesburg city council and the private sector, notably mining entities, the square has been renamed Oppenheimer Park and comprises luscious gardens, a mini auditorium for performers, cement benches in strategic places, often in the shade and more importantly, an extremely popular basketball court. It is a perfect lunchtime retreat for city workers, but also for children, or anyone else really to enjoy the tranquillity of a safe and clean environment. Unobtrusive security guards watch over the park 24 hours a day even when it is locked between 6pm and 6am daily.

Adjacent to the park, informal traders have been allocated space where they can ply their wares under newly-erected shelters, and it all seems to work. So-called “block leaders” have been allocated portions which they manage, ensuring a clean and safe flea market experience. The difference between the formally managed areas, run by the CIDs and the local authority as opposed to the unregulated trade in parts of Jeppe, Bree and other streets is astounding. The latter are filthy, unhygienic and generally unsafe.

The CIDS have been around for about 12 years and if developments in parts of the CBD are anything to go by, they could be a viable option for landlords to protect and enhance their investments. The Urban Genesis website says “… managed environments … are a proven tool in the fight against urban deterioration and decay,” which help to offer landowners a better return on their investment.

 

Recently conducted research by Auction Alliance, the country's leading property auctioneers, shows that the student accommodation market is one of the few property sectors that has successfully bucked the economic downturn.

“Within recent years, South Africa’s student accommodation market has emerged as a key asset class, and has attracted a growing interest from investors, developers and private operators on auction floors countrywide”, says Auction Alliance CEO Real Levitt. 

Factors such as the swift development of South Africa’s middle class, rapid urbanisation and the influx of approximately 72000 foreign students, mainly from Africa, has resulted in a growing inability of tertiary institutions to house students. Recent figures from the education department show that the current provision of student housing in residences is approximately 100 000 for a student population of 530 000.  Meaning that on average, just under 20% of students nationally, will be able to find accommodation on campus.

“Whilst student numbers have significantly climbed in recent years, the lack of funding of tertiary institutions has created lucrative opportunities for a small number of niche developers and private property companies to take advantage of, and seize the opportunity of the high demand and low supply student accommodation market”. 

Over the last few years, the sector has experienced impressive rental growth and attracted a healthy amount of investment when many other categories of real estate investment and development have struggled. With the living conditions of students playing a significant role in their overall performance, a higher end product has entered the market, offering low cost student housing options such as dormitory style shared accommodation rooms or flats within renovated purpose built blocks that offer modern amenities. 

“Companies such as South Point Properties bought partially let office properties that were considered undesirable to mainstream investors due to factors such as insufficient parking, at good prices, and turned them into clean and secure student environments”.

Levitt maintains that this trend has had a particularly significant impact on areas such as Braamfontein in the Johannesburg CBD due to the high concentration of tertiary facilities in the area. “The rising demand amongst students for secure accommodation, within close proximity to such facilities, had an instrumental influence on the area’s rejuvenation”. 

“In spite of the instability of the real estate sector, the lack of student accommodation facilities within close proximity to South African universities, are proving to be significant commercial drivers for investors and developer. The sector is thus anticipated to continue offering investment potential in both the purpose built and buy-to-let sectors, specifically in the current low interest rate environment”. 

Auction Alliance have sold a number of properties to South Point Properties, including New Market Junction in Woodstock for R49 million , 10 & 12 Plein Street in the Cape Town CBD for R30 million, President House in Barrack Street for  R12.6 million and Stanhope Building in Claremont for R24.5 million

This year, Auction Alliance has also sold a student college in Braamfontein for R5.8 million, 46 Biccard Street in the Johannesburg CBD for R15 million and 249 Smit Street Braamfontein for R6 million.

 

Get over it and put your shoulder to the wheel say the professionals

Nedbank backs inner city development

Billing crisis causes Joburg debt hangover

Joburg throwing millions at billing crisis

The City of Joburg has spent another R13.1 million on trying to get the City of Joburg’s billing system right. This, despite already having spent R800m in the past few years trying to get the systems right, but failing dismally.

And to add further insult to injury, the council approved this spending, even though it was done without following proper procedures in terms of Municipal Supply Chain Management Regulations.

The council on Thursday approved R135m worth of contracts without going through proper tender procedures. This happened in the space of 30 days between February and March. A total of 19 deviations were approved and 10 contracts ratified, all of which were not approved in terms of council regulations.

The R13.1m was supposed to have been spent on improving the billing problems within four months of March 31, yet there is very little evidence that it has had any impact.

Although details provided in the report submitted to the council asking for approval of contracts are sketchy, it was stated that the money was needed because of “billing challenges” in the Revenue and Customer Relations Management unit.

The report says that the company, EOH, was “at that stage” involved with the billing systems, enhancements, configurations and billing developments to address system challenges post-Phakama implementation. It had the “necessary system business knowledge and all the necessary background to assist the city with the billing challenges,” said the report and the deviation from tender procedures was required to “ensure continuity and completion of work in progress.”

The approvals for deviations from tender procedures were asked for after the auditor general, in issuing his qualified report for the year 2010/11, issued a warning to the council that such deviations from procurement processes were not in accordance with legal regulations.

Other examples include property leases not extended before expiry date, extension of contracts prior to the commencement of new ones, the non-inclusion of escalation clauses in contact negotiation and decisions made by employees without consultation.

The contracts include one for R3.7m for the establishment of new offices for the housing department in Braamfontein, R7m for a maintenance contract for digital high-speed copiers, R1.3m for extending a lease which expired for the Region F municipal offices, R35m for the extension of a contact for city fleet cars, R500 000 for the scrapping of taxis for the Rea Vaya and R2m for the appointment of legal representation for Rea Vaya former taxi drivers who wanted their own team, and not the one appointed by the city. According to the Municipal Supply Chain Management Regulations, the council can bypass tender procedures under certain circumstance which include emergency circumstances or in exceptional cases where it is “impossible or impractical to follow official procurement processes.”

The City of Joburg’s member of the mayoral committee responsible for finance, Geoff Makhubu, said the situation was not accept able.

Makhubu, while not providing details, said they were “implementing systems” to address this.

DA Joburg leader Mmusi Maimane said this was “deplorable”, especially in the light of the city’s recent qualified report.

“The criterion for deviations is weak and open to interpretation. It is open to abuse and can lead to corruption,” he said.

Maimane said proper planning was needed, especially in the cases where leases were about to expire, to avoid relying on emergency clauses to extend them.

Councillor Alan Fuchs said that no disciplinary action had been taken against any official involved in these deviations, except in two cases where letters of reprimand had been written to the heads of departments concerned.

“Now that Makhubu himself has expressed concern over the matter, he should call for investigations to establish who has acted unlawfully and to lay charges against those involved,” he said. - The Star

 

Residential property prices to deteriorate

JOHANNESBURG - Housing prices have been coming down in real terms for much of 2011 and this negative growth trend is something that property analysts expect to continue for at least the rest of the year, probably longer.

With investment in residential property more likely to lose the average homeowner money in the near term, Moneyweb asks whether those consumers who have a choice should be opting to rent or to buy.

SA’s housing price boom, which saw year-on-year price increases of around 30%, began tapering off as far back as 2004, according to Absa’s senior property analyst, Jacques du Toit.

But it will come as no surprise that housing prices saw their strongest declines following the financial crises of 2008/2009 with nominal housing price growth dipping sharply into the red for much of 2009.

They have never really recovered.

According to FNB, since February 2008, residential properties have shown a real-term (ie, when adjusted against inflation) cumulative price decline of just under 15%.

The nominal (ie, in simple rand terms) increase has been placed at a dismal 6.4% over that period.

Recent performance, too, has been bleak.

After picking up (off a very low base) in the first half 2010, housing price indices from FNB, Absa and Standard Bank have all been saying pretty much the same thing for 2011: prices have been increasing nominally but at a snail’s pace.

Nominal growth for 2011 has hovered at around 1-2% for most residential markets. Prices have seen a recent upswing, growing at around 5% in July, but those who view that as the start of a sustained upward trend are badly mistaken, according to the analysts spoken to.

Going forward, it is essentially that same theme which hammered property markets in 2009: an increasingly bleak-looking global economy.

While a host of local ailments such as a diminishing local GDP outlook, consumer over-indebtedness, below-inflation salary increases, rising cost of living, slumping consumer confidence and tightening bank lending criteria provide the bread for this rotting sandwich, it is a dire global outlook that provides the nutrition-less margarine.

With talks of a second recession now beginning to circulate, analysts see marginal (1-3%) nominal housing price growth in the near term (up to five years) at best, with real-term growth expected to continue to decline.

FNB’s July index states that “July’s economic data releases and events lead to the belief that we could see increased pressure on the market in the near term”.

According to Absa’s July 2011 index, homeowners are likely to experience a further 2.5 – 3.5% real-term price decline on their properties by the end of the year.

John Loos, FNB’s home loans strategist, says: “The next time we’ll get nice real house-price growth will be at the next interest rate cutting cycle, which is probably a few years away.”

But we all need a place to sleep, so would renting be the way to go?

“The most important consequence (of current and forecasted real-term house price deflation), according to property economist Erwin Rode, “is that ,especially for new entrants, there’s no urgent reason to buy, it’s not like the markets are going to run away from you ... Renting is the savvy option at the moment”.

Loos essentially agrees, but with a caveat.

“The impression is that rental yields (payments) are still on the low side … very often you can rent a property for cheaper than a 100% instalment payment on a new 100% bond”.

However, he warns this current cost-saving opportunity through renting is not necessarily going to continue as rental prices will tend to increase while longer-term interest rates (which affect the repayment amounts on mortgages) tend to fluctuate.

“It’s a tough one to say but what I would say is that if you’re under financial pressure the rental option can be very attractive.

“If you do rent ,and you save money, you consume it …[so] often borrowing big amounts of money for a house with a contractual obligation to pay it back does enforce financial discipline on a household,” he said.

So if you are going to rent in the near term ensure that you are financially prudent.

Du Toit is not entirely for the rental option but suggests that consumers may not have much choice.

“In some instances it can be even more expensive to rent a property than to buy that same property,” he said.

With current levels of poor savings and over-indebtedness, most consumers will simply not be able to come up with the deposits required to secure mortgage loans.

“The deposit issue is a major thing at this stage,” but “if you have that deposit, mortgage repayments are currently 33-34% lower than at the end of 2008 … and that is the difference,” Du Toit concluded.

 

The number of people selling their property with a view to emigrating is the lowest since 2008, according to the second quarter FNB Estate Agent Survey released on Monday.

JOHANNESBURG - The number of people selling their property with a view to emigrating is the lowest since 2008, according to the second quarter FNB Estate Agent Survey released on Monday.

"From a peak of 20 percent [of total residential selling] in the third quarter of 2008, the percentage of residential sellers believed to be emigrating has declined to four percent for both the first and second quarters of 2011," said FNB Home Loans strategist John Loos in a statement.

FNB has since the first quarter of 2008 been asking agents for estimates on why people were selling their homes.

Loos said it was not clear why the rate had dropped.

"But... flows of investments and people between countries have to do with 'relative sentiment or environment changes' between countries," Loos said.

There had been a significant drop in confidence levels in many European countries, including the United Kingdom, and the United States due to their declining economic fortunes.

"Sentiment aside, high unemployment rates in many developed countries probably mean that they aren't nearly as welcoming to immigrants from the likes of South Africa, compared to a few years ago in the global boom years, and even where they are welcoming of immigrants the job prospects just aren't as promising as a few years ago."

Loos said agents' estimates indicated that the percentage of expatriates buying property in South Africa had been relatively stable at around two to three percent of total buying since mid-2009.

"This is not perfect, as expats buying property in South Africa don't always do so with a view to returning permanently.

"Nevertheless, we assume that this is a partial indicator of skills returning or intending to return," he said.

The gap between emigration sellers at four percent of selling and expatriate buyers at two percent of total buying, appeared to have narrowed, suggesting that the net skilled labour outflow may have subsided in 2011, Loos said.

Will Property Stay In A Slump

Indicators point to weakening demand in fragile economy; office vacancy rate at 2004 highs.

JOHANNESBURG - Despite showing year-on-year gains, the news from FNB’s latest housing price index is not altogether positive.

When viewed within the context of a range of other indicators, the index becomes another voice in a growing choir chanting local and economic ailment.

Sustained growth in the property market is unlikely; real-term growth is not on the visible horizon.

FNB’s index on Monday reported a “further acceleration” in year-on-year growth in housing prices which is now at its highest level since August 2010.

The nominal year-on-year (as compared to the same month last year) growth rate for July was at 4.6% , growth for June sat at 3.1%.

However, when adjusted for consumer price inflation (CPI), the real growth rate remained in negative territory to the tune of -1.8% against a recorded CPI of 5% for June.

This implies that homeowners are continuing to effectively lose money on their property investments barring rental returns.

Says John Loos, FNB Home Loans Strategist, “the year-on-year growth uptick is still a reflection of what’s past in the summer. We had, in addition to seasonal demand… some increased demand on the two rate cuts late last year”.

“I think that’s all we’re seeing now coming through into the numbers with a bit of a lag”.

Says Loos, with the marginal effect that record low interest rates have had on the property market now beginning to “wear thin” and with a range of negative news painting a gloomy picture for the local and global economy, the outlook for property does not look good.

According to FNB’s report, “economic data releases and events lead to the belief that we could see increased pressure on the market in the near term.”

Says Loos, FNB’s estate agent survey, which acts as a leading indicator to the housing index, suggests that that uptick from the summer didn’t last and that “already in the second quarter there has been a weakening in demand”.

 He notes that FNB valuers also point to “some weakening in their demand rating”.

The same interpretation may be drawn from the South African Property Owners Association’s (SAPOA’s) Office Vacancy Survey which has revealed moderate increases in office space vacancies.

At just above 10% SA’s overall office vacancy rate is now at its highest level since 2004.

According to Marc Schneider, director of business strategy at Investment Property Databank, which conducted the survey, these increasing levels of vacancy come as office space supply is constrained.

With constrained supply, increasing levels of vacancy imply a weakening demand for office space.

“What you are finding is that the take-up generally has suffered a bit and as a result you are finding a moderate increase in vacancies,” said Schneider.

Says Schneider this weakened demand is, in turn, linked to reduced levels of business confidence.

Business confidence is strongly correlated with the current and expected performance of the local economy as a whole.

Ultimately, says Loos, this weakness in residential and office property demand is a consequence of an adverse global and local economic environment which is reflected in a host of leading macro-economic indicators.

Included here is the Reserve Bank’s leading economic indicator, which is closely correlated to statistics for new residential loans granted both of which are now showing negative growth year-on-year for a three month moving average.

Another major indicator is SA’s non-USA trading partners, this too, has by now slowed in terms of month-on-month and year-on-year percentage change.

Statistics for new residential loans provides a forward looking indication of movements in demand for residential buildings which in turn affects their price.

All-in-all, in case you hadn’t noticed the stubbornly high oil price and the worryingly high levels of debt in Europe and the US, it would seem that dark clouds may be starting to form on the horizon of the global and local economies.

Property, as always, is not likely to do well in such an environment

 

The Rates Panic Is Over For Now

Johannesburg - Government used too broad a brush to describe its proposed amendment to the Municipal Property Rates Act, thus painting itself into a corner.

This was the view of experts as government tried to douse the flames amid an uproar in property circles countrywide about the proposed changes.

The experts further said that government would have to alter the proposed legislation because, in its current form, it includes all rental property.

On Monday Yunus Carrim, Deputy Minister of Cooperative Government and Traditional Affairs, tried to defuse the situation, saying people who own more than one residential property will not be taxed at commercial rates on their additional residences.

The aim of the amendment, he said, was to ensure that guesthouses, bed-and-breakfasts, small hotels and the like paid the commercial tariff.

Ben Espach, an expert in municipal property rates, said that was not what the proposed amendment said and, if that is government’s intention, that’s what it must stipulate.

The definition in the draft amendment reads that a property used to house people who are not the owner for financial benefit will no longer be classed as residential, and will therefore no longer be assessed at the residential rate but rather at the commercial rate.

Espach said if the intention is to target guesthouses, bed-and-breakfast establishments and small hotels for the business tariff, the definition needs to be altered to specify this. At the moment the definition includes all residential property being let.

On Tuesday Carrim said the amendment would be changed to offer greater clarity, if necessary, before the proposed bill was submitted to parliament.

Kokkie Herman, a director at Rates Watch, which specialises in property rates for individual property owners, said the problem was that the legislator wanted to target specific types of property but in the process had included everyone in the net.

He said government would have to change the definition to achieve its aim, after which there should no longer be a problem with its interpretation.

Schalk van der Merwe, a property attorney at VFV Mseleku, said what had been proposed was yet another example of thoughtless alteration to legislation – the consequences of which government said had never been the intention.

He said there were many other examples – such as the new Consumer Protection Act and its impact on the rental market, which is still unresolved. This creates great uncertainty in a property market already under severe pressure.

On Tuesday the DA asked the deputy minister to spell out precisely which properties would be assessed at business tariffs.

The big question remains as to how holiday homes, which are let from time to time, will be affected by the amendment, as well as the status of blocks of flats and townhouse developments owned by individual investors.

Johannesburg's inner city appears to be making steady progress in luring upmarket residential buyers into the fold.

CBD is luring more up-market buyers

Apartment prices touch new highs

Johannesburg’s inner city appears to be making steady progress in luring upmarket residential buyers into the fold.

Last month, an apartment of 147m² in the historic headquarters of Barclays Bank at 87 Commissioner Street fetched R1,15m. That’s believed to be the highest price ever paid for an inner-city office-to-flat conversion, bar the 226m² shell in nearby Corner House bought in June 2005 for R1,25m by executive Wendy Luhabe, wife of former Gauteng premier Mbhazima Shilowa.

Corner House was the flagship renovation of developer Urban Ocean, founded by Alfonso Botha and Duan Coetzee in 2004. The duo entered the CBD with much fanfare, buying up old office buildings with ambitious plans to turn the inner city into a trendy work, live and play hub. But by early 2008, some of Urban Ocean’s regeneration efforts had stalled, and demand for higher income housing dried up.

Now the trend appears to be reversing. Jawitz Properties agent Rochelle Johnson, who clinched the R1,15m Commissioner Street sale, says investor interest in the luxury end of the CBD market has re-emerged in recent months. The impending opening of the Gautrain station, which will link the CBD to Rosebank and Sandton, as well as the advent of art galleries, restaurants and shops in the area, are attracting more young executives, academics and creative’s into the city.

Besides, CBD loft-style developments are far more affordable than their counterparts in Johannesburg’s leafy northern suburbs. Johnson says CBD selling prices average R8000R10000/m² That compares favourably with the average R38000/m² that buyers are paying for the latest residential phase at mixed-use precinct Melrose Arch near Rosebank, for instance.

Figures from property research portal Lightstone show that the highest price paid in the Johannesburg CBD last year was R800000 for an 89m² unit in an apartment block, The Newtown in Quinn Street, Newtown.

Property group Broll confirms that Jo’burg’s inner city is back on the radars of both residential and commercial investors. Broll broker Keke Khojane says a “huge transformation” is under way in the inner city, including Braamfontein and Newtown, fuelled by a number of new and brownfield developments. Easy access to highways, rail and bus transport is a key selling point.

Source: Financial Mail

 

Billing Mess Could Cost Joburg

The City of Johannesburg faces hefty penalties imposed by the National Consumer Commission (NCC) over the recent large-scale billing crisis that the city claims has been resolved.

This follows a year-and-a-half of residents complaining about incorrect statements.

The city claims to have sorted out about 52 000 complaints that arose after it moved its disparate systems onto SAP, under project Phakama, which cost R580 million to implement between November 2009 and the middle of last year.

However, despite the city's claims of progress, the NCC says there are almost 200 unresolved issues. This week, it will come down on the city over the backlog, issuing it with notices forcing it to fix the problems.

If the city fails to resolve the problems the NCC has been battling to get it to sort out, it faces a maximum penalty of R1 million for each complaint.

The city's billing system has been a major headache for Johannesburg consumers, who have been complaining about grossly inflated bills, inaccurate meter readings, illegal disconnections and a lack of service from the city's call centre since the project started.

About 65 000 out of the more than 1.2 million account-holders were affected by the crisis as the city battled with post-implementation issues.

Towards the end of last month, Johannesburg claimed it had sorted out the inherent issues, while 13 000 outstanding complaints would be fixed within a month or two.

Or else

However, despite the city's assurances, the NCC has had enough, claiming it has faced an uphill task trying to get complaints sorted out. The commission received between 300 and 400 grievances from disgruntled residents, of which about half have been resolved.

Under the Consumer Protection Act (CPA), which came into effect in April, the NCC has the power to handle complaints, force companies to sort out issues and refer unresolved matters to the tribunal for adjudication.

This week, the commission will put the city on notice to wrap up the unresolved complaints. If Johannesburg does not resolve the problems within 21 days, it faces a maximum fine R1 million.

However, this fine could be imposed for each unresolved case that the NCC is fighting, taking the possible penalty to as much as R200 million.

Commissioner Mamodupi Mohlala says the NCC is preparing compliance notices to force the city to resolve outstanding issues. She says two notices will be served: one to cover general unresolved issues and one seeking the maximum fine over a case in which a consumer lost out on rental income.

On Wednesday, the NCC will quantify the penalties it will seek for the bulk of the unresolved complaints. However, in the matter of the resident who lost rental income, the NCC wants the city to pay the maximum R1 million fine, says Mohlala.

The Johannesburg resident was involved in a dispute with the city over incorrect meter readings, which led to wrong bills, says Mohlala. Despite the ongoing battle, Johannesburg removed the consumer's electricity meter, a “heavy-handed” act that led to lost income as the property cannot be leased, she says.

As a result, the NCC will seek the maximum penalty, because Johannesburg has not fully cooperated with the NCC, and its actions caused financial harm to the consumer. The complainant was treated in an “unbecoming” manner, and the city has yet to explain why it ripped the meter out, she argues.

The city will be given between 15 and 21 days to resolve all the outstanding problems. If it fails to do so, the matter will be sent to the tribunal for an administrative fine to be imposed, says Mohlala. Consumers are being prejudiced, and the commission has done all it can to get the city to respond, she argues.

Mohlala explains, in some instances, resolution is dragging on and the city has argued that the change in management is behind the delays. This is not acceptable, as the systems have not changed, she argues.

After the recent municipal elections, Parks Tau replaced Amos Masondo as mayor, and Trevor Fowler will take over as city manager from 1 October, replacing Mavela Dlamini.

Many issues

Complaints lodged with the NCC vary from incorrect meter readings to wrong bills and the city's inability to reconcile statements, Mohlala says. “We just don't understand what is happening to hold the city back on these issues.”

The City of Johannesburg was one of the first entities the NCC met with after it came into being, says Mohlala. “They can't keep on giving the same excuses to consumers.”

Mohlala wants concrete answers and resolution time frames. She gets the sense that the city is saying it is dealing with unresolved issues, but is not providing concrete answers as to what the problem is, and when the matters will be sorted out. “Consumers can't be held in abeyance and left in limbo forever.”

The NCC believes there are many more outstanding complaints than those lodged with it. Mohlala says the NCC can only act on complaints it has received.

The city did not immediately respond to a request for comment.

 

Property owners urged to oppose new bill

Johannesburg - Property owners and tenants are being called on to object to the draft municipal property rates bill despite assurances from government.

"There are just a few days left to lodge comments on the municipal property rates amendments bill - and both property investors and tenants should be objecting strenuously to at least one clause in the proposed legislation," said Hano Jacobs, chief executive of the Realty 1 International Property Group, on Tuesday.

Jacobs is worried that the proposed bill would result in people who own more than one residential property being forced to pay more expensive commercial rates on additional properties.

"What this will mean if the bill is passed, is that residential rental properties will in future be treated as commercial properties, and that the property rates levied on them will in most cases be more than three times what the owners are currently paying," he said.

However, the department of cooperative governance and traditional affairs said on Monday this was not the correct interpretation of the proposed amendment.

"But contrary to media reports on the draft bill, people who own more than one residential property will not have to pay commercial rates on their additional residential properties," said Deputy Minister Yunus Carrim in a statement.

"The intention is to ensure that guesthouses, bed-and-breakfast establishments, small hotels and the like pay commercial rates.

"If necessary, we will amend the draft to make this clearer before submitting the bill to parliament."

Carrim said the new legislation was supposed to make property rating "simpler, more transparent, more uniform and easier to implement".

The only policy shifts in the bill were that properties used for game hunting would be regarded as agricultural property and subject to rates; that there would be uniformity across municipalities in rating houses owned by recipients of old age pensions and disability grants; and that some public service infrastructure would be excluded from property rates because of their contribution to the country's developmental needs.

The bill was gazetted for comment on June 9 and the last day for public comment is Friday, July 22.

Comment can be faxed to 012-334-4811 or emailed to mpra@cogta.gov.za.

House Prices Show Signs of Growth

Johannesburg - House prices grew marginally in June compared to the same month last year, bond originator ooba said on Monday. "The June oobarometer price index reveals that the average house price rose 1% year-on-year (y/y) to R845 725 from R837 599 a year earlier," ooba CEO Saul Geffen said.

The increase followed two months of y/y decreases in local house prices. Growth in the average purchase price for first-time buyers increased slightly, with y/y growth of 1.1% to R618 084 in June 2011 from R611 611 a year earlier. The average approved bond size grew y/y to 6.1% at R737 457 from R694 759 a year earlier.

Geffen said the value of approved bonds for ooba reached a three-year high in June 2011. "We have experienced a growth of 51.9% in the value of approved home loans in the last quarter in comparison to same period in 2010," he said. "However, the volume of approved loans in June were still only 25% of the approved loans recorded at the peak of the market in May 2007."

Geffen attributed the improved property market conditions to the current low interest rate environment. "The record low interest rates, coupled with subdued property price inflation, increased bank approval rates and lower deposit requirements, has resulted in an influx of applications by potential homeowners."

Major lenders had also relaxed their lending criteria. "The effective approval rate has increased to 63.9% in June 2011, up from the lowest effective approval rate of 55.6% recorded in May 2010," he said.

This was still well below ooba's peak approval rate of 81% in May 2007, he said.

Tariff hikes hit Jo'burg hardest

Consumers and ratepayers across the country have been left reeling as municipalities have imposed double-digit hikes in rates and electricity tariffs.

The hardest-hit residents are those in major cities such as Johannesburg, Cape Town, Bloemfontein, Durban and Pretoria.

The shock increases come shortly after the local government elections, as new councils sit to vote on their budgets for the next financial year.

Apart from the rates and taxes hikes, most people will also feel the pinch as other services such as bus and taxi fares are also expected to be increased.

Already, commuters in Bloemfontein have embarked on a bus boycott in protest against the increase of bus fares by a local operator, Interstate bus company.

In Johannesburg, property rates have been increased by 6.7% for all categories of properties, 14% for water and another 6.7% for refuse removal.

But the real shocker in Johannesburg is the 27.7% increase for electricity. This ranges from 5% for prepaid customers to 31% and 28% for business and industrial customers respectively.

Johannesburg residents with a property valued at less than R150000 will pay an annual rate of R60. The Johannesburg increases are still lower compared to last year’s hike of between 15% and 33,5%.

In Durban, the electricity price increase is also above 20%, while customers in Cape Town will see electricity charges increase by 20% and water and sanitation rises by 8.28%.

Joburg's turnaround plan 'yielding results'

Johannesburg's turnaround strategy has been a catalyst for further improvements and increased confidence in the inner city, said Sipho Shabangu, leasing and sales broker for independent property services group JHI Properties, on Wednesday.

The city's turnaround strategy was adopted in early 2000. It led to significant infrastructure developments including new taxi ranks, the Rea Vaya bus rapid transit system and revamped residential accommodation.

"Various projects are either completed or underway in the CBD, Braamfontein, Newtown and the Empire Road area in Parktown," said Shabangu.

"A further symbolic sign that that the city is coming alive is the refurbishment of the Johannesburg City Hall, in order to accommodate music events and meetings," he said.

The installation of CCTV cameras, coupled with visible policing, had helped areas such as Braamfontein see an increase in demand for both office and residential accommodation, suggested Shabangu.

He said good news for the city was that planning was in progress for "an impressive new mixed-used development" to be known as Stimela Square, situated at the corner of Sauer and Hall Streets on the southern fringe of Johannesburg CBD.

"This landmark project creates a 'city' in one block, comprising offices, retail and a hotel in one consolidated development," he said.

The completion of the Gautrain station at Park Station in Braamfontein boded well for stimulation of a higher demand for office accommodation in the area, said Shabangu.

Shabangu noted that the expansion of Empire Road and the construction of a bus rapid transit station would serve to facilitate accessibility to the M1 for both private and public transport users, providing "another positive for the commercial property market in the area".

 

 

Parking firm coining it 'as Braamfontein dies'

THE new metered parking system is killing Braamfontein, say residents and businesses who complain bitterly about having to pay R7.50 an hour for parking.

Catherine Corry, who works for a property development company, says: “We’ve been in the Braamfontein district for the past eight years, and have slowly been trying to bring a positive change by improving buildings and creating new and exciting shops to attract new customers to the area and, ultimately, contributing to revitalising the city centre.”

However, the recent introduction of the Ace Parking system was undermining their efforts, Corry says.

The system, which operates along Juta Street and the lower end of De Beer Street, has cost them office tenants. A restaurant on the corner of Juta and De Beer streets, Corry says, is also under strain because patrons find the parking system too expensive and “ineffective in providing a parking solution”.

Other tenants are also experiencing a significant reduction in foot traffic, Corry says, adding that the area’s tenants and landlords were not involved in any decision-making process or adequately informed about this new system.

“There has been no participation from our side in the development of the area. The notion that a few months ago there was free, available parking, but now there is paid parking, with no security benefits and continued illegal parking, is ludicrous,” she says.

The parking attendants are also not trained adequately to communicate the process to drivers who park on the street as drivers are taking their printed parking ticket with them instead of leaving it on their vehicles’ dashboard, which often results in parking fines.

It is also not explained to motorists that there is a time limit on parking or that they need to pay beforehand.

Ace charges R7.50 for the first hour and R3.75 for every half-hour after that. That is more expensive than parking at Sandton City, which is R7 for the first hour and then R2 thereafter, or Rosebank Mall, which charges R6 for the first hour with increments of R1 after that.

These shopping centre parking areas are monitored by security and usually covered – the public street parking offers none of these aspects, Corry says.

The parking attendants also have a bad attitude:

“(They) lounge on the public artworks down Juta Street, sometimes without their shoes on.”

There is no alternative, so if a building doesn’t have its own parking area, monthly parking can cost up to R1 350, she says.

“This system is incredibly frustrating as we cannot offer our tenants, clients or patrons any advice or solution. Before the system came into place, our own security ensured there were no hawkers or illegal parking guards hassling anyone… This is not the case anymore.

The metro police defend the system. Director of licensing, prosecutions and courts Gerrie Gerneke says: “We’ve had very few negative comments. The biggest challenge was to find parking for employees used to parking for free. That… has now been resolved.”

Phase 2 of the project was west of Rissik Street, between Anderson and Jeppe streets, which was highly successful, he says.