Strategies to stop slumlords

WAYS to stop buildings from being hijacked and slum lording in the inner city were discussed at a summit held by the City at the Parktonian Hotel in Braamfontein on Tuesday, 19 April.

The City has a plan to tackle the problem of slum lording, says MMC Ros Greeff

The meeting was attended by stakeholders in the inner city – Region F – among them property owners, bodies corporate, caretakers and City officials. Throughout the day, they debated how to combat these two issues.

Speaking at the summit, the member of the mayoral committee for development planning and urban management, Roslynn Greeff, said that despite efforts to eradicate the hijacking of buildings and slum lording, there were still unscrupulous individuals who took buildings from legitimate owners or landlords and populated them with people desperate for accommodation.

Slum lording
“The rental money collected by these individuals is not paid to the City for the provision of basic municipal services,” said Greeff. “These buildings are very often in a very bad state of condition and often have problems with waste, fire and safety.”

Region F had formulated an action plan strategically guided by the Inner City Charter to tackle the ongoing problems. “The focus has to a large extent been to address slum buildings and at the same time to proceed with criminal investigations with various law enforcement agencies in the country,” said Greeff.

To date, 321 buildings are under investigation, 244 suspects have been arrested and 52 cases are on trial.

Hotline
Greeff said the region had established an anonymous hotline number and email address, where people could safely provide information to the City for investigation and referral.

At present, the hotline received an average of 20 calls a week and had responded to more than 200 legitimate complaints. Each one of the complaints was receiving attention, she added. “Concrete steps need to be taken to ensure enforcement of the law, strengthening of partnerships and transformation of slum buildings.”

Problems relating to bad buildings originated during the 1990s when the inner city came under pressure from rapid urbanisation. Many buildings were vacated by businesses and owners, who moved to the suburbs.

 

An illegally occupied building in the inner city Buildings became dilapidated through mismanagement and many of them fell into the hands of criminal groups that hijacked them, taking full control of the buildings from their legal owners.

Bad buildings

Tanya Zack, a consultant for Tanya Zack Development Planners, said tackling bad buildings in the city required many different actions to be undertaken by multiple agencies. “The City requires a coherent policy to address the large number of bad buildings,” she explained.

The problems associated with bad buildings posed a grave threat to the stability and the course of inner city regeneration. Zack noted that bad buildings had an impact on residents, owners, and the neighbourhood.

“These buildings provide accommodation for the poor residents, while trapping them in a cycle of exploitation and inadequate services.”

She suggested that bad buildings could be eradicated by developing additional low-income rental stock across the city through inclusionary housing, social housing and registered landlords. “We need also to improve conditions in existing occupied buildings.”

Effective by-laws

The regional director of Region F, Nathi Mthethwa, said people who acquired property illegally should be punished heavily. “We need to consolidate all our by-laws so that they become effective and allow us to respond to some problems.”

Mthethwa noted that it was difficult for the City to tackle a building where the building owner was not known, making it difficult to serve notices and build up viable cases. Some owners lived outside the country and had no idea what was happening to their buildings, he stated.

Much to the amusement of the stakeholders, he gave an example of an absent landlord who called him recently to enquire about investment opportunities in the city, after having left the country in 1982.

Challenges
Johannesburg emergency management services’ station commander, January Molo, spoke of the challenges that his department faced when it responded to calls from bad buildings.

 

Once hijacked, the Chelsea Hotel has been upgraded by the City

These included blocked fire escape routes, unavailability of fire fighting equipment, illegal connections of electricity and insufficient lighting. Molo suggested that such buildings should be sealed and monitored.

“We should take a leaf from New York success in addressing urban decay.”

Nuisance buildings

Flavia Masekwameng, the City’s environmental health operations manager, said tracing owners of bad buildings to serve summons on them was difficult as the council Deeds Office information was not fully up to date.

“Successful prosecution depends on tracing the physical location and availability of the owners and managing agents,” said Masekwameng. “Notices sent to such people are often returned unclaimed.”

Masekwameng said the success of dealing with “nuisance buildings” depended on a good multidisciplinary team approach, supported by co-operation from the building owners.

During the discussion, stakeholders agreed that a permanent anti-hijacking unit needed to be established in the South African Police Service to win the war against the hijacking of buildings and slum lording.

A communications strategy also had to be set up to ensure broader public awareness of the problems.

 

 

 

 

Wendy Machanik, criminal case postponed

The criminal case against former estate agent Wendy Machanik was postponed by the Johannesburg Specialised Commercial Crimes Court on Friday as she has run out of funds, her lawyer said.

Attorney Cyril Ziman said the case was postponed to May 30.

Machanik, the close corporation Wendy Machanik Property Holdings, and its chief financial officer Bruce Bernstein are charged with conspiracy to commit fraud, among other things.

Their previous court appearance on March 6 was postponed to allow them to make representations on the charges to the National Prosecuting Authority.

“She Machanik however has run out of funds to finance her litigation and so the representations were unable to be prepared,” Ziman said.

“We have since been placed in funds from Tuesday, and are in a position to proceed with representations,” he said.

Ziman represents Machanik, Bernstein and the close corporation.

Machanik is out on bail of R25,000 and Bernstein is out on R5000 bail.

They are charged with failing to keep accounting records and failing to reflect 116 transfers between the trust account and business account.

The second charge is for failing to have accounting records audited for 2008, 2009 and 2010. The alternative charge is failing to cause financial statements to be made out for 2008 and 2009.

The third count is for failing to notify the board of each trust account that was opened.

The final charge is for conspiracy to commit fraud.

They allegedly made irregular transfers totalling R28 million from Wendy Machanik Property Holdings, to a fictitious account.

Machanik allegedly used this money to keep her company afloat and for personal expenses.

The High Court in Johannesburg declared Wendy Machanik Property Holdings provisionally insolvent in February.

In January, the high court ruled Machanik should not be granted a fidelity fund certificate for 2011, which would have allowed her to operate as an estate agent.

The move followed a successful court application by the Estate Agency Affairs Board in December to place the agency's trust accounts under curatorship, following the alleged financial irregularities in the management of the accounts. - Sapa

 

Rental market to improve in 2011 - FNB

While data availability for the South African rental market is somewhat sparse, available indicators suggest some improvement in the fundamentals driving the rental market, the FNB property barometer indicates.

"It is difficult to determine the level of rental demand, but we believe that the current economic and financial times may have led to some improvement in the demand side of the rental market too," said FNB property strategist John Loos.

He said household sector financial pressure could be a positive factor for the rental market, because it could increase the short-term appeal of renting for a certain group of financially stretched households.

The risks of interest rate hikes later in 2011 were also believed to be a positive for rental demand, as this could lead to some more cautious would-be home buyers adopting a "wait and see" approach, remaining in the rental market for longer and supporting rental demand.

"Our home-buying survey respondents suggest that, although having declined significantly since 2008-09, the percentage of home sellers selling in order to downscale due to financial pressure remains high at about 22%, and many of these sellers move into the rental market," Loos said.

As to how much of the rental market's performance was due to supply factors and how much due to demand-side forces was debatable, Loos said. "We believe that there are elements of both, particularly on the supply side due to weak buy-to-let buying in recent times. The net result, though, appears to be one of mild rental market strengthening through 2010."

Using data from Rode and Associates regarding flat rentals, it would appear that at least the flats component of the rental market had responded, Loos said.

"By major city, while one saw no fireworks yet, our calculations of flat rental averages per major city showed a broad increase in market rental inflation rates since the 2009 slump. The two-quarter moving average for Johannesburg showed the most impressive increase of 16.2% year on year as at the fourth quarter of 2010, while Pretoria showed the slowest rate of increase of 5.5%," he said.

 

Work starts on Newtown

Luzuko Pongoma

Work to develop Newtown into a world class precinct has started, after it took a knock that saw the area being a haven for hobos and illegal squatters.

The area, which was supposed to be the cultural hub of Johannesburg, is receiving an R857m injection which will include a hotel, office park and movie theatre.

The area ended up as a place for people who blocked the road with their carts, used to transport recycled items after the closure of popular hot spots like Horror Café and Shivava.

Ester Tsotetsi, who sells food opposite the construction site, said that she was happy that development had started and hoped her business would grow.

“Some workers have come to buy food here and I hope to have more customers,” she said.

Tsotetsi said that she had been selling food in the area for more than four years.

For graffiti artists nearby the development could be their worst nightmare.

An artist who introduced himself only as Sam said: “I hope they don’t chase us away. This is the only place we have.”

Newtown resident Bonolo Matshidiso said, “It is great to have a mall close to the residential area. You can go out at night, watch movies and residents will get jobs.”

Matshidiso urged the city to clean the area before its opening.

“They must clear the rubbish, the empty spaces and buildings, and move the people who sleep under the bridges so that we can be safe.”

The rest of the development will start in June.

City of Joburg Property Company (JPC) spokesperson Brian Mahlangu said: “The Majestic is 2688m² of retail and office development, where an estimated 160 permanent jobs will be created when the development starts in June.”

He said that companies such as Protea Hotels, Shoprite Checkers, Edgars and others would be tenants.

Mahlangu said that the Newtown Junction, popularly known as the Potato Shed, was a 2.1ha high-density retail and hotel development that is expected to create at least 1700 jobs for the residents of the area.

The illegal occupants of the facility moved out voluntarily after negotiations between them and JPC.

Mahlangu said that the developer, Atterbury Property Developments, had taken occupation of the site in February.

“JPC’s objectives were to enhance the city’s property portfolio, both socially and economically, to increase economic growth and broad-based black economic empowerment, while creating jobs and economic opportunities for the disadvantaged communities and businesses,” he said

“JPC does not use agents or brokers when leasing or selling property as legal requirements demand that we have an open tender system in terms of the Municipal Finance Management Act and its various regulations.

“This allows everyone an opportunity to participate in the economic development of a world class African city,” he said.

Mahlangu said the project was expected to be complete by late 2012, with the rest of the development.

 

Residential property plays catch-up

Johannesburg - The performance gap between commercial and residential property has narrowed, with buy-to-let flats now spinning better profits than shopping centres, offices and factories.

The latest Sapoa/IPD South Africa property index released last week showed commercial real estate – including the retail, office and industrial sectors – delivered a total return of 13.3% last year, which comprises capital growth of 4.1% and an income yield of 8,9%.
 
Offices were the best performing commercial property sector in 2010, with a total return of 14%, followed by industrial buildings (13,6%) and retail (13,1%).

Although the total return for commercial property at 13.3% was well up on 2009’s 11-year low of 8.8%, residential property staged an equally impressive comeback last year.
 
Although SA doesn’t have a single index that tracks the total returns for residential property, taking data from both Absa Group [JSE:ASA] and First National Bank the total return for residential buy-to-let was 14.6% last year.

That’s based on a 6.8% average house price increase recorded by Absa last year, coupled with a 7.8% average gross income yield recorded by FNB’s residential rental index in 2010.
 
Residential property recorded stronger capital growth than all sectors of the commercial property market last year: 6.8% against 4.4% for shopping centres, 3.9% for offices and 3.2% for industrial buildings.

But commercial property beat the housing market on the income return front, with retail at 8.3%, offices at 9.7% and industrial buildings at 10%, which compares with 7.8% for residential buy-to-let.
 
Last year was the first time in a number of years that residential buy-to-let returns overtook commercial property.

In 2009 house prices dropped for the first time in almost 20 years (-0.3%, according to Absa), bringing the total return for residential property to around 7%.

At the same time, commercial property delivered an average 8.8% total return. Commercial property’s lead was also markedly higher in 2007 and 2008.
 
However, it’s uncertain whether residential property investments will continue to outperform their commercial counterparts this year.

Currently, property economists – such as Absa’s Jacques du Toit – expect house price growth to slow to around 1.5% for the year as a whole.

But the good news is residential rental yields are likely to rise over the next 12 months on the back of a strong acceleration in rental growth.
 
FNB property strategist John Loos says it appears demand for rental accommodation is starting to outstrip supply in certain areas.

That applies particularly to flats, an indication of more tenants downscaling to smaller, cheaper properties.

Flat rentals were already up an average 8.6% in fourth quarter 2010 year-on-year (from 6% in the third quarter).
 
Loos says the fact that fewer investors are now putting money into buy-to-let properties also means a limited amount of new rental stock should come on to the market over the next six to 12 months.

That should place further upward pressure on rentals, translating into higher income yields on residential property over the course of 2011.
 
Latest FNB figures show only 7% of all housing sales went to buy-to-let investors in fourth quarter 2010 – a far cry from the 25% average recorded by FNB during the boom years between 2004 and 2007.

A programme to address urban decay and rejuvenate the Johannesburg CBD was launched by the city's mayor, Amos Masondo

"... The state and appearance of a CBD is an important barometer to determine the ability of a city to attract and retain investment," Masondo said at the launch of the Inner-City Property Scheme (ICPS).

"It is also a reflection of the extent of the advancement of commerce and overall economic development," he said.

Masondo said the ICPS was a partnership with the private sector and would replace the Better Buildings Programme (BBP), which had tried to turn "bad" buildings into "better buildings"

He said the BBP had been only moderately successful because of the lengthy expropriation process, the screening of participants and the need to provide evicted people with transitional housing.

The ICPS, which was developed by the economic development department, would transfer expropriated properties to an inner-city property portfolio. There were 30 buildings which would be refurbished.

Broad-Based Black Economic Empowerment (BBBEE) participants would hold the controlling shares, with each having to invest R5 million.

A panel of BBBEE service providers would be created and would be responsible for the rejuvenation of the buildings.

"This makes the ICPS one of the most far-reaching BBBEE transactions yet introduced in South Africa, and definitely the biggest in the property field," said Masondo

He said the city would transfer properties that were dilapidated, abandoned, illegally occupied or hijacked, and vacant pieces of land through a developmental lease with an option to buy.

Once the buildings were transferred they would be refurbished and brought in line with the city's building code to turn them into viable and productive economic assets.

The city would ensure that the option to buy was exercised only once the dilapidated property had been refurbished.

Masondo said the city would provide transitional housing for people living in the buildings at the moment.

A Transitional Housing Trust had been formed to manage the process.

The trust would acquire buildings that would be revamped and turned into transitional housing facilities.

Economic development executive director Jason Ngobeni said this transitional housing would be provided until people could find new homes.

He said that as the old buildings were refurbished, rates would increase, which would make them unaffordable to many of these former residents, who were RDP housing candidates.

 

Comment on draft rates policy

PROPERTY owners in Joburg can comment on the City’s draft rates policy and amendments to the policy for the financial year 2011/12, which are now available for public scrutiny.

Comments can be submitted until 2 May. The City’s rates policy guides it in all aspects of levying rates on property owners. It has been reviewing the policy since 2008 to reflect policy changes proposed by the public and the council.

The director of the City’s rates department, Sihle More, said: “This is a very important process and we especially urge property owners to make their input so that the final approved rates policy is one that has been thoroughly consulted.”

The draft rates policy and the proposed amendments to the rates policy are available online.

Public consultation meetings on the draft rates policy will be held in all seven regions, from 11 to20 April.

“The whole idea of consultation processes is to engage the public and to give them a platform to give their view on the policy. Included in the draft policy are proposed rates on the purchasing of vacant land,” explained the City spokesperson, Virgil James.

James said: “The draft policy also helps property owners to make wise business decisions.”

The rates will also affect those who rent property, as their monthly rent money will also be determined by the outcomes of interest rates.

When making a submission, include your full name, physical address and company name.

All recommendations and proposals will be handed to the mayoral committee for consideration. Comments can be emailed to RatesComment@joburg.org.za This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or dropped off at the City’s offices on Jorissen Street, in Braamfontein, or faxed to 011 727 0189.

Read more: http://www.joburg.org.za/index.php?option=com_content&view=article&id=6438&catid=88&Itemid=266#ixzz1IWu9lhR0

 

Demand for Student Accommodation

The demand for a place at the University of Johannesburg is at an all-time high; with queues of people trying to apply recently blocking the road and getting to and from campus was never more difficult.

As a result, more and more people are looking for student accommodation close to Johannesburg’s main university campuses. Thousands more students are registering at tertiary institutions in Johannesburg and they’re battling to find accommodation.

“Student population growth has far outstripped the supply of available rooms, making it difficult to find quality accommodation at affordable prices,” says Simon Rubin, marketing director of Aengus Property Management (APM), an inner-city developer renowned for turning defunct buildings into up market accommodation.

The problem is so critical in fact, that the Minister of Higher Education and Training, Dr Bonginkosi Nzimande, has established a committee to review the provision of student housing at public universities.

The minister said current student housing in residences provides for about 100 000 out of a student population of 530 000. This means just under 20% of students, nationally, will be able to find accommodation on campuses.

“Off-campus providers are cropping up but students are becoming more discerning,” says Rubin. “Although they demand value for money for accommodation, they are no longer prepared to accept low-quality accommodation with limited amenities, just because they are studying.”

“The ideal student accommodation should provide a private space for studying as well as opportunities for socialising and getting together with friends. Our developments also take into account that it’s important for students to live somewhere that is conveniently situated for day-to-day activities such as lectures, sport and socialising, as well as routine necessities such as shopping and doing laundry,” he says.

Rubin advises corporates to move quickly if they are looking for top-notch accommodation for bursary students attending the Johannesburg Universities and colleges.

“Demand always outstrips supply. With our main rental thrust taking place in January and February, I would advise anyone seeking affordable, up market alternatives to traditional student accommodation, to get onto waiting lists as soon as possible.”

 

Budget Speech summery

“Income Tax Relief for Individuals

Budget 2011 proposes tax relief for R 8.1 Billion, mainly for middle to lower income taxpayers through adjustments of personal income tax brackets. In addition to the primary and secondary rebates, a third rebate of R 2 000 per annum has been proposed for taxpayers 75 years and older.

Conversion of medical deduction to medical tax credit

Monthly deductions for contributions to medical schemes and for qualifying out-of-pocket medical expenses will be converted into tax credit effective 1 march 2012. This is to ensure that the tax relief remains consistent across different tax rates. The manner in which these credits will operate will be released in a discussion document.

Businesses and Trusts

Dividends tax

The new dividends tax set to replace the existing secondary tax on companies will come into effect on 1 April 2012. The introduction of dividends tax should correct the impression that a tax on dividends is another tax on businesses: legally and economically, it will be a tax on dividends and non-resident shareholders.

Two issues remain unresolved regarding the new dividends tax – the proposed taxation of inbound foreign dividends and the taxation of foreign-owned South African branches. Foreign-owned South African branches are currently subject to tax at a 33 percent rate instead of the standard 28 percent rate. It is proposed that the 33 percent rate be repealed when the new dividends tax comes into effect.

Closure of Dividend Schemes    

Revenue is of the opinion that certain dividend schemes undermine the tax base as a consequence of dividend sessions, receipt of dividends from shares in which the taxpayer has no meaningful economic risk and the use of preference shares that generate allegedly tax-free dividends while the dividends are indirectly generated from interest-yielding debt. Revenue will effectively close these schemes by treating the dividends at issue as ordinary revenue.

Revised tax rules for capital distributions and for pre-2001 capital gains assets 

Currently dividend distributions are subject to secondary tax on companies and capital distributions are subject to capital gains tax. The international practice is to reduce the distributing share base cost by the capital distributions, with gains only taking effect once the base cost is exceeded. This has, however, not been practical in South Africa as the pre-2001 capital gains tax rules prevent taxpayers from knowing the base cost of pre-2001 assets until disposal. A simplified system for determining the base cost of pre-2001 assets is being considered and this should align the South African capital gains tax rules with international practice.

Youth employment subsidy

In order to support job creation, a tax credit system over the next three years will be introduced when youth are employed.

New environmental tax and levy on electricity

From 2012, Revenue will introduce a new carbon tax. The detail of how the tax work is still to be finalised. In addition, the government levy on electricity generation from non-renewable energy sources will increase to 2.5c/Wh from 1 April 2011.

Cross-border withholding tax on interest

The new proposed withholding tax on cross-border interest payable at 10% will become effective from January 2013.

Currency transaction indirectly connected to certain foreign hedges

Currently, only certain exemptions and deferrals are available on foreign currency transaction used for business. It is proposed to further expand on the exemptions to allow for the exemption of foreign gains/losses on all linked instruments, i.e. where foreign bank loans are utilised to fund foreign inter-group loans.

Tax payments by individuals with more than one source of income

Pensioners receiving income from more than one retirement fund/insurer may be contacted by SARS in order to request that the pension/annuity be subjected to a higher rate of tax. This is to ensure that pensioners whose income is split across different sources (and consequently taxed individually at lower rates) do not have a tax liability on assessment.

Employer-provided long-term insurance plans

Revenue concedes that the changes to employer-provided insurance plan such as key-man, income protection policies and unapproved group life remains ambiguous. It is the intention of Revenue to rationalise the concerns that the industry has raised.

Lump sums from provident funds

Retirement lump sum amounts from provident funds will be subject to the same one-third limit applicable to pension funds and retirement annuities. This implies that two-thirds of the retirement value must be used to purchase compulsory annuities. The fact that no deductions were historically allowed for employee contributions to provident funds does not seem to have been considered. As two-thirds of the retirement benefit must now be taken as an annuity which is subjected fully to tax at marginal rates, provident fund members will effectively be denied the tax relief for non-deductible contributions that would have been obtained when taking the full benefit out as a lump sum.

As with the change to the deductibility of retirement fund contributions, the impact of this change on provident fund members also requires evaluation and further engagement with Revenue.

Miscellaneous changes

Gambling:

All gambling winnings above R25 000 will be subject to a final 15% withholding tax. This includes winnings from the National Lottery.

Securities Transfer Tax:

Brokers (members of a stock exchange) are exempt from securities transfer tax. It is proposed that the exemption be revised to clarify that it applies solely to players engaged as market makers.

Tax policy research projects:

Revenue has commenced with tax policy research projects which include investigations into the taxation of financial derivatives, long-term insurers and the effectiveness of estate duty.”