Property values head north in South Africa as Johannesburg outperforms London, New York and Eurozone crisis drives returns in new safe-havens

It claims to be the lightning capital of world, but however dubious this title may be, Johannesburg has avoided being struck by the global property crash as its offices, shops and warehouses outperformed those in every other global city outside of South Africa over the last decade.

Commercial property is a key measure of economic vitality, since strong retail, leisure and industrial performance encourages investors such as pension funds to buy up buildings to earn income through rental income and capital value increases.

Capital value appreciation in Johannesburg has hit 7.5 per cent over the ten years to 2011, compared to 3.6 per cent percent for New York, 2.2 per cent percent for London and -0.1 per cent percent for Munich over the same period. 

Like Johannesburg, Sydney, Melbourne and Seoul remain (relatively) untainted by European contagion and investor appetite has been growing in these locations. 

However, despite their growth over the last ten years, 2011 saw returns in the more conventional investment locations of London and New York improve considerably, as investors searching for safe havens put increasing pressures on limited stock. Last year, values in London rose by 6.0 per cent, in New York by 8.6 per cent and in Munich by 3.6 per cent - whilst in Johannesburg saw growth slow to just 0.4 per cent. 

Peter Hobbs, IPD’s senior director, said, “The picture for global real estate is a tale of havens and have-nots. Institutions want safety, and at the minute, that means low-yielding prime office or retail in safe haven pockets around the world.” 

“As a result, there’s been a real polarisation between the likes of Dublin and Madrid against the financial centres of London and New York, and the commodity rich cities of Calgary, Perth and Capetown.” 

“Unlike gold or other commodities, real estate is a living, breathing asset that generates income through its tenants. Properties with good leases held by strong tenants tend to be attractive to institutions sheltering from the volatility of global markets.” 

“It is for these reasons that these two different types of market have tended to perform well over the past couple of years. On the one hand, the financial centres of London and New York benefit from the quality of real estate and tenants as well as market transparency and liquidity that has attracted capital from many global investors. On the other hand, the commodity-driven cities of Australia, Canada and South Africa have benefited from the strong fundamental demand for real estate in these markets.”

 

Article by http://www.sacommercialpropnews.co.za

 

Johannesburg is safer than Cape Town according to the Most Violent Cities Report.

 

The past two years saw a few notable improvements to South Africa’s reputation abroad: we hosted a very successful Fifa Soccer World Cup, Table Mountain officially became one of the 7 Natural Wonders of the World and Cape Town will be the 2014 World Design Capital. 

This week sees another boost, of sorts: it transpires that, contrary to the stereotype of darkest Africa, South Africa is not high on the list of the most dangerous places to visit.

The Citizen Council for Public Safety and Criminal Justice (an NGO in Mexico) released their report of the 2011, 50 Most Violent Cities in the World (link: http://emergingterrains.com/investmentnews/mexico/the-most-violent-city-in-the-world-is-in-honduras-mexico-has-five-of-the-top-10/). 

The report focused on urban areas with more than 300 000 inhabitants where murder statistics are available. The Council then looked at the murder rate per 100 000 people. Arguably not surprising is that the top 5 cities are all in Mexico. In fact 40 of the 50 most dangerous cities are all in Latin America.  

What does come as a surprise to many is that Cape Town, beautiful, laid back Cape Town comes in at number 34, Port Elizabeth at number 41, Durban takes the 49th place and Johannesburg the 50th slot. Had anyone locally had to make a guess a week ago, Johannesburg would almost certainly have come out heading the list.

As such, while it is by no means commendable to make a list of the most violent cities in the world – being lumped together with established dangerous zones like Ciudad Juarez in Mexico or Cali in Columbia – Joburgers might have been pleasantly surprised and one could forgive them for sharing a snigger or two at the news. 

The City of Gold might not have a world famous mountain or the ocean but, it is a great town for doing business in and, one could hope that people’s perspectives on how dangerous it is might be altered, even if ever so slightly, by the news that it’s not quite Sodom and Gomorrah.
 
Of course, first prize would be not having any area of South Africa on the list at all but, in the meantime the silver lining might be that prospective property buyers will take another look at Johannesburg. “Joburg is a fantastic city brimming with opportunities for entrepreneurs. It vibrates with energy and is a great place to live. It’s worthwhile taking a look at the local property market and this news can’t hurt”, says Jan le Roux, CEO of Leapfrog Property Group.

 

PROPERTY IN JOHANNESBURG - CPA

Since the introduction of the Consumer Protection Act in South Africa there are many more services that you can expect from an estate agent when looking at properties in Johannesburg. The Consumer Protection Act is however not just there to protect you but the rights of a property owner as well as the obligations and responsibilities of the estate agent. With all these new rules in place property may be a bit more complicated to come by but at least every party in the transaction knows exactly where they stand. The Consumer Protection Act relates to both rental properties in Johannesburg as well as properties that are for sale. Properties for Sale and the Consumer Protection Act There are two main ways in which the Consumer Protection Act affects properties for sale in Johannesburg. In the past buyers who put an offer in to purchase a property were obligated to finalise the purchase and could not change their minds. The first way in which the Consumer Protection Act protects potential property buyers is by providing a five day period in which they have the option to withdraw an offer to purchase. Once this five day period expires the buyer is obligated to purchase as before Before the introduction of the Consumer Protection Act all properties in Johannesburg and in South Africa were sold ‘Voetstoots”. This is no longer the case and the owner as well as the estate agent must point out any defects or problems with the property before an offer is made. The owner is then responsible to make any necessary changes or repair and can alternatively cover the costs of any necessary work on the property. Rental Properties and the Consumer Protection Act There are numerous ways in which lease agreements have been changed according to the regulations in the Consumer Protection Act. The most important of these changes is that no lease agreement may have a term of longer than 24 months or two years. After the expiration of the period the property owner and renter can come to an agreement to extend the lease period for another two years. Prior to the Consumer Protection Act there was no way out of lease agreement for either the Lessee or Lessor unless both parties agreed to terminate the agreement. Now however the renter and the owner only need to give a 20 day notice that they will be terminating the agreement. However, the owner can only give notice of termination if the Lessee is in any way in contravention of the lease agreement. There are many more factors that have changed with regard to the leasing of immovable properties in Johannesburg. Whether you are a property owner or wish to rent a property it is very important to make sure you know about these factors and how they will affect your rights and responsibilities as they relate to the rental property. Your nearest estate agent should be able to assist you in ensuring that your rights are covered whether you are renting or buying a property.

 

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.