2012 South African Interest Rates Advanced Comment - Jawitz Properties

Herschel Jawitz CE of Jawitz Properties believes that even without a rate cut by the Reserve Bank this week, this is a still a good time to buy a property in South Africa.

A rate cut would certainly give consumers and buyers a short term impetus to get into the market but what is not needed is a short term cut in rates followed by an increase in rates later in the year. Stability and consumer confidence play a critical part in the residential market. When these factors aren’t there, long term buying decisions go out the window. If rates start to bounce around, people nervous.

With property values in real terms as they were in 2007, and rates still at historic lows, the market is offering value but not bargains. Provided a long term view is taken, now is a good time to buy. The breakeven period has probably increased to five years from the previous three year term given the slow rate at which prices are increasing. Homes are taking time to sell and sellers are still slow to adjust to the market - but in the metro areas there is activity.

Jawitz says that while a rate cut would be welcomed, it would very little impact on the rate at which prices are increasing in 2012.

Paula Neild is the Marketing Manager for Jawitz Properties South Africa. Contact paula@jawitz.co.za or call 011-880-3550. Jawitz Properties specialise in South African property for sale and property rentals throughout South Africa. Visit http://www.jawitz.co.za for more information.

Ballito, Fast Becoming a Residential Town - Jawitz Properties

Ballito has shed its ‘holiday resort’ image and is fast becoming a popular residential town.  Quality of life, safe bathing beaches and easy access to the new airport, are enticing Gautengers to seek a better quality of life away from bustling cities.  

Prospects for the Ballito property market are looking up.  On the whole, the area has held its own through the recession and although there have been fewer sales than pre-2008, prices have not come down as dramatically as in other KZN areas. The market has been reasonably stable for the past year and levels are expected to remain steady in 2012. Supply and demand always plays a role in pricing as well as external factors such as the bank lending criteria and the economy.

“King Shaka International Airport has undoubtedly played a role in uplifting the area.  Commercial development, with easy access to the airport, continues to increase.  Many businesses are relocating to Ballito and with the construction of shopping centres and a new road infrastructure, growth is positive. This means increased demand for housing as people choose to live close to work,” says Keith Brown, Jawitz Properties’ principal franchisee.

By and large, the greatest value is still in the suburbs where homeowners pay less per square metre. Demand for older homes that need renovation has increased but there is a shortage of stock. Average priced homes sell within three to six months, but higher value properties over R3.5m take much longer. Again, this has not changed from a year ago although there has been a slight increase in buyers since the beginning of August 2011. Prices vary dramatically from suburbs to gated communities.

The average price for a three bedroom family home in fair condition is R1.9m. A renovated home of equal size can go from R3m upwards. As all the homes in the gated estates are new, they tend to start at R3m and increase from there. A two bedroom sectional title unit on the beachfront will cost anything from R1.5m upwards, depending on location and age of building.

“Market related priced property attracts interest from buyers and sells within four months of listing.  However, there are many properties which are still overpriced and struggle to change hands.  Gated Estates such Simbithi are highly sought-after and sales of land are on the increase.  The idea of designing and building their own home appeals to many buyers. Re-sales of homes in these estates are improving as more homes are built and come on the market. Once again, price plays a big role. Second home, sectional title still makes up over 60% of all sales, particularly those units along the beach front,” he says.

The lower end of the market up to R1.5m is the most active fuelled mainly by first time buyers who qualify for bank loans.  The middle sector, from R1.5m to R3.5m is faced with affordability issues and other disposable income debt, making it difficult to raise a bond. Sales in the upper end of the market are slow. Deals, when they do take place, are usually generated by cash buyers or bridging finance. 

Rentals are booming and long term rentals struggle to keep up with demand due to an influx of people migrating to the town. Return on investment is still low at between 5 and 6%, but with the current demand this is expected to increase over the next year.

“Typically, sellers always push for top prices and buyers are continually looking for bargains. Currently, the market is well balanced and sellers are having to face the reality that the banks’ lending criteria has not changed. They are, however, beginning to understand that if they want a sale, they have to get in line with market related prices. Property buyers, on the other hand, are far more realistic and open to negotiation,” he says.

Paula Neild is the Marketing Manager for Jawitz Properties South Africa. Contact paula@jawitz.co.za or call 011-880-3550. Jawitz Properties specialise in South African property for sale and property rentals throughout South Africa. Visit http://www.jawitz.co.za for more information.

FIRST GREEN STAR ECO FRIENDLY RESIDENTIAL DEVELOPMENT

A Green Star-rated residential development in Port Elizabeth has been registered with the Green Building Council of SA.

Developer, Khaled El-Jabi of Fusion Properties says: “We acquired the land with the specific intention to develop a green project and are proud that it is the first of its kind in Port Elizabeth. The project has been registered for certification and we anticipate a four-star design rating. The development is expected to come on stream towards the end of 2012,” he says.

Marketing agent Juan van Loggerenberg of Jawitz Properties Port Elizabeth says that the development is situated in Jutland Crescent in the heart of Port Elizabeth. “It lies on the border of Setters Park – a 54-hectare greenbelt - and is described as a ‘green conscious’ project. There are six, three bedroom, free-standing units of approximately 250m² each, sloping gently towards the Baakens Valley.”  

Architect Craig Billson, director of Studio D’Arc explains that the objective is to create a healthier living environment for the homeowner by staying true to the concept of a green building - one that is energy and resource efficient and environmentally responsible.  “Careful planning has gone into the architecture and construction making sure that there is minimal environmental impact.  This includes the elements of design, construction and operational practices that significantly reduce or eliminate any negative impact on the environment and its occupants,” he says.

Currently, from construction to operation, traditional buildings use 15% of available water, consume 40% of the available electricity, are responsible for 23% of the country’s greenhouse gas emissions and produce 40% of all waste that ends up in landfills.  However, green buildings are not a new concept. In the past, older houses were built ‘green’ simply by designing with nature rather than against it.

With the rising cost of property taxes and services, a more holistic approach is needed to achieve sustainable green buildings. Considerable thought, planning and innovative design goes into green buildings in order to reduce heat loads, in corporate natural light and the circulation of fresh air; the use of energy-efficient air-conditioning and lighting; environmentally friendly, non-toxic materials; the reduction of waste, and the use of recycled materials; water-efficient plumbing fittings and water harvesting; the use of renewable energy sources and, finally, sensitivity with regard to the impact of the development on the environment.

From the outset, the design team set out to address these key issues, taking into consideration not only the construction of the buildings, but the operation of the units over their proposed lifetime.

“There was also the notion that building ‘green’ commanded a price premium over a ‘normal’ build structure. In a way, this is true because a conventional building will require huge amounts of technology to operate. This is where the principles of ‘passive’ design come into play - where nature plays an important role in the operation of the building,” says Billson.

Features such as daylight harvesting, grey-water recycling and natural ventilation all work in conjunction with nature.  Of course the biggest advantage is that these features come at no cost to the owner of the building, thus reinforcing the fact that green buildings have a much lower operating cost over a normal building.

“Furthermore, studies have proved that users of green buildings have reported improved productivity and a reduction in sickness related to sick building syndrome,” he says.

Design characteristics of the project include:

·         Passive Design

·         Daylight harvesting

·         Green roof

·         Smart Building Management System

·         Water Management

·         Electrical load reduction

·         Renewable energy production

·         Waste management during construction and operation

·         Urban food production

·         Reduction or elimination of Greenhouse Gases during construction and operation

·         Eliminating materials and furniture that contain toxins

·         Rehabilitation and protection of the surrounding land and ecology

·         Source sustainable building materials as locally as possible while reusing materials from the existing building

·         Reduce the distances travelled by automobiles in order to reduce the overall CO2 emissions

Paula Neild is the Marketing Manager for Jawitz Properties South Africa. Contact paula@jawitz.co.za or call 011-880-3550. Jawitz Properties specialise in South African property for sale and property rentals throughout South Africa. Visit http://www.jawitz.co.za for more information.

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RESIDENTIAL MARKET MIRRORS THE ECONOMY FOR 2012

The residential property market in 2012 will, for the most part, mirror the performance of the South African economy which is holding its own despite global trends and uncertainty remains as to the rate at which the economy may grow or contract over the next 18 months.

“The residential market is no different and given the current economy, it would be difficult to expect anything else. Price growth, even if in nominal terms only, is managing to hold its own given current economic volatility,” says Herschel Jawitz.

Current price growth is appropriate to the economy especially when issues such as disposable income, affordability and bank lending are taken into account. If property prices were to grow beyond current inflation, it may well reduce demand below the current levels based on affordability. Real price growth taking into account inflation is always first prize, but in the current economy it is likely to impact on affordability and inhibit demand.

“Banks continue to report soft demand in the market, but these are general statements and do not necessarily reflect the market as a whole,” he says. “Coastal leisure markets are under pressure and will remain so for some time as supply significantly exceeds demand.  It is not the same however in the metro areas, particularly in the price bracket up to around R3.5 million where demand, while not strong, is better than the banks’ research suggests. There is activity.”

“Interestingly, lending on cars, personal loans and credit cards is increasing at a much faster rate than mortgage financing.  Ironically, it would appear to be easier to get an unsecured loan than a mortgage loan secured by bricks and mortar.

Despite the fact that property prices and demand are sluggish, there will always be those, who for financial or emotional reasons want to buy and can afford to buy. In previous markets, the buy-to-break-even time-frame was about three years as opposed to the current five years.  Provided that buyers take a long term view, residential property will show real growth.

The whole issue of buying versus renting goes beyond a simple yield calculation. Home ownership forms the backbone of communities and families on both aspirational and social levels.  Yields, however, do not take this into account. “Even if property prices increase by only two to three percent per year over the next few years, the owner would have built up some equity - it may be small, but it’s a start,” he says.

This is supported by the fact that first time buyers increased considerably in 2011, versus 2010 and 2009 despite consumer indebtedness and the economy. According to FNB research, first time buyers made up 23% of buyers in 2011. This is important. First time buyers will ultimately support the overall recovery of the market from a demand and then price point of view. The recovery has to be ‘bottom up’ for it to be sustainable.

Jawitz cautions buyers must do their homework and make sure they buy at prices that reflect the market today.  Whilst there are no real bargains, this is definitely not the market to overpay for a home. For sellers, it’s about understanding the market and pricing the property accordingly. Homes are not taking four months to sell, sellers are taking that long to finally realise what the market is prepared to pay for their home. Every seller’s home is their castle but unfortunately the emotional value that owner’s place on their homes does not always equate to financial value.

“Patience will be a key factor in terms of a recovery in the economy and similarly in the residential market. Property prices will inevitably start to move, but it’s a matter of when.  In the meantime, with property prices at current levels and interest rates at historically low levels, the decision to buy now, with a long term view, is sound,” he says.

Paula Neild is the Marketing Manager for Jawitz Properties South Africa. Contact paula@jawitz.co.za or call 011-880-3550. Jawitz Properties specialise in South African property for sale and property rentals throughout South Africa. Visit http://www.jawitz.co.za for more information.

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Constantia Stands the Test of Time

Constantia's vineyards are not the only thing that is productive in this historic Cape Town suburb. Its property market continues to bear fruit for both buyers and sellers, particularly for properties priced under R10 million. This is according to Francois Venter, Western Cape Regional Sales Manager of Jawitz Properties.

Since the beginning of the year, 89 homes have sold to a combined value of just over R483 million. According to figures from PropStats for the period 1 January to 31 August, the most active segment of this market was properties valued under R5 million (55 homes), followed by those valued from R5 million to R10 million (27 homes). Together, these two segments account for 92% of sales to date. Five properties sold in the luxury category (R10 million to R15 million) as well as two in the 'trophy' category (over R15million).

The average price at which homes were listed in Constantia was R6,385,949, whereas the average selling price was R5,420,034. "The 15% average difference between selling and asking prices indicates that sellers are potentially still overpricing their homes to the market, particularly at the outset," says Venter.

The number of days a property stayed on the market before being sold during this period was an average of 145 days, or nearly 5 months, which exceeds the national average of just over 15 weeks.

Sellers need to ensure that they list their properties to the market at the most realistic price possible, taking into account what properties have recently sold and what properties are currently on the market, says Venter.

"Buyers don't reject a property they only reject the price," he says. "Regardless of the market; good, bad, or indifferent, buyers will always respond within 5% - 10% of the asking price if they see value. There is no such thing as a property that cannot sell; there are only sellers who are reluctant to accept what the market is prepared to pay."

He says a Constantia property that is priced competitively and realistically to the market should by all accounts sell within 10% of the asking price within three months. Properties that are not priced realistically remain on the market for a long time and will ultimately sell anywhere from 15% to 30% below the asking price.

"There are some great success stories where sellers list their properties at the correct price and sell their properties quickly; and there are some examples where the opposite is true.

"We're seeing this trend across the Western Cape; the longer a property stays on the market, the greater the risk of receiving lower offers. The market never lies," Venter concludes.

Paula Neild is the Marketing Manager for Jawitz Properties South Africa. Contact paula@jawitz.co.za or call 011-880-3550. Jawitz Properties specialise in South African property for sale and property rentals throughout South Africa. Visit http://www.jawitz.co.za for more information.