Residential building inflation up

Residential building inflation up
2008/05/23

South African residential building costs inflation measured 10,9% in the first quarter, up from a revised 6,8% in the previous quarter, the FNB Commercial Property Finance Residential Building Cost Index showed on Thursday.
The index reflects the average building cost per square metre, as charged by building contractors when winning tenders in the formal residential property sector. It excludes affordable and so-called "RDP" housing.
The average building cost per square metre was measured at R5,864 for the first quarter.
"However, this mild rise from the previous quarter comes at a time when residential market conditions are extremely weak, and contractor pricing power must be low, leading to the belief that input cost pressures are beginning to drive building cost inflation higher," said John Loos, FNB property strategist.
He added that if the uptick was the start of a longer trend, it would add to the woes of an industry already under pressure.
"Rising building cost inflation would probably slow the supply of new stock further," said Loos. - Tiisetso Motsoeneng, I-Net Bridge

Residential building inflation up

Eskom to build R2,9bn power station

Eskom to build R2,9bn power station
2008/05/23

Eskom has announced that it has awarded a R2,9bn contract to a consortium of South African companies to construct the main civil works at Lephalale in Limpopo.
The contract was awarded to the Medupi Power Station joint venture, a consortium made up of Murray and Roberts, Grinaker-LTA Civil Engineering and Concor.
"Medupi is one of the key installations in Eskom's New Build Programme geared towards closing the current supply-demand gap.
"We are pleased with each milestone reached in the project," said Eskom's chief officer for generation Brian Dames.
The Medupi Power Station will be South Africa's first green field coal-fired station to be built in more than 20 years.
It is expected to cost an estimated R80bn to build.
The first unit is scheduled for completion in 2012 with the entire station completed by 2015.
"It will be the biggest dry-cooled power station in the world and will have an installed capacity of approximately 4,800 Megawatts," Dames said.
The contract covers all civil engineering work and construction of roads, drains, foundations, column supports, floor slabs and basements.
Also included a utility spine and connectors beneath an auxiliary bay, the boiler house and turbine hall.
The awarding of the contract followed a thorough tender evaluation and adjudication process.
A number of preliminary steps have already been taken to prepare the ground for the construction of the Medupi Power Station, including the placement of the boiler and turbine contracts. – Luyanda Makapela, BuaNews

Eskom to build R2,9bn power station

Homebuyers baulk at poor security

Homebuyers baulk at poor security
2008/05/23

Inadequate security measures are a definite turn-off for prospective homebuyers.
This, says Martin Schultheiss, CEO of the Homenet estate agency group, is becoming more evident as suburban homes have to compete with secure complexes and gated estates in an increasingly softer property market.
"Good security has become one of the prime criteria among homebuyers and homes with inadequate security measures are being punished by the market," he says.
Most buyers prefer a home with security in place and are not keen to buy property where they would need to install alarms, burglar bars and other deterrents.
"Apart from the additional costs they would incur to install protection, most are not willing to move into an unprotected home, even for a short while," Schultheiss says.
"And buyers who are prepared to install their own security are increasingly driving a hard bargain when it comes to making an offer to buy. They are calculating the likely costs of top-of-the-range measures and insist that sellers subtract the total from their asking prices."
Buyers are also no longer convinced by arguments that certain residential areas are relatively "safe" or "crime-free" and any owner contemplating selling his home would be well advised to update security.
"It is also important for security measures to be clearly visible. At a minimum this includes burglar bars, security gates, security lights and preferably an alarm system."
For more information contact Martin Schultheiss on 031 266 9850 or click here to visit the website.

Homebuyers baulk at poor security

Land claims to miss target

Land claims to miss target
2008/05/23

The department of land affairs is going to miss its target of finalising all outstanding land claims by the end of this year.
Minister Lulama Xingwana admitted this in Parliament on Wednesday when she spoke in an extended committee of the National Assembly in the debate on her departmental budgets.
She said the commission for the restitution of land claims had settled more than 95% of total claims lodged, and was left with 4,998 very complex rural claims.
"A number of challenges are still confronting us in the finalisation of the outstanding land claims," she told MPs "As a result of these challenges, between 2% to 3% of these claims may not be finalised in this financial year."
The challenges she said included cases in the land claims court, and others disputed with landowners around land prices and the validity of the claims. There are other claims held up because of disputes around traditional leadership and boundaries, and because of community and family disputes.
The commission, she said remains committed to ensuring that all land claims are eventually settled, and to that end, a memorandum and an action plan for the finalisation of the outstanding claims had been submitted to Cabinet.
"The economic models for settling forestry claims and claims with mineral rights (for example Anglo American, Sappi, and Mondi) are in the final stages and should also assist in addressing some of the more challenging claims. We are working closely with the department of environmental affairs and tourism, SANParks and other agencies towards the finalisation of co-management agreements for the claims on protected areas." - Michael Hamlyn, I-Net Bridge

Land claims to miss target

Consumers defining fractions market

Consumers defining fractions market
2008/05/22

The fractional ownership market in South Africa is being driven by consumer demands, not by the promoters, and the projects that will emerge victorious will be those that cater for what consumers are looking for. So says co-founder of fractionalownership.co.za and member of the South African Association of Fractional Intermediaries (SAAFI) Working Committee, Dirk Wilson.
"It really boils down to what service levels the South African consumer expects from a luxury lifestyle investment such as fractional. When they arrive at their fractional holiday home at Pinnacle Point or Zimbali they expect a hotel-style check-in, cleaning services and check-out facilities. Everything must be of a very high standard in terms of value-added on-site services - for example, being able to phone down to reception and book a round of golf or organize fresh towels for the morning. They can't just arrive at a game farm, be pointed 2 km down the road, given their keys, and told 'There's your bush lodge, see you in a week!'."
Wilson explains this trend of consumer control further: "There are many resort developers who are looking to do mixed-use developments, and they want fractional to be a component. Undoubtedly the on-site hospitality provider is the most intricate part of making a successful project – those who do not have a specialized hospitality or hotel operator on the resort and don't have the standard of say a Three Cities or Legacy, have to provide an equivalent standard - because this is what the market expects. Many developments just don't have the infrastructure to be able to provide this standard.
"Many leading fractional promoters now are only taking on properties where there is a leading hotel operator at that resort, since the market demands it. Feedback from the recent World Fractional Ownership Conference in San Francisco, USA, is also that by far the most successful fractional ownership resorts in the USA are those serviced by the likes of Marriott, Hyatt Hilton and Fairmont, and the South African market is following suit. It is mirroring what is happening in the USA – where they have 8 years' more experience in this arena than us - and we see it as a good sign that our market is aspiring to live up to that same standard of shareholder hospitality and exchange."
He says that feedback from consumers that have bought fractional indicates is that their experience of top-notch services is the defining factor that really makes their purchase worthwhile. "Fractional ownership should equal shareholder hospitality and comfort – and this is a reality that developers have to face. We endorse this and aim to educate potential players in our regular workshops of what logistics they need to provide in order to roll out a successful fractional ownership resort."
fractionalownership.co.za holds workshops every 2 months – one each in Cape Town and Johannesburg, the next scheduled for mid-June. Says Wilson: "We are happy to assist the developers and service providers. We see many at our workshops that would like to do fractional because it adds value to their entire development, but they have to be able to live up to what the consumer expects from their purchase." He adds that he is now seeing many players from the financial sector attending the workshops – since their clients want to know whether they should buy shares in fractional, a trend once again driven by the consumer.
To book for the workshop or for any enquiries contact Dirk Wilson on 072 591 0582 or 021 556 5064, email www.fractionalownership.co.za or click here to visit the website.
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Consumers defining fractions market

Nelspruit gets virtual office park

Nelspruit gets virtual office park
2008/05/21

A new virtual office park was established in Nelspruit for businesspeople and entrepreneurs in need of temporary office space.
Central Park has offices that are available for a few hours, a few days or on a regular weekly or monthly basis and the tariffs ranges from R200 per day.
John Powell from JD & Associates, the developers, says the business park is affordable to all types of businesses.
"Clients can rent a desk, a conference room or a hall, with broadband internet access, telephones, printers and reception facilities," he says. – Sake24
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Nelspruit gets virtual office park

March build plans passed drop 18,5%

March build plans passed drop 18,5%
2008/05/22

The value of South African recorded building plans passed at constant 2000 prices in March decreased by a telling 18,5% year-on-year (y/y) from a revised down 1% in February (previously down 11,1%), Statistics South Africa (Stats SA) data on Wednesday showed.
Residential building was the culprit as it recorded a 23% fall, while non-residential building was up 2,6%, but additions and alterations fell 20,7%.
That is the biggest fall in residential building since the –19,1% recorded in November 2007 and comes after an 8% increase noted in February.
The value of recorded building plans passed by larger municipalities at current prices during the first quarter of 2008 rose by 7,3% y/y compared with the first quarter of 2007. Two of the main categories of buildings contributed positively to this figure - non-residential buildings (18,7%) and additions and alterations (16,4%), Stats SA noted.
Building activity has come under a significant amount of pressure due to slowing housing demand and electricity shortages and delays in plans passed, and this is expected to continue. – I-Net Bridge
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March build plans passed drop 18,5%

Oil breaks through $130 barrier

Oil breaks through $130 barrier

May 21 2008 1:07PM

London - Oil climbed to a life-time high above $130 a barrel on Wednesday, driven higher by a combination of long-term production worries and a near-term focus on tight fuel stocks.

Oil breaks through $130 barrier

Firms reined in with property deals

Firms reined in with property deals
2008/05/21

Companies that get involved in property transactions cannot try to wiggle out of the deal at a later stage by assigning unreasonable interpretations to stipulations in the purchase agreement.
This unanimous verdict by five judges in the court of appeal is one of many in the last few months whereby the court issued a warning that property buyers and sellers have to strictly abide by the letter of their agreements.
Many sellers attempt to free themselves from a sales agreement, especially when they realise they can get more for the property.
In Mystic River Investment 45's case, over which the judges presided, the company sold an extremely precious piece of land in Springfield Park, Durban, for R12m to the closed corporation (CC) Koumantarakis Group.
One of the conditions in the buying agreement was that the CC should issue a guarantee of payment to Mystic "which should be satisfactory to Mystic".
The guarantee eventually issued via a bank contained words stipulating that the bank reserved the right to rescind the guarantee.
Mystic then rejected this guarantee and cancelled the transaction because it wanted an "irrevocable" guarantee.
During this time the property was again on the market, but at R2m more than what the CC would have paid.
However, appeal court judges C. Howie, I. Farlam, M. Navsa, F. Kgomo and N. Mhlantla unanimously rejected Mystic's actions and said the agreement contains no stipulation that the guarantee has to be "irrevocable" – only that it needs to satisfy Mystic. "If Mystic had an irrevocable guarantee in mind, it should have made specific mention of it in the purchase agreement."
Mystic was therefore not entitled to reject the guarantee that the CC provided and the transaction should now – after hundreds of thousands of rands in legal costs – take its due course. – Philip de Bruin, Sake24

Firms reined in with property deals

1% June interest rate rise likely

1% June interest rate rise likely
2008/05/21

With April's rate of inflation having straddled the double digit barrier and apparently still unchecked in its upward trend, expectations of a 1% rate increase at the next Monetary Policy Committee (MPC) meeting on June 12 have firmed, according to a media release on property news website www.rodneyhayter.com.
Motivation behind such MPC boldness – it would be the first full percentage point increase since September 2002 – lies in the belief that the size of increase could deliver a knock out blow to less serious credit lending, according to Jeanne van Jaarsveldt, RE/MAX of SA finance and marketing director, who believes the MPC has little left in its armoury to rein inflation back into its target band of 4% to 6%.
Efficient Group chief economist Dawie Roodt also believes the MPC is now ready to try its hand with more psychological tactics when it reviews the increasingly bleak inflation situation in June.
Roodt points out that the Reserve Bank has a double role – "firstly to control inflation and secondly to curb inflation expectations", which he believes could prove effective with a 1% rise.
Bad news definitely for a property market already wilting from nine rate rises in the last 24 months and other extraneous, but equally sentiment damaging factors, but Roodt and Van Jaarsveldt believe an iron fist approach could serve a big enough market blow for the MPC to exclude further increases for the rest of the year.
According to van Jaarsveldt the size of such an increase would further dampen the property market, "but if it proved effective in arresting the need for further hikes then we could expect to see some restoration of market sentiment toward the end of the fourth quarter".
But Roodt only expects the gloom to lift early next year with conditions getting a little worse between now and then, pointing out the inevitable time lag between rates falling and a restoration of confidence in credit-driven home buyers.
Some cheer filtering through is the gathering attractiveness of investment activity, but the real opportunities, according to Roodt, are still a few months down the line when the market tightens further and especially if the MPC breaks the trend with a 1% hike, which John Loos, property economist at FNB, strongly discounts, given the MPC's stated reluctance to increase rates further.
"In fact, the MPC were even talking about the possibility of a quarter percent rise instead of a half percentage point at it's last meeting."
Loos strongly discounts the MPC resorting to any radical interest rate adjustments even if inflation data continues to deteriorate. Supporting Loos' view is the fact that the current key inflation drivers – oil and food prices – are essentially out of the MPC's sphere of direct influence.
John Roberts, managing director of mortgage originator Bond Approve, also discounts any drastic rate adjustments by the MPC. His view is based on the historical rate adjustments by the committee and the fact that inflationary drivers are largely out of the MPC's power.
However, he does see the probability of a further rise as does Absa's economics department who notes that March's jump in Private Sector Credit Extension (PCSE) to 26,6%, while not a deciding factor for the MPC, is a further disappointment following poor inflation numbers earlier in the month, believing it is unlikely that the slowdown in the real economy will allow the inflation-targeting SARB to leave rates on hold at the 12 June MPC meeting.

1% June interest rate rise likely

Road upgrade contractors announced

Road upgrade contractors announced
2008/05/19

The South African National Roads Agency (SANRAL) on Thursday announced details of the contractors awarded the seven contracts for the first phase (125,5 km) of the Gauteng Freeway Improvement Project (GFIP), amounting to a total of R11,5bn.
Siyavaya Joint Venture, led by Group Five (GFI), was awarded Work Package A* (18 km), consisting of N1 section 20 between Golden Highway and 14th Avenue (17 km); and N12 section 18 between the Diepkloof interchange and the M1 interchange (1km); as well as Work Package E (16 km), consisting of N3 Section 12 between Old Barn (Heidelburg Rd) and Geldenhuys (M2) interchanges (12 km) and N12 Section 18 between Reading (R59) and Elands (N3) interchanges (4 km).
GFI Contractors Joint Venture, comprising WBHO (WBO) and Senyati Construction, was awarded Work Package B (21 km), consisting of the N1 Section 20 between the 14th Avenue and Buccleuch interchanges.
GLMB Joint Venture, led by Aveng (AEG), was awarded Work Package C (23 km), consisting of the N1 Section 20 & 21 between the Buccleuch and Brakfontein Interchanges; as well as Work Package F (17,6 km), consisting of N3 Section 12 between Geldenhuys (M2) and Buccleuch Interchanges.
Basil Read Joint Venture (BSR) was awarded Work Package D (15km), consisting of N1 Section 21 between the Brakfontein and the R21 interchanges (10km) and the N1 Section 21 between the Atterbury and Proefplaas (N4) interchanges (5 km).
CMC joint Venture was awarded the upgrade of the N12: Gilloolys to R21 (10km), consisting of N12 Section 19 between the N3 (Gilloolys interchange) and the R21 interchanges (10km) as well as works on the N3 Section 12 between the N12 (Gilloolys interchange) and Modderfontein interchange (partial upgrading).
Upgrading of the freeway sections will take place over the next 36 months, with the works having been prioritised to be substantially completed for the 2010 World Cup.
The project will involve provision of additional lanes; interchange improvements and intelligent transport management systems, including cameras, ramp metering and electronic signage. – I-Net Bridge
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Road upgrade contractors announced

50% drop in WC show house visitors

50% drop in WC show house visitors
2008/05/20

The average number of interested buyers attending show houses in the Western Cape has plummeted with 50%, while the show house property stock has increased with 25% compared to the previous year.
According to statistics derived from House Finders' data tracking 13 Western Cape real-estate companies' show house exhibitions, there has been a 22% year-on-year (y/y) increase when comparing the first quarter of 2007 with the first quarter of 2008.
However, more stock means more options for buyers, and the spill-over is a decrease in buyers visiting show houses.
Commenting on this development by analysing show house trends in Cape Town's southern suburbs, Jeanne van Jaarsveldt, RE/MAX of SA finance and marketing director, said there was a 50% drop in buyers visiting show houses over the last few months.
"A year ago the average number of buyers visiting a show house was between 15 to 30, with homes in middle price brackets being the most active. We are now seeing between 4 to 12 visitors coming to show houses over weekends," he said.
"The most active price brackets are in the Plumstead area where buyers have an interest in properties between R900k and R1,3m. In the South Peninsula the average price is R750k to R1m, while in the South East Peninsula, the majority of buyers are looking for properties under R750k," says RE/MAX Elite broker and owner, Alan Burgoyne.
"Bergvliet and lower Constantia have the most active show houses, which are in the vicinity of R2m plus."
But now, negative reports about increased crime at show houses, which circulated in the media last week, can further negatively affect attendance figures.
Western Cape media reports of increased crime activity targeted at estate agents, specifically during weekends at show houses in the Southern Suburbs, have appeared recently.
"With the number of houses for sale increasing dramatically over the recent months, the majority of serious sellers recognise the important role show houses play in ensuring that their homes are viewed by the maximum number of serious buyers," says Van Jaarsveldt.
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50% drop in WC show house visitors

 

 

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Show days 'dangerous' for agents

Show days 'dangerous' for agents
2008/05/17

Lately show houses have been an easy target for criminals, and with the glut of properties for sale now there's plenty to choose from. An agency group has published guidelines for its agents on how to protect themselves and the seller's property.
Lately show houses have been an easy target for criminals, and with the glut of properties for sale now there's plenty to choose from.
Johannesburg estate agents have for some time refrained from publicising the addresses of show houses until the last minute, often preferring to only give out the address to potential buyers after checking them out. An indication of how serious the situation has become was seen on Wednesday, when Rawson Properties announced the launch of a new dossier for its agents that includes information on how to protect themselves. In doing so, they also protect the seller's property, and help ensure the safety of potential buyers when visiting show houses.
While it is now a concern in the real estate marketing sector that open day show houses can be a security risk, it would be a great pity if they were dropped, says Tony Clarke, MD of Rawson Properties, because show days are still effective in selling property fast. The small firms with limited advertising budgets would be particularly hard hit, he says.
Clarke has drawn up three full pages of advice to Rawson agents on how to protect themselves and "keep ahead of the bad guys" in all situations, but especially at show houses.
Some of the key pointers mentioned in the document are:
• On entering a show house for the first time, Clarke advises, the agent should check all rooms and work out the most convenient escape routes, unlocking all deadbolt locks which might slow down an exit. Back doors, although often a handy for an escape, can lead into high walled yards, Clarke warns.
• When visitors arrive, agents are advised to note their car licence place numbers and when showing them the house the agent should walk behind, not lead.
• "Watch what prospects are doing at all times. Do not become preoccupied with viewing the home – and always expect the unexpected," says Clarke.
Clarke also advises agents to notify their office or a friend that they will call every hour – if they do not the colleague should contact the police at once.
"Neighbours should be asked to keep an eye on the property throughout the day. Above all, do not be in the house on your own – have a colleague or friend with you. If you become suspicious of a prospect, leave at once," writes Clarke.
In general, he says, agents should meet prospective buyers the first time in the company offices and then should insist on identification, giving the reason that "it is company policy". He advises them to find out as much as they can about the prospects, such as where they work, what they do, and how much they earn. "Ask many questions and be a good listener."
Clarke warns agents always to use their own car for viewings and to be familiar with the area in which the property is located.
Clarke's document for Rawson agents also includes advice on office safety and harassment, whether by telephone, stalking or direct approach.
"It is regrettable that we have to be aware of these matters," said Clarke, "but it is also true that crime can be prevented by adopting simple precautions. Our industry has an unusual number of women, whom criminals and psychopaths see as soft targets because in this job they have to work away from the security of their offices."
For more information contact Tony Clarke on 021 658 7100 or send an email to research@rawsonproperties.com.

Show days 'dangerous' for agents

Transfer Duty Act briefly explained

Transfer Duty Act briefly explained
2008/05/19

Transfer duty is a form of government tax that was introduced as long ago as the 17th century and is still relevant to most property transactions today.
Transfer duty, not to be confused with transfer fees or costs, is imposed in terms of the Transfer Duty Act ("the Act") and, generally speaking, it is payable when immovable property is acquired.
Transfer duty is payable by the purchaser to the South African Revenue Service (SARS) and is calculated as a percentage of the purchase price. The rates of transfer duty are specified in the Act. If no purchase price is payable or if SARS is of the opinion that the purchase price is less than the fair value of the property, then SARS will calculate the transfer duty based on the fair value.
By way of example, using the current transfer duty rates, which have applied since 1 March 2006, transfer duty payable on a purchase price of R2m is calculated as follows:
- if the purchaser is a company, close corporation or trust, transfer duty is 8% of the purchase price = R160k
- if the purchaser is an individual, transfer duty is:
- 0% on the first R500k of the purchase price (R Nil);
- 5% on the amount from R500k to R1m (R25k); and
- 8% on the amount over R1m (R80k)
- Total transfer duty = R105k
Transfer duty is payable within six months from the date of acquisition. In most cases this will be six months from the date the sale agreement is signed. If the transfer duty is not paid within this time period, penalty interest will be charged by SARS.
In terms of the Act, the Deeds Office is not permitted to register a transfer unless there is proof that transfer duty has been paid or that no transfer duty is payable. This means that a purchaser is required to pay transfer duty prior to the transfer being lodged in the Deeds Office so that the conveyancer can obtain a transfer duty receipt or exemption certificate from SARS for submission to the Deeds Office.
A purchaser does not pay transfer duty in transactions where VAT is payable. This is where the seller is a VAT vendor and the sale of the property is in the course of the seller's business e.g. a property developer. In such instances, the purchaser will pay the purchase price and VAT to the seller who is then responsible for paying the VAT to SARS.
For more information contact 031 570 5300 or send an email.

Transfer Duty Act briefly explained