I am now in the second half of my life and am hard at work reinventing myself. I have left the safety of a big corporation and exchanged it for a career in Real Estate in one of the scariest market downturns.
Thursday, April 2, 2015
This is a great message to remember at Easter.
I like these 2 quotes:
The key is to be a student not a follower. Live your life as the product of your own conclusion.
You will never know joy until you experience the joy of success of someone you helped in the past.
The property clock is often used
to follow the property cycle, which circulates over a seven to ten year period,
and is based on the relationship between interest rates, supply and demand,
affordability/finance availability, and the cost of renting.
It is seen as a useful tool by the
experienced investors to aid them in determining the best time to strategically
enter and exit the property market.
A property Boom, indicative of peak prices, is shown at the top of the clock at 12 o'clock, while a property Bust, is indicative of when property is at its lowest price, at 6 o'clock. The best time to invest in property, just after 6 o'clock, is during a rising market where it can dramatically lower the risk of investment.
An important point to remember is that the "time span" between
a boom and bust market is on average three to four years, but due to the deep
recession the world has gone through after the Sub-Prime Crises the time span
between our bust and boom looks like it will last seven to eight years.
I do believe we are now safely in the Recovery Phase and at
around 10 o’clock on the property clock which makes it the ideal time to invest
in property before the sharp increase in prices start.
Characteristics
of Recovery (9 o'clock to 12 o'clock)
* Experienced
investors - Still predicting rising prices
* General
public - Increasing credit availability
* Tenants -
Afraid price increases will make later purchases impossible
What moves the clock?
* Employment
increases
* Market
stabilizes * Increased
disposable income * Improving
personal debt to income ratio * Property
becomes an attractive investment * House
prices still low * Increasing
construction * Increasing
demand for property * Renewed
business confidence * Interest
rates and inflation declining
We had very good news on Budget day when the finance minister
announced that they will be increasingthe transfer duty threshold from R600,000 to R750,000.
The implication of this on real estate transactions in 2015/2016will be that
people buying homes for less than R750,000 will be saving from around R300 to
R4,500 in transfer duty depending on the price of the property purchased. (See table below)
For those people buying property costing more than R750,000
but less than R2.25 million there is also a reduction in the transfer duty.
Unfortunately people buying for more than R2.25 million will be paying more
transfer duty. (See table below)
It is important to keep in mind that all property purchases
are subject to transfer costs which is the sum of the deeds office charges and
the conveyancing fees. There is a common misconception that registration of
properties under the transfer duty threshold is free.
Lastly it is also important to remember that the home loan
divisions in the banks are not allowed to include the transfer costs in the
bond grant and so all buyers must have access to enough funds to pay the
transfer costs before buying a new home.
Transfer Duty 2015/16
Value of property
Transfer duty calculation
R0 – R 750,000
0%
R750,001 – R1,250,000
3% on value above R750,000
R1,250,001 – R1,750,000
R15,000 plus 6% on value above R1,250,000
R1,750,001 – R2,250,000
R45,000 plus 8% on the value above R1,750,000
R2,250,001 +
R85,000 + 11% on the value above R2,250,000
Table supplied by Leeuwner Maritz Attorneys
Please contact me on 082 785 3305 or caroline@remax2000.co.za if
you need more information or help regarding buying or selling your home.
The property clock is often used to follow the property cycle, which circulates over a seven to ten year period, and is based on the relationship between interest rates, supply and demand, affordability/finance availability, and the cost of renting. It is seen as a useful tool by the experienced investors to aid them in determining the best time to strategically enter and exit the property market.
A property Boom, indicative of peak prices, is shown at the top of the clock at 12 o'clock, while a property Bust, is indicative of when property is at its lowest price, at 6 o'clock. The best time to invest in property, just after 6 o'clock, is during a rising market where it can dramatically lower the risk of investment.
An important point to remember is that the "time span" between a boom and bust market is on average three to four years.
The four quadrants of the clock can be better explain by looking at who buys & sells and what makes the clock tick (market move).
Boom Market (12 o'clock to 3 o'clock)
Who sells and why?
* Smart investors - Off-loading and shifting into an asset class with more growth potential
* Fortunate investors - Those "lucky investors" who were at the right place and the right time!
Who buys and why?
* Inexperienced investors - Jumping in just as the band stops playing
* First time buyers - Interest rates are low and entrance to the credit market is relatively easy
What moves the clock?
* High economic growth rate
* Very low inflation
* Sustained low interest rates
* Healthy foreign exchange rate and foreign reserves
* Experienced investors - Still predicting rising prices
* General public - Increasing credit availability
* Tenants - Afraid price increases will make later purchases impossible
What moves the clock?
* Renewed business confidence
* Market stabilizes
* Employment increases
* Interest rates and inflation declining
* Increased disposable income
* Improving personal debt to income ratio
* Property becomes an attractive investment
* House prices still low
* Increasing construction
* Increasing demand for property
Although this is a very simplistic analytical tool it is widely used by many investors. It is important to remember that it is not always the same "time" in every market and it is always advisable to gather the facts of the market you are considering and determining what "time" it is in that market.
The recent global slump we experienced and are still experiencing in many markets was unusually deep and long. The property cycle came to a complete halt; it was literally like taking the remote and clicking the pause button on the property market. We saw factors like global economic markets, business and investor confidence and finance availability inhibit the cycle’s movement.
In the market I work (middle class neighbourhood in the West Rand, Johannesburg, SA) we estimate it to be at around 8 o'clock, which signals the recovery will probably start in early 2011.
What you should do now:
Buy
* If you need or want to upgrade
* If you have extra cash to invest, buy a small second property (even if you can afford to use up your equity in your primary residence)
Sell
* If you need or want to upgrade (even if you sell your current home at a lower price)
* If you are drowning in your debt
Don't Buy
* If you can't afford at least a 1% increase in your mortgage repayment
Don't Sell
* If you are considering down-scaling
* If you have investment properties which seem to be sluggish
Remember the market will move on and if you are careful you will have many more opportunities to invest and make money in the property market.
Sources used: The Mortgage Magazine, and South African Real Estate Investor
THE VOETSTOOTS CLAUSE = “As is” / “As it stands” To protect the SELLER from any action by the Buyer, on discovering any defects he was not aware of when purchasing the property, from doing anything to jeopardize the actual sale contract.
TYPES OF DEFECTS: PATENT: A defect that is, or should reasonably be, easily identifiable upon inspection of the property.
Patent defects are described as flaws that will be clearly visible on a normal inspection of a property. They include wall cracks, sagging gutters, broken windows, missing tiles, etc. It is a Buyer’s duty to acquaint himself with the general condition of a property on purchasing it and he cannot later claim he did not see such defects. The test is an objective one, namely what could have been seen on the original inspection of the property.
LATENT: A defect that is not apparent after ordinary inspection by a 'reasonable man'.
Latent defects are defects which only an expert could discover or defects which cannot be discovered by an ordinary person during a reasonably thorough inspection, for example, rising damp in a house, faulty pool pumps and geysers, rusted internal pipes, leaking roofs (except where strain marks make the leak obvious) and defects that have been concealed such as dampness behind a cabinet. The test is what could not normally be seen on inspection.
Important: Defects can be TANGIBLE (E.g. crack in wall, hole in the roof) or INTANGIBLE (E.g. bad tenant or soon to be raised special levy)
The Seller’s Responsibility
In terms of numerous South African court cases a Seller is only excused from liability for latent defects where he himself was not aware of the problem at the time of the sale. If a Seller knowingly conceals a latent defect he will be liable to the Buyer for the cost of its repair.
A Seller will thus be liable for all cracks or dampness and other similar faults deliberately hidden from view. He is also responsible for latent defects which he is presumed to have been aware of, such as any appliance, which is not functioning properly. Examples are geysers delivering only lukewarm water, defective electrical points, etc\
.
The Buyer’s Recourse
It is very important for a Buyer to know what his rights are in such cases. By law he cannot do any of the following:
He cannot obtain a quotation and deduct the cost of repairs from the purchase price and tender a lesser amount (or reduce his deposit);
He cannot refuse to pay occupational rental or any portion thereof unless the defective article seriously restricts occupation of the property;
He cannot repudiate or cancel the sale contract.
It is he, and not the Seller, who will be in breach of contract if he takes any of these actions. By law his proper recourse is to institute an action for damages and sue the Seller. This will obviously not appeal to the Buyer and the best way to resolve the problem is to ask the Conveyancer doing the transfer to settle the matter amicably with the Seller. Ideally he should arrange a refund of the costs of repair to the Buyer on registration of transfer. It is in the best interests of both parties to agree to this.
Late Discovery of Defects
There are two issues here. Firstly the discovery of defects that only appear later. For example, a Buyer may only experience a major roof leak when the first summer rains appear long after registration. If it can be shown that the Seller knew or must have known about the leak and consciously failed to disclose it, the Buyer can sue him for his repair costs.
The second issue concerns a delayed discovery of defects by the Buyer. For example he may only first complain about a wall crack six months after taking occupation. It will be very hard to prove that the Seller knew about a defect which the Buyer himself took so long to discover or that the defect existed at the time of the sale. In such cases the Buyer will have no recourse against the Seller.
The Estate Agent’s Responsibility
An Estate Agent is only obliged to inspect the property for obvious patent defects, to inquire from a Seller as to what known latent defects exist and to then disclose them before signature to the Buyer. Once having done this the Buyer’s recourse is against the Seller alone. A Buyer’s recourse will inevitably rest against the Seller alone and not the Estate Agent.
SOLUTION “Prevention is better than cure” When taking the mandate, the Estate Agent should advise the Seller to disclose ALL defects, and disclose same in the Offer To Purchase.
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Sad news, my dad passed away just before 5pm Saturday afternoon. He has been aging quite fast the last year or so and had been ill for a bit more than a month. He eventually died of pneumonia but it was very peaceful and as far as we could see quite painless. We decided to not take him back to hospital when he came home after Easter so he spent the last while in the frail care unit at Elm Park Village, where they cared for him with such tenderness and love. It has been a difficult period for us second guessing our decisions and sitting around watching him deteriorating on a daily basis. I believe we are all relieved its over but he was such a big part of all our lives and will leave a very large gap.
I am particularly glad that he was around for so long and that he shared so much with Charles and I. He was much more than a grandfather to Charles and they had such a strong bond. He was always there for me and bullied me into buying my first property in 1983 - which I still own! I think he transfered his love of the property market onto me and got so much pleasure out of the fact that I had the courage to leave the safety of a big corporation and follow my heart. He could never get enough of my stories about my clients and deals and particularly loved to hear about the bodies corporate on which I serve as trustee.
I promised myself I would write a positive blog and not go down into the downwards spiral of complaining which is often seen in my industry, but I would like to ask a couple of questions.
The Jo'burg city council decided to upgrade their West Rand systems to SAP in October 2009. It has been a total disaster for all involved except it seems the people who are responsible. According to Kerry Taylor Director of Rates On Line, "On the 11 January 2010 (2 months later) the first applications were accepted for the issuing of clearance figures on the new SAP system. One person in the clearance department had received training and could capture the applications. As of the 18th January 2010 the next two staff members in the clearance department received training and began allocating figures to the staff who would be issuing the figures ultimately. There still poses a problem though. Up until today only a few of the staff have received training."
We have experienced a total bottle neck in property registrations since October 2009 - there are millions tied up in this mess and it seems nobody is prepared to do anything about it! Have we given up and will we just except this total incompetence?
What amazes me is that there was no class action against the Jo'burg council, if you look at people affected.
Firstly, we have the financial sector who have granted mortgage bonds worth millions on these new properties. These funds have been allocated to these mortgage bonds and are not earning any return while it is in the process. Why is there no pressure from the banks?
Secondly, we have the legal professionals - the slump in the property market since 2008 has had a significant influence on their bottom line if you just look at the way they cut back on their staff numbers. The market has started recovering and they now also have fees locked up in this mess. Why is the legal fraternity so helpless in this situation?
Thirdly, we have the estate agents - the few of us that survived the disaster of 2009 are now sitting with our commissions frozen. Why do the Estate Agents Affairs Board and the Association of Estate Agents not act - is this proof that they really as toothless as we thought? Also what about the large Agencies like RE/MAX, Pam Golding, Chas Everit, etc? Are they too busy fighting about turf that they can't stand together to fight this incompetence?
Fourthly is the normal citizens of which you and I are members - are we just going to accept what is being done to us? We go through the trauma of selling our homes and finally everything falls in place for us to move to our new homes with all the stress that is involved with that only to realize that we will now have to pay occupational rent until the staff at the council decide they feel like working? We are also forced to live in our new homes without doing any of the renovations we planned because we will stay tenants until the council staff decide to issue a clearance certificate for us.
You have to ask what has been done to resolve this?
As to my knowledge the banks have done nothing to date.
The Property Law Committee of the Johannesburg Attorney Association have drawn up a list of complaints and had talks with the council, twice as far as I know - with no effect that I have seen.
To my knowledge, the estate agencies have done nothing as a collective, neither have the Estate Agents Affairs Board nor the Association of Estate Agents.
I took photographs of one of my client's meters, she went to the police station and did an affidavit that she had done her own meter readings and that the documents attached were a true reflection of the meters. She took these to the council and was assured that her information was captured - nothing. She went to ask her local councilor for assistance - nothing.
The DA had a meeting with residents with no results - I doubt if they have even bothered to contact the people who attended the meeting. To me it seemed like the ideal situation for them to baffle the meeting with political propaganda - they need to be re-elected soon!
The DA staged a protest against Nedbank last week in protest of the bank declining to grant a commercial bond to finance the resale of an office block. The message I take from this is that the councilors know that it will have no effect to address their colleagues in the council and thus don't even bother!
What do we need to do to rectify this?
Is the council waiting for someone in the private sector like FNB to volunteer to send FNB staff to do their work while they sit and eat KFC like what happened when Outsurance started doing the Traffic Police's work and now KFC is fixing the potholes. Where will this end?
Is this the definition of nationalisation the young politicians are asking for?
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