Notes from a very important week

Nov 30, 2016 12:41:24 AM Share this:

If more evidence of the challenges confronting South Africa households was needed, data released last week by Stats SA provided it. With both consumer inflation and the unemployment rate up, the difficulties that many South Africans have in paying their bills seem set to intensify. This will reverberate through the country’s property market.

Rising consumer inflation points to the most immediate problem. At 6.4% for October, it is at its highest level in eight months, and above the Reserve Bank’s target range of 3% - 6%. Most seriously, inflation has been driven in large measure by the rise in food prices, which have risen by some 12% over the past year.

A consequence of the drought, rising food prices will hit lower and middle-income households particularly hard, since food represents an increasingly large portion of their income, and one not easily reduced.

South Africa’s unemployment rate, meanwhile now, sits at 27.1%, the highest level in 13 years. This points to what is arguably the most persistent and debilitating problem confronting the country – the inability of millions of people to find work.

Together, these two factors are putting a particular squeeze on the South African property buyers. This confirms large volumes of industry data and our experiences as property agents. Lower-income buyers are finding it increasingly difficult to service their home loans as their incomes are stretched. The difficulties of finding work mean, for example, that households might be depending on one income, where two would be optimal.

Even more affluent buyers are under pressure, sometimes being forced to liquidate investments or purchasing smaller properties than they might wish for.

However, not all is pessimistic. South Africa’s rising unemployment rate masks the fact that between the second and third quarters of 2016 over a quarter of a million new jobs were created. The rise in the unemployment rate owed much to greater number of people seeking work. While this does not address the severity of South Africa’s unemployment malaise, it does demonstrate that there remains some dynamism in the economy.

South Africans are waiting anxiously as economists are predicting a 40% chance of downgrade from S&P at the end of the week.

Moreover, the Reserve Bank did not hike rates, meaning that property buyers will be spared the increases that this would have implied.

Concerns were expressed about the direction South Africa is moving in, but for now we have gained some valuable breathing space. It is crucial that we as a country use it.

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Sectional title still going strong - Harcourts South Africa

Nov 18, 2016 9:24:51 PM Share this:

Data released by FNB in its latest Property Barometer explains that the volume and value of sectional title transactions have significantly increased since 2010 after the dip in the 2008/9 recession. What is even more remarkable is that FNB states that sectional title transaction volumes have risen to 29.94% of total property transactions by individuals by the 3rd quarter of 2016.

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Topics: Sectional Title Properties

Choosing the 'right' estate agent

Nov 16, 2016 7:51:58 PM Share this:
Selling or buying property is one of the most important transactions most people will make in a lifetime – so finding the right agent to handle it is essential.

Though an agent’s reputation is an important consideration, there’s more to it than that. Being an agent is very much about forging and maintaining relationships. However well-regarded an agent is, the quality of service depends on how well they can match the client’s personal needs.

In our experience, two factors are key to this. The first factor is expertise. A good agent needs to have a finger on the pulse of the local property market. He or she must understand how property value is determined in a dynamic market, and know what it takes to market a property for optimal returns. It’s also important for agencies to offer its agents industry-leading training and technological support to sharpen their competitiveness in the market.
The second factor key to matching a client’s needs is enthusiasm. A good agent is one who enjoys relationship-building. He or she will communicate conscientiously, and explain the opportunities and limitations that a transaction faces – and will look for means to improve its prospects. Perhaps more than anything, a good agent enjoys their work and draws satisfaction from doing it, not just the rewards it offers.

This is largely a question of values. You need to build a culture that rests on four principles: people first; doing the right thing; being courageous and fun and laughter. Rather than seeing enjoyment, ethics and fulfilment as incidental or even supportive of our work, we see them as fundamental.

This is an important and unique value proposition offering a culture of long-term relationships. It stresses rewards both in personal contentment and financial prosperity – each supporting the other.

Dealing with your clients to ensure that their experience provides the same rewards, and the foundation for a mutually beneficial long-term relationship, is a priority.

Statement by
Richard Gray
Harcourts Africa Chief Executive Officer
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Topics: choosing the right agent

The Medium Term Budget Policy Statement: is there a silver lining?

Nov 7, 2016 11:05:28 PM Share this:

Last week’s Medium Term Budget Policy Statement (MTBPS) was unsettling news for homeowners struggling to keep up with their bond payments. Concerns are quite rightly on the rise about mooted tax hikes. But the bigger picture may be a little more positive than they seem.

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Topics: Medium Term Budget Policy, Tax hikes, MTBP, economic direction, servicing your bond

Construction suggests property resilience

Oct 28, 2016 6:14:17 PM Share this:

Newly released data, outlining the dynamics of South Africa’s construction industry, provides an informative perspective on the of the real-estate chain by tough economic times – and also indications of optimism and resilience.

Stats SA’s new private sector building statistics presents data collected by the largest municipalities in the country for the first eight months of the year (January to August 2016).

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Topics: real-estate chain, Residential property construction, Alterations and additions, Industrial space and warehousing, demand for new properties

Employment data signals tough times

Oct 17, 2016 7:21:51 PM Share this:

South Africa’s economy continues to shed jobs, placing its workforce under considerable pressure. This will inevitably introduce additional strains into the country’s property markets.

Released last week, Stats SA’s latest Quarterly Employment Statistics assesses the state of the formal, non-agricultural sector in the second quarter of the year (in other words, between April and June). It is the key measure of the state of employment in the country. It revealed total employment of 9 218 000 people in this part of the economy over this period. In the first quarter of the year it recorded 9 285 000 – which meant that South Africa had shed some 67 000 jobs over this period.

Hardest hit was the community services sector – government, health, education and recreational services, for example – which shed 48 000 jobs. Manufacturing, trade, transport and mining showed smaller declines. Construction added a modest 1 000 jobs.

Measured over the longer term, the economy has added a little over 30 000 jobs since June 2015 (when total employment stood at 9 188 000), but has seen a significant decline since the recent highpoint in December 2015 (9 288 000).

These numbers suggest continued economic turbulence impacting on the livelihoods of a many South Africans. This adds a worrying dimension to recently released data from the Association for Savings and Investment South Africa and from Old Mutual’s Savings and Investment Monitor – which suggested that stressed households were dipping into savings or minimising their bond payments.

The hardest hit are likely to be those in the lower and middle-income groups, whose reserve funds are smallest, and who rely heavily on their paychecks to meet their living expenses. The prospect of defaults on bonds and declining sales in this part of the market are very real.

On a positive note, the slight increase in employment in the construction industry, demonstrates an encouraging resilience, indicating some buoyancy in the property sector – and also highlighting its critically important role as a creator of employment in the current difficult economic environment.

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Topics: Employment, Stressed Households, Difficult economic environment

Fencing in your property’s value

Sep 29, 2016 11:10:54 PM Share this:

Security is a foremost concern for many if not most homeowners in South Africa today. Fences and walls surrounding properties have become a common feature today. What do they mean for a property’s value and saleability?

Fencing and walling for security purposes began in earnest in the 1980s, and gathered steam ever since. Worries about crimes affecting home spaces are real. For many buyers, a security fence or wall (not merely a boundary demarcator) is a non-negotiable.

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Topics: Fencing

Property: A South African dream

Sep 23, 2016 3:31:38 AM Share this:

Owning a home is a very South African aspiration. Not only is a home a roof over a family’s head, and a valuable asset that can be leveraged in future, but it means permanence, belonging, security. It is a unique achievement. In short, home ownership is the dream of a lifetime. 

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Topics: owning a home, Standalone Properties, Home Ownership

A green thumb for a great price

Sep 16, 2016 3:54:19 PM Share this:

Spring has arrived and many South Africans are eagerly hoping to get stuck into their gardening. Not only an enjoyable pastime, landscaping and garden maintenance is a surprisingly good investment, provided it is well designed.

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Topics: Gardening, Foreign Investment, Garden, Water Restrictions, Garden Features, Watershedding, Garden Maintenance

Green buildings catching on in South Africa

Aug 11, 2016 12:07:53 AM Share this:

South Africans are increasingly opting for green property solutions in both their residential and commercial investments. This is excellent news for property values in the future, and is increasingly setting the standard for planning and construction.

According to a recent study of industry stakeholders by US-based construction think-tank Dodge Data and Analytics, “green building” – that is, designing buildings to limit their environmental impact – is making strong headway in South Africa. It estimated that around 41% of the country’s construction activity in 2015 was green. This was the highest of the 13 countries surveyed.

The countries surveyed include both mature markets for green solutions (such as Germany and the UK), and emerging markets (such as India and Colombia). The average level of green construction activity across all 13 was 24%.

Moreover, South African firms report high expectations of green work in future. Some 61% expect green building to account for more than 60% of their operations by 2018.

Green buildings are rapidly becoming the big story of the real estate industry.

Conventional buildings make a significant contribution to greenhouse gas emissions, and consume large volumes of water.
From the perspective of environmental protection, green buildings make sense. It’s particularly encouraging to note that the Dodge study found that going green in South Africa was driven by a sense of it being ‘the right thing to do’, and by the requirements of clients. This shows that environmental concerns are increasingly integrated into the property market.

For South African property owners, the experience of power outages and escalating electricity tariffs make green solutions such as solar power a practical consideration.

Although greening a building – whether building new or retrofitting – can be expensive, the savings in future operational costs invariably make the initial investment worthwhile.

Green buildings are about comfortable and productive living that takes into account the realities of our environmental stresses. They are also an excellent investment: green features can add to the value of a property and make it vastly more attractive to buyers. And they are also the future: what is considered distinctly green today, will be standard in years to come.

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Topics: Enviromental Concerns, Green Buildings, Electricity Tariffs, Greening A Building, Power Outages, Solar Power