FNB released it’s property barometer for March on Wednesday this week. The results are unfortunately not very encouraging. According to the statistics property has suffered yet another year-on-year loss in March of -7.8%.
Demand for property has drastically dropped over the last few years as we saw the introduction of the NCA and a worldwide economic downturn. These factors contributed to creating a major oversupply of property where few are in a position to buy.
Recent figures have suggested that banks are approving less than 40% of bond applications due to strict adherence to the NCA. The NCA was introduced to stop consumers from incurring too much debt, this has of course negatively affected the property market and other sectors as well.
Late last year experts were predicting a turn around toward the end of 2009 and that property would then start to experience better growth again. For many homeowners that are desperate to sell this is an unfortunate prediction as they may slide into negative equity within months if their properties lose enough value.
It is unlikely that we will see a turnaround in the property market any earlier than the end of the year unless lending policies drastically change very soon. We will probably see many more homeowners lose their investments before the year is out.
What do you think? Is the market going to turn around before the end of the year?
Sectional title owners need to be aware that as of 1 July 2009 they will have to pay their rates directly to the municipality, not through the body corporate as was previously allowed.
This is because the Municipal Property Rates Act No 6 of 2004 will come into full effect from 1 July. Some may welcome the switch but many sectional title owners will be unhappy about paying directly to the municipality.
The biggest concern they have is that they may end up paying far higher rates because each unit will now be individually assessed and rated. Many homeowners saw major increases a few years ago when municipal rates started being based on the market value of their property. Many people will simply not be able to afford a rates increase at this stage and we may see a few extra sectional title units coming on the market after the 1 July deadline if the rates do end up going up.
Not paying your municipal rates is also a far more serious offence than people may be aware of. The municipality may instigate the forced sale of a property to recover any monies owed to them if the owner is in arrears. This would be a very unpleasant experience for any homeowner and one that should be avoided at all costs. So keep up with paying those bills.
Another thing that needs to be kept in mind is that municipal rates take precedence over the bond or mortgage of the home. This means the property can be sold out from under the bank if the unit is in arrears with the municipality.
If you are the owner of a sectional title unit that has yet to switch over to paying rates directly to the municipality be aware that there is a deadline and start making provisions for a possible rates increase. It will serve you better to be prepared than to have a nasty surprise when the deadline passes.
What do you think? Will sectional title unit rates definitely increase with the change in billing?
Yesterday Deputy Trade and Industry Minister Rob Davies said that growth was still predicted for South Africa in the year ahead despite a contraction in the fourth quarter of 2008.
Last week there had been rumblings of South Africa being in a recession and being in desperate need of an emergency rate cut, but the people in power, namely Tito Mboweni and Trevor Manuel do not necessarily share that view.
Manuel denied that we were in a recession and said fear mongering by less experienced individuals was irresponsible. It also appears an emergency rate cut by Mboweni is highly unlikely at this stage. Perhaps we are better off than we imagine, but it is still rather confusing, who should we believe?
Much of the growth predicted by Davies is based on high expectations for the 2010 FIFA World Cup and everything that is happening because of it, such as job creation, ticket sales and tourism, as well as road, rail and port upgrades. According to Davies the biggest macro-economic challenge the country faces is the current account deficit, but even that is expected to improve within the upcoming months.
So, who are we to believe? Give us your opinion.
According to Auction Alliance the number of bondholders under severe stress has risen to 35 000 in the fourth quarter of 2008, this is a sharp increase from the 8000 reported in the second quarter.
They went on to say that an estimated 80% of these bondholders would have to rid themselves of their homes either voluntarily or not. The bad figures are continuing to grow, despite some rather large rate cuts, due to other factors such as joblosses and a generally negative economic climate.
The US has given itself an estimated 2 years to recover from the terrible economic situation it is currently in but many economists are saying this is wishful thinking and the damage to the country’s economy will run far deeper than expected. The problems in the US started with a mortgage crisis and then bled through to many other sectors causing widespread financial damage to individuals and the country as a whole.
In South Africa there has been an increase in distressed sales and properties in possession that are auctioned off by creditors to recoup some of their loses. Although some lending institutions are less inclined to repossess properties due to the fact that there are increasingly fewer buyers in the market.
This is leading them to consider alternatives such as negotiating a lower monthly repayment that will enable the bondholder to keep paying for the property. This is surely preferable to them having thousands of repossessed properties on their books that they are unable to sell to cover the outstanding amount owed them.
One thing that may help is a very major rate cut in the near future that will actually free up cash in consumers’ pockets. Smaller rate cuts may be safer but they don’t immediately alleviate enough financial pressure from everyday people in any demonstrable way.
What do you think? Would a major rate cut be a good thing or would it hurt us in the long run?
Many people are speculating as to whether or not we may be in for an emergency interest rate cut.
This is because of South Africa’s poor economical performance in the last quarter of 2008, showing a 1.8% contraction in output. Many people are concerned that we are entering a recession and could soon follow in the steps of the United States where they are experiencing very serious financial problems despite plans of huge bailout packages.
Perhaps an emergency rate cut will work and stimulate some more consumer spending, however many people are already under so much pressure that a rates cut would merely decrease their monthly budget deficit and not give them any real money to spend.
It may just be too little too late and more drastic action may need to be taken as we watch basic commodities such as bread and milk skyrocket in price when they should have been becoming more affordable.
According to a Citigroup economist the Monetary Policy Committee is only likely to call an emergency meeting if the GDP drops by between 2% and 2.5% . So although there are many rumours it is unlikely that anything will happen before early next week.
What do you think? Will there be an emergency rate cut and will it help.
South Africa has a well known problem with violent crime and home invasion robberies. We are not the world leader in violent crime but are very close to being it. Logically homeowners want to feel as safe and secure as possible in their homes and most will take any action necessary to protect themselves.
If you are trying to sell your home and it is located within a high crime area you will find it far harder to sell. Location is the one thing about a property that cannot be changed and affects everything.
Buyers may be more willing to consider your property if you have adequate security measures in place at the time of sale. Many, many people will not even consider spending a single night in an unprotected home, particularly in the areas that are rife with crime such as Gauteng.
Visible security measures will make the buyer feel more secure and probably act as a deterrent for criminal activity. Measures such as:
- burglar bars
- security gates
- electric fencing
- security cameras
- alarm systems
If you do not have these in place already you should consider installing them before putting your home on the market as many buyers these days will calculate the cost of these security measures and demand that the seller reduce his price by that much. If you do it yourself it will not pose a problem for you in the future and will give you more negotiating power.
There is also the effect of immigration, due to crime, taking buyers out of South Africa. The higher income areas are probably most affected as they can afford to emigrate to other more appealing countries if they wish to do so. This will eventually make it much harder to sell the higher end properties at their market value as the demand for them will have decreased.
If you intend on selling your property make sure it looks like a safe and secure purchase as this will affect it’s re-sale potential very much. If you are selling your home because your security measures have been ineffective in preventing crime on your property it would be best to consult with a professional that can advise you on the best way to protect your home and family. This will then also help you sell your home in the future.
Buying a property these days is costly enough without having to pay all those extras like transfer duty. South African bond origination firm Ooba has indicated that finance Minister Trevor Manuel should increase the threshold of when transfer duty is paid.
It was already increased in 2006 from R190 000 to R500 000, and now three years on it looks as though it may be necessary again to allow first time buyers to enter the market.
Transfer duty is the tax a buyer pays when purchasing a home. The money is paid to the government, not the seller of the property. Currently if the property costs less than R500 000 there is no transfer duty/tax payable on it. Transfer duty is often in the tens of thousands of rands and can seriously affect a buyers options. They may be able to afford the bond on a home of R800 000 but when the transfer duty is added on it may put that property into an unattainable category.
Transfer duty is 5% on transactions between R500 000 and R1000 000. Anything above R1000 000 has a flat rate of R25 000 and then 8% of the balance over R1000 000. So for example a house costing R800 000 has a transfer duty of R40 000, making the total R840 000. Quite a big difference.
With the difficulty of getting a bond these days, due to affordability and stricter lending regulations all buyers would welcome a change to make things more affordable. You can find basic transfer duty calculators online, but always confirm how much you will be paying with a professional before you sign anything.
What do you think, will changing the transfer duty threshold stimulate the property market a bit more?
Smaller, cheaper houses in the residential market were apparently the hardest hit by last years dismal performance by the property market. Smaller,cheaper houses were defined as two bedroom, freestanding homes that cost an average of R332 000. This segment of the market saw a 9.6% drop in the final quarter of 2008, although a large contributor to this was the fact that most of these homes are in low-income areas.
According to FNB’s homeloans department it was likely that investors were reluctant to buy because of the bad growth experienced last year, therefore affecting the buy-to-let market negatively, and by first time buyers not making purchases. Investors and first time buyers usually buy smaller houses as they are easier to rent out and more affordable.
There could be many different reasons for first time buyers not to purchase, tougher regulations because of the NCA making it more difficult to obtain a bond and perhaps even personal choice to remain where they are until the current economic turbulence settles down, all this could have influenced their decisions.
According to FNB’s latest Residential Property Barometer, released on Monday, there may be bad news for home owners hoping for quick sale.
According to the figures released, currently the average time it is taking for a property to sell is 15 weeks and 3 days or almost 5 months. However this is still vastly better when compared to 20 weeks and 1 day which is what it peaked at. Although the time frame has improved it probably also points to most sellers not getting their asking price.
We will have to wait and see what the Tito Mboweni does with the interest rate in the coming months to get a better idea of what homeowners can expect this year and the year to come. The interest rate will influence many homeowners in many ways whether it goes up or down.
Many people have never been through the trauma of repossession and just the thought of it makes many of us break out in a sweat, but do we really know what will happen?
Each case is assessed individually but alot of the time if you inform the bank of your dire financial situation in time or are approximately less than 6 months in arrears your case will first be passed on to the banks pre-legal department. This department aims to assist in making repayment arrangements for clients who are in arrears, however as I said each case is assessed individually and you should contact your bank to find out what will happen in your situation.
You should then be true to your word and make the payments you have arranged.Most banks also have a system that allows for 3 strikes, if you fail to keep up your end of the bargain 3 times your case will then be passed on to the legal department. They will usually try and design another payment structure however this time they will try and have you sign a document that allows them to sell your home or property using their own agents on your behalf if you again default. Always have a qualified person assess any document like this as there could be pitfalls for you if you sign it without knowing all the consequences thereof.
This is not a pleasant situation to be in and the best advice you can get is to contact your lender as soon as you become aware of a possible problem. Each case is unique but if your situation is a temporary one they will usually be able to offer help.