Potential in buy-to-let for investors
INTEREST Buy-to-let purchasing has fallen off dramatically in the past year in response to very low rental increases in most parts of the country, but carefully selected rental property is still a good investment prospect over the medium to long-term.
The first thing to consider, says Realty 1 International Property Group CEO Hano Jacobs, is interest rates, which are currently at a 30-year low. “From an investment point of view this means that the monthly bond repayment on your rental property is now also at a new low and that a sizeable percentage will be covered by the rent your tenant is paying. Secondly, lower rates don’t mean that everyone can become a homeowner. The very strict credit criteria now being applied by the banks, high levels of debt and the recent return of home prices to real-term increases are going to keep a lot of people in the rental market for the foreseeable future.”
It is also worth noting, he says, that property development and residential building are still at historic lows following the recession, which means that the demand for moderately priced rental homes is likely to remain ahead of supply for some time.
Investors need to be clear on their strategy, and be looking for medium to longterm gains from rental income and capital growth. This is not a market for speculators looking for a quick turnaround. Factors to be taken into account in a rental property purchase decision, Jacobs says, include locality with regard to convenience, consumer amenities and access routes. Also important to tenants are price, security, and proximity to schools and day care.
High Court rulings strengthen collection
LEVIES AND RENTS Two recent High Court cases will make it a great deal more difficult to avoid the payments due on sectional title levies and rents, says Grant Gunston, senior
director of Grant Gunston Attorneys.
“Recently, there have been instances where defaulting body corporate members and/or defaulting sectional title tenants have applied for debt counseling — and the National Credit Act stipulates that where this happens the defaulting payer is entitled to a temporary moratorium on his payments in order to give him time to sort out his affairs.
“These new High Court rulings have exempted the landlords and bodies corporate from this ruling, taking us by and large back to the situation where non-payers are held to the contract they signed.”
In both cases, Dlamini v the Body
Corporate Frenoleen, and Pareto v Kalnisha Sigaban the court refused to exempt the tenant from levy payments because he or she was in debt counseling. Gunston said that the decisions recognise the realities of the property market.
“We have to accept that in our society property has become a popular investment channel and that many of the investments are geared, ie bought with bonds. We also have to accept that bodies corporate are simply representatives of their members — they are not in most cases wealthy asset holders who can afford to carry their members and their water, electricity, sewerage and insurance payments.
“The new rulings are, therefore, welcome. and in the long run will help to restart residential property development in South Africa, currently stagnating as a result of a lack of bank support for developers and the strict criteria of the National Credit Act.”
Payment advice for off-plan buyers
CASH ISSUES If you’re a homebuyer purchasing “off-plan” — or in advance of your home actually being built — you will most likely have more money issues to deal with than those purchasing a pre-owned property. And the first of these is the matter of the deposit. It is very important, says Berry Everitt, CEO of the Chas Everitt International property group, that you do not pay any deposit for a stand or an off-plan home — or sign any agreement to purchase such a home — until you have thoroughly checked the credentials of the developer and/or home builder and made sure they are well-established operators with a record of completed, successful developments.
“You should also make sure that your deposit is only paid into the trust account of an attorney or a registered estate agent — not the bank account of the developer or builder. There have been far too many cases in recent years of bogus estate agents, builders’ agents and construction companies taking deposits and then simply vanishing.”
Writing in the Property Signposts newsletter, he says the second thing to consider is the possibility that you may need two separate home loans — one to pay for a stand and the other for the actual structure — if the development is not sectional title.
“The second loan is used to pay the building contractor in instalments known as draws. These are paid as certain stages of the building work are completed to the satisfaction of the financial institution.
“However, you as the buyer will have to sign each draw form authorising the bank to pay, so you can have a large measure of control over the way the work is done. And you should exercise this control by visiting the building site frequently so that any problems can be rectified immediately — and before the builder collects the last draw.”
In addition you should never occupy or sign for the keys to your new home before you’ve checked it over thoroughly once more, and got the builder to agree in writing to rectify any remaining “snags”.
10-year milestone for antiques fair
HISTORIC This year has not only been a momentous year for South Africans in terms of current events but it also marks some milestones in our historical and cultural past. The National Antiques & Decorative Arts Faire, the country’s most definitive showcase of antiques and collectables, celebrates its 10th successful year.
It aligns itself to the global “antiques are green” movement — encouraging investment in antiques as a way to recycle and reuse, and celebrating the return to beautiful things as well as showing visitors how to appreciate living with them. As we mark the 100th year of SA as a union, the fair will be showcasing the very best in antiques and collectables — international dealers like Ricus Dullaert of Holland and Ed Pascoe from the US will show never seen before antiques and English pottery, and local dealers will feature the best of the best from silver to porcelain and glass; from vintage to retro; and from Afrikaner, Dutch, French and English furniture.
The National Antiques Faire takes place in Exhibition hall 1 of the Sandton Convention Centre from the 23-25 July 2010.