Real Estate Investor Magazine July 2013

Where others see challenge, we see opportunity. SOUTH AFRICAN REAL ESTATE INVESTOR © Good Debt vs. Good Debt vs. Bad Debt Bad Debt Our passion. Your investment’s success. F Free yourself from fi nancial slaveryree yourself from fi nancial slavery D D DREAMS DO COME TRUEREAMS DO COME TRUEREAMS DO COME TRUE Just ask investor Musa Hadebe LISTED PROPERTY Brace yourself for a bumpy ride OF OFFSHORE DIVERSIFICATIONFSHORE DIVERSIFICATIONFSHORE DIVERSIFICATION OF Global REITs gives great returns Global REITs gives great returns GREEN YOUR BUSINESS Simple ways to Save www.reimag.co.za STANLIB Direct Property Investments STANLIB Direct Property Investments manages the Liberty Property Portfolio which owns the Eastgate Shopping Centre and is the majority shareholder of Sandton City. July 2013 We have launched the STANLIB Africa Direct Property Development WINNER Fund which aims to invest in retail-led real estate developments with R50.00 (Incl. VAT) SAPOA AWARDS a focus on opportunities in West and East Africa. R43.86 Other Countries Best Printed Property 10175 Compliance number: 3DR068 www.stanlib.com JULY 2013 Z www.reimag.co.za Publication 2013 STANLIB is an Authorised Financial Services Provider MASTER INVESTOR SISA NGEBULANA

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CONTENTS July 2013 COVER STORIES 8 Master Investor 12 Good Debt vs. Bad Debt 38 Listed Property 56 Ofshore Diversifcation 64 Green Your Business 66 Dreams Do Come True UPFRONT RESIDENTIAL COMMERCIAL 5 Investor Talk 22 You Don’t Need Money 38 Brace Yourself Financial unrest To make money The ride might get a little bumpy 6 INBOX 24 Investigate Thoroughly 40 Derivatives Ask The Property Experts Before you buy-to-let The key to reducing interest rate risks Tax on property 26 Wooing The Market 42 Embracing New Trends 8 Master Investor With your home Rural retail on the rise SA’s self made black property billionaire 12 Break The Shackles 28 Commissions, Cost & Your Bond 44 Changing The Face of JHB AFHCO meets the challenge What should you expect? Free yourself from fnancial slavery 30 Get Yourself Of The Blacklist 46 Eatern Cape Property Market 18 News Alerts Part 2 Rising from the ashes The Good, Bad & Ugly 32 Bathroom Remodelling 50 Property Talk From bare basics to absolute excess Ask the professor INTERACT WITH US fnd us on facebook fnd us on twitter fnd us on youtube www.facebook.com/Real Estate Investor Magazine www.twitter.com/Sa_Reimag www.youtube.com/reimag www.reimag.co.za July 2013 SA Real Estate Investor 1

OFFSHORE THE TEAM 54 Help To Buy London’s new housing scheme 56 Global Diversifcation With the international REIT market 60 Turning Your Home Into a holiday home Neale Petersen Angelique Redmond James Clark Amy Little Publisher Editor Designer Designer LIFESTYLE 63 Upcoming Event World Green Building Convention 64 Simple Ways To Save Melissa Petersen Juanita Heilbron Marisa George Russell Krynauw By greening your business Ofce Assistant Trafc Financial Manager Sales Director 66 Dreams Do Come True Just ask Musa Hadebe 68 5 Star Area Sea Point ticks all the right boxes 70 Open-Source Is Back Roy Lategan Renier Lombard Alex Masamuna Russell Bennett For your desktop Sales Team Leader Sales Executive Sales Executive Web Administrator 71 The Future CONTRIBUTORS Not the present 72 In Business It’s all about trust Dr Andrew Golding Monique Terrazas Jonathan Smith Koos du Toit Printed by Distributed by John Roberts Scott Picken Mike Smuts Mike Watters Published by REALE MEDIA Neale Petersen (CEO) B. Taylor Tel: 021 674 5026 Fax: 086 627 2400 Email: [email protected] Physical: Bizmall, Shop 3, Heritage House, 20 Dreyer Street, Claremont, 7700 Michael Dryden Ian Anderson Erwin Rode Anne Nurock Postal: PO Box 858, Howard Place, 7405 Also Published by REALE MEDIA Advertising: 021 674 5026 Subscriptions: 0861 228 669 / [email protected] JUST PROPERTY MAGAZINE PROPERTY All rights reserved. No portion of this Just Distribution: On The Dot Distribution Where investment SOUTH AFRICAN REAL ESTATE INVESTOR Politics, Policy & Property © publication may be reproduced or used For distribution inquiries contact Craig Hughes and excellence meet The road to a brighter future Spot Checks in any form without prior written consent STANLIB Direct and permission from Reale Media. The What to look out for THE 2013 BUDGET on 021 918 8659 / 073 395 2396 Property Investments BUYING PROPERTY? How will you be affected? Heavenly Tenants Know the numbers How to fnd them IRELAND & CANADA RETIRE IN STYLE Investing in Overseas investing Rent killing you! publisher gives no written guarantees or retirement villages made simple Printing: SED Printing Solutions STANLIB Direct Property Investments manages the Liberty www.reimag.co.za assurances and makes no representation How to save Property Portfolio which owns the Eastgate Shopping Centre and is the majority shareholder of Sandton City. We are in the process of registering and launching the STANLIB African Direct Property Fund which aims to invest in retail-led real www.justpropertygroup.co.za estate developments with a focus on opportunities in Nigeria and Kenya. regarding any goods or services written or advertised within this edition. Prospective April 2013 R50.00 (Incl. VAT) R43.86 Other Countries ISSUE investors should always consult their APRIL 2013 LESSONS FROM A BILLIONAIRE INVESTOR Autumn 2013 4 www.stanlib.com Z attorneys, advisors or accountants. www.reimag.co.za MASTER INVESTOR JANNIE MOUTON www.reimag.co.za Copyright © Reale Media 2 July 2013 SA Real Estate Investor www.reimag.co.za

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INVESTOR TALK BY ANGELIQUE REDMOND Financial Unrest Te rand is sinking faster than the Titanic on her maiden voyage and this downward spiral has investors heading for the hills. So what TWITTER COMMENT will the long-term efects of this economic instability be? Mark_Walker64@SA_Reimag Congratulations on your SAPOA Award for Best Printed Property Publication 2013. Well deserved. With the mining sector unrest and labour disputes leading to investors’ lack of faith in Follow us on Twitter South Africa, the President gave a speech SA_Reimag meant to quell fears and the end result was a freefalling rand. Te results of his second speech have yet to be seen. President Zuma FACEBOOK COMMENT is quoted as saying: “The Presidency will this year take a hands-on approach, working Mduduzi Mthimunye commented on Real closely with relevant departments and social Estate Investor Magazine partners to boost confdence in the economy. Mduduzi wrote: \"I love your mag guys its really interesting We will do this against the background of & I’m learning a lot from it.\" achievements on the economic front since 1994, which must be borne in mind especially Like us on Facebook http://www.facebook.com/RealEstateInvestorMagazine when we face the current economic turbulence.” With the public crises faced this year, such as the Marikana shooting, Nkandlagate, soldiers dying in Central African Republic and Guptagate, what the country is crying out for is decisive and immediate action. Te current rand drops and the possibility of a fnancial downgrade will afect every single person in South Africa. THE REIM APP IS COMING! What South Africa needs is an end, once and for all, to the constant labour disputes which threaten economic security and swift and decisive Presidential action to curtail anymore investors feeing the ship. Without further ado, here is the July edition of Real Estate Investor magazine, enjoy! Angelique Redmond Editor FOREWORD We can bounce back? It is becoming increasingly difcult to be successful in business and investing today. In South Africa, everyone is eating the middle class, while the wealthy are targeted for selfsh civic need and the poor are just getting poorer. Te global economy is sluggish at best with Europe still struggling. China and India are leading the growth stakes while the US and Japan are starting to show signs of recovery. Te good news is that there is an African sunrise, with 7 of the top 10 fast growth countries on our continent. Te bad news is that South Africa is not beneftting like its African counterparts. South Africa’s economy grew by only around 2.5% last year and growth is struggling to reach 2% right now. Enough said! More bad news is that there is no investor confdence in South Africa. Te weakening rand, wild cat strikes, high unemployment, and the ineptness of government to deal with labour, crime, violence and corruption is now really starting to take its toll on the economy. A complex web of laws that rules and regulates individuals and small business, the backlog in housing provision and the non-delivery of services all add massive fuel to the fre. Nevertheless, we simply cannot aford to be downhearted. We have to start taking control of our own destinies and prevent governments and other organisations with ulterior motives to determine our fnancial futures. We have to start taking action, get streetwise fnancial education, build businesses, invest wisely through informed decision-making and assist other entrepreneurs to become successful. If a new breed of entrepreneurs begin to prosper, so will our economy. Make it your purpose to make a diference in the world. Neale Petersen PUBLISHER “The stability of global fnancial markets is a public good. If governments fail to protect this public good, then those who suffer are the working people of the world whose jobs, whose homes, and whose standard of living depends on it.” Kevin Rudd www.reimag.co.za July 2013 SA Real Estate Investor 5

INBOX Tax On Property Managing Tenants Investing In REITs Michael Dryden Michelle Dickens Estienne de Klerk FinServe Trust Accounting TPN SA REIT Association www.fnserve-trusts.com www.tpn.co.za www.sareit.com Q Frank Edwards Asks: Q Megan Taylor Asks: Q Zola Mbengu Asks: When you own more than one property, what I have recently bought a number of flats in a I am an investor and would like to invest in will you be taxed and are there rebates if you complex, and I want to rent them out. What REITs, please can you explain the benefts of own more than one? How does tax work when should I be wary of when looking for tenants? the new SA REIT structure to me? you generate income from more than one property? A Michael Dryden Responds: A Michelle Dickens Responds: A Estienne de Klerk Responds: Tax will only be relevant where income is From the outset, it’s vital to ensure that the Te SA REIT has opened up new potential for the generated on a respective property, be it your tenant you choose will not default on the rent SA listed property sector. Te SA REIT gives the first, second or third property. Usually the or electricity, cause damage to the property or listed property sector an internationally-recognised income generated on a property is in the form result in costly legal fees. A simple credit check structure, in which good governance and best of a rental, and such rental is subject to income through TPN enables landlords to view the practice is ingrained, which will allow the sector to tax. Fortunately, earning rental on a property credit history of all tenants and co-tenants. grow with tax certainty. It is also fexible enough to is treated as a ‘trade’ for tax purposes, and adapt to various models while encouraging best-of- therefore income tax is calculated on the ‘net While leases can be written or verbal, a written breed practices. Tis is attracting new listings to the profit’ of the trade (ie not just the income). lease provides the best protection. It is unwise sector, which are set grow its market capitalisation In simple terms, income tax is calculated on to take the property off the market until the even further. South Africa’s new REIT structure the net: amount after deducting ‘permissible’ tenant has signed the lease agreement and paid has also put the listed property sector more frmly expenditure such as bond interest, levies, repairs the deposit. Te same applies for handing over on the radar of international investors. and so on related to the property in question. the keys of the property, which should only be Tax is then paid on the above according to the done once the agreement is signed and the frst Benefts of REITs in SA include: tax rate of the particular taxpayer (eg individual, month’s rent has been paid in full and cleared. • Te unique structure of the SA REIT asset company or trust). class provides two possible ways of beating If you want to attract the right type of tenant, infation: capital investment growth and Where a taxpayer owns more than one make sure that the property is maintained to regular income distributions that grow. property, the amounts are pooled together to its full advantage. In this way, you’re also able • SA REITs have equity and bond represent the trade as a whole. Terefore a loss to avoid the risk of the tenant withholding rent characteristics. SA REITs ofer investors the on one particular property is automatically set- for maintenance. A well-maintained property best of both worlds. A recurring cash of against a proft on another; balancing this will provide rental income and capital growth distribution yield like a bond as well as growth results in a tax efcient property portfolio. – don’t lose value on the property due to in income like equity. non-maintenance. • Your investment is predominantly Capital allowances (write-ofs) for property is underpinned by lease agreements with limited, but they do exist. tenants in property assets. Do you have a property question you would like answered by our experts? If so, post it on ASK THE EXPERTS on www.reimag.co.za or email [email protected] 6 July 2013 SA Real Estate Investor www.reimag.co.za

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MASTER INVESTOR BY NEALE PETERSEN SA’s Self-Made Black Property Billionaire - No BEE Required Inspired by resourcefulness and curiosity 8 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

UPFRONT isa Ngebulana is the Founder and captained the Eastern Province rugby team Executive Chairman of the Billion and played for the Springboks in the 1940s. Of SGroup Limited and the CEO of Rebosis course, he was eventually kicked out of the team Property Fund. His entrepreneurial approach, due to his skin colour at the time Apartheid resourcefulness and achievements are nothing thrived in 1948. Thereafter he started a soap short of spectacular, given the short time he has making business, but was forced to leave the had to build a sizeable property empire. area in 1952. He then bought a smallholding in Mthatha where he started planting vegetables Rebosis is one of the fastest growing loan stock using two donkeys and a sleigh. He soon owned companies on the JSE. It has grown its market a number of successful family businesses, which capitalisation from R2.2 billion since the frst included a general dealer, a butchery and a clay listing in May 2011 to the current R6.5 billion. brick-making factory along the river. In fact, his Rebosis is also one of the frst black managed grandfather has been such an inspiration to him SISA MICHAEL NGEBULANA property funds to list on the JSE. Tey have a that Sisa is naming Mtatha Mall after him. Personal Statistics “Corruption will lead to the downfall Age: 47 of our economy and our country - Qualifcations/Experience: University of Fort Hare, B Juris; transparency in government tender University of Natal (now KZN), LLB; Rand Afrikaans University (now UJ), processes is critical” LLM Masters degree; Cape High Court attorney Achievements: Entrepreneur of particularly successful development division Sisa had the privilege of helping, learning the Year 2006; Past President of SA which they hope to capitalise on. Rebosis owns and working in the shop and at the brickfelds Shopping Council; Member of Clinton all its own buildings and Sisa wants to see the in his formative years, during which time his Global Initiative. market cap at around R10 billion within the father mentored him in fundamental business Marital status: Divorced with 2 kids next three years. skills. He inherited his father’s strong morals aged 15 and 12 who live with him. His and work ethics, which saw his father become life is focused on his business during Sisa is a self-made billionaire entrepreneur. a successful 100% self-made entrepreneur, the week and his family and kids over He shrugs off suggestions that he is a despite being suppressed and alienated by the weekends. “tenderpreneur” using government support to Apartheid blocking out black businessmen in Close-up achieve success. Although government is an the 60’s and 70’s. Mentors: Sisa’s grandfather is his important client of Billion Group, Sisa believes biggest inspiration, conscience and that corruption will lead to the downfall of our Te general dealer became the central point mentor. Nelson Mandela is another great economy and our country and that transparency of contact between the villagers and family inspiration, a man with an ideal he was in government tender processes is critical. members working in the cities, who would prepared to die for. Sisa admires great send money to the village to build their families characters and draws inspiration from Rebosis has an impressive retail property a home. Sisa remembers getting involved in people such as mining magnate Brian portfolio, which includes the Hemingways the building of local houses as a 12-year-old Gilbertson and Mick Davis. regional mall in East London, one of SA’s child, doing the planning on a piece of paper, Books: He enjoys reading fnancial top 20 malls, as well as Mdantsane Shopping then preparing plans and foundations for four reports, novels and biographies, City in East London and Bloed Street Mall bedroom brick houses and rondawels. He particularly those about Richard Branson, in Pretoria. The company recently acquired did all the costing without calculators and Barack Obama and Warren Bufett, as Sunnypark Shopping Centre in Pretoria. co-ordinated the building himself. well as books about the early successful, In addition, the company owns a number self-made entrepreneurs such as Richard of government-tenanted commercial office He matriculated at St John’s College Maponya and Anton Rupert. buildings. in Mthata, and then attended Fort Hare The best fnancial advice Sisa has University in Eastern Cape to study law, been given? Sisa has had his fair share of successes and influenced by his grandmother who used to Sisa learnt his fnancial fundamentals from failures in his life, which he considers to be life win all the arguments in their home! He then his grandfather, who taught him to save, lessons. He was born and bred in the Eastern attended the University of Natal (now KZN) to be curious and resourceful in creating Cape town of Mthatha in East London. His and enrolled as an estate agent with Realty wealth and leaving a legacy, to educate grandfather Buchanan Tandi (BT) Ngebulana Elk to fnance his studies and living expenses. himself about investments and to invest in was a strong leader and very infuential in the Sisa also started speculating with property property and stock markets. community. He built most of the local schools, and fipped properties for cash. He sold about www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 9

MASTER INVESTOR 28 homes and became one of the best local Sisa then decided to invest the profts from the developments of around R35 billion under agents in Maritzburg. He renovated many of Hyde Park development in a mining company construction for next 10 years. the properties using CorelDraw to prepare called Century Capital. He recognised colourful plans for refurbishing kitchens and the opportunity to delist the capital and Billion also has a rapidly growing African bathrooms, and created fencing which was recapitalise, with Nedbank and IDC among the strategy, and are developing regional shopping termed ‘stop nonsense’. Tis allowed him to pay funders. Unfortunately, the company met with centres in Ghana, Nigeria and Angola. Already, cash for his frst BMW. one mining disaster after the other and after 15 dedicated senior staf members are based in having lost his entire investment, Sisa decided various African countries to grow their presence Sisa then moved to Pinelands, Cape Town, that real estate was the only sure investment. in those markets. where he completed his articles at Jan S de The start of Billion Investments SISA’S ADVICE FOR PROPERTY INVESTORS Villiers law frm between 1992 and 1994. To make ends meet, he bought a tow bar and Sisa then subdivided a big parcel of land he 1 Build your wealth brick by brick launched a furniture removal business, moving owned in Dainfern and took an option on furniture over the weekends in Green Point land in a cluster housing development in Hyde 2 Start small and something much and Bloubergstrand. Park. Under the name Billion Investments bigger will happen trading as Billion Afcon, he invested in artist’s Qualifed as a commercial lawyer, he moved impressions, building plans and sales material 3 Focus on one area of investment to Johannesburg and set up a fulltime transport and pre-sold all the homes in the development. 4 Invest in appreciating assets business, Blue Truck Rentals. But the stressful such as real estate pace of the business took a toll on his health and Sisa’s next move was into the commercial 5 Educate yourself about property he decided to accept a position as a legal advisor, property market. At a time when most big and business specialising in fnance and treasury derivatives companies were moving out of the CBD, and transactions, at Eskom. During his fve- he recognised the opportunity and started 6 Learn about the JSE and listed year stint at Eskom, Sisa was part of the frst to convert derelict buildings in downtown property funds finance team enabling the Euro Rand bond Johannesburg into A-grade offices. The 7 Investigate stock available in the issue, which they launched single-handedly. company’s next investment was Mdantsane listed property sector He spent 18 months in structured fnance and Mall in East London. Sisa hit the headlines 8 Buy into a residential or listed learnt the tricks of the trade. when he beat SA’s biggest investment and pool fund to avoid risk development guns - Atterbury, ZenProp and In 1999, Sisa returned to the property game, Investec Property - to build Hemingway’s Mall. 9 Acquire a savings culture - invest speculating with houses and land. He started rather than spend developing in Kyalami Estate and Dainfern. Sisa formed Rebosis in 2011 and listed the This was followed by other developments company on the JSE - one of the largest new RESOURCES including a cluster development with 20 units in listings in the real estate sector. Billion now Bryanston and a cluster in Hyde Park in 2000. remains focused as a developer with total Billion Group 10 July 2013 SA Real Estate Investor www.reimag.co.za

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COVER STORY BY MONIQUE TERRAZAS Break The Shackles Free yourself from fnancial slavery How does it feel when you go to work every day, but at the end of the month you have nothing to show for it? How does it feel when you can barely aford enough food, much less pay for necessities like transport or water and electricity? How does it feel when there is no end in sight and no hope for the future? It feels like slavery... 12 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

UPFRONT Many of us believe that slavery has been “Bad” debt - which includes, for example, Minister, commissioned an investigation into eradicated hundreds of years ago, but the truth clothing or furniture store accounts, credit the considerable gap between the repo rate is quite startling. An estimated 27 million cards and personal loans – traps people into as determined by the Reserve Bank and the people today are enslaved and the majority are a debt spiral from which it seems impossible prime lending rate which local banks charge “bonded labourers” in South Asia, whose labour to escape, because of the high interest rates consumers. Of course, nothing came of it, but – and that of their children and grandchildren charged –up to 25% per annum on credit cards. that does not mean the issue is not a matter of - is “owned” as collateral for debts, which they It also includes the high interest rate unsecured national importance, given the country’s massive will never be able to pay of. loans, particularly those ofered by the micro- consumer debt. lending industry at exorbitant interest rates There are no “bonded labourers” as such of around 30% over a period of six months. And the banks certainly did not moderate in South Africa, but there is no doubt that In addition, this kind of “bad” debt is mostly their behaviour subsequently. Late last year, millions of South Africans are completely used for expendable items that are consumed estate agents criticised banks for providing enslaved by debt. Just ask those who have instantly or quickly and do not grow in value, home loans at prime plus 6% on homes priced garnishee orders against their salaries, such as meals and entertainment, cars, clothing, between R400 000 and R750 000. At a Western forcing their employers to pay their creditors jewellery and gadgets. Cape Franchisees Conference, Rawson Property first and directly, before they receive their Group chairman, Bill Rawson and Mike van salaries, often leaving them little to survive But even lower interest debt can shackle Alphen (a former Absa regional manager), used the rest of the month. Just ask the average people to seemingly never-ending interest such phrases as ‘totally unjustifable’ and ‘out of South African whose debt-to-income ratio payments. For example, on a R1 million bond all proportion’ to describe the situation. “Never stands at 75.8% - leaving just R24 out of each paid over 20 years at 8.5% interest, you will pay before in the history of South Africa have banks R100 they earn to live on. Just ask those who R1 082 775 in interest. In efect, that means worked on such fagrantly exaggerated mark-ups. have efectively become “bonded labourers”, that a R1 million property will cost you double A 6% over prime interest rate equates to a 70% working only to pay of their debt, and forced - R2 082 775 - by the end of the 20-year term. mark-up,” noted Rawson. to make ever-more debt just to survive month And that is at a historically low 8.5% interest to month. rate. Just imagine how fast a 25% interest rate But this is just one example of the reckless can hurtle you towards fnancial slavery. lending practices that abound. Even debt at But how do people become so enslaved to lower interest rates provided recklessly will debt? And what can we do about it? Tere are legal and moral issues that must be - just like “bad” debt – create a shortcut to considered in respect of the interest payable on fnancial hardship. Tis became patently clear The path to slavery... loans created through the fractional reserve during the property boom years, just before the It isn’t debt as such that enslaves people. In the system, which allows financial institutions to National Credit Act (NCA) came into efect, current global financial system, it is difficult “create” the money loaned through electronic when the banks were freely handing out 118% to get ahead without access to debt fnancing: bookkeeping entries. Because the banks do not home loans. And when property prices stopped most people will not be able to buy a car or fund “lend” something they had prior title, ownership growing rapidly and interest rates soared, university studies, much less acquire a property, and rights to, it is questionable whether a “loan” thousands of people found themselves in severe without debt. agreement legally exists. And this raises a moral fnancial trouble. and legal issue around the charging of interest. Low-interest, longer-term debt that allows Why is interest charged when the bank does not Te implementation of the NCA brought hope you to acquire assets, such as property or loan its own money to the borrower? How can that credit consumers in South Africa would qualifications, which will grow in value over the bank charge interest on a “loan” that is not receive some protection from such unscrupulous time or increase your earning capacity (such legally valid? lending practices. But the fnancial institutions as a home loan or a student loan) can help merely responded by taking their reckless Unethical lending practices you achieve financial freedom, if it is used lending to even greater heights. intelligently and responsibly. Given the incredible power of compounding interest to enslave people financially, it is Tis is clearly evident in the alarming growth So what enslaves people is not debt as such. no surprise that the Libor scandal caused in unsecured lending. Unsecured lending refers Rather, it is the high compounding interest such an outcry. The banks were exposed for to loans that are not secured by collateral, payable on particularly short-term debt; the manipulating the Libor and Euribor interbank allowing the banks to charge high interest rates, reckless and irresponsible lending practices of interest rates - providing false fgures on key which traps people into a spiral of debt. credit providers; and the unethical and immoral interest rates upon which mortgages and loans debt collection processes that turn honest, are provided - afecting millions of people and “The National Credit Regulator (NCR), hard-working people into “bonded” labourers. companies across the globe. realising that the easy access to unsecured lending was getting out of control, issued a The shackles of compounding interest But don’t believe for a moment that the Libor Code of Conduct on 1 May 2013, requesting Te interest charged on debt is a good indication scandal was just a global financial conspiracy. its members to improve their affordability of how short a path it is to fnancial slavery. In 2009, Trevor Manual, then Finance analysis when considering a loan application,” www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 13

COVER STORY comments Meyer de Waal of My Budget Fitness. repayments. And it is a situation that is rapidly Just ask those South Africans who have lost “Tis shows a realisation of the actual debt time deteriorating as the cost of living rises steadily and everything they own to unscrupulous debt bomb that exists. In the second quarter of 2012, the prospect of interest rate hikes looms. collection practices. Just ask those who cannot get a staggering R9 billion in unsecured loans were a job because they have been blacklisted and these Bad business practice granted to borrowers who earn less than R15 000 adverse listings remain on their credit profles for per month, compared to only R1.5 billion in home Unsecured lending, even when considered years, even after the debts have been settled. loans for borrowers in the same income category.” purely from a common sense perspective, is bad business practice. Lending money to people Just ask those whose homes have been Although the Reserve Bank says that the level who cannot repay the debts, let alone the hefty repossessed only to be sold in execution on of unsecured lending “doesn’t pose a risk to the interest charged on these loans, is a shortcut auctions for up to 40-50% less than market value. banking system as a whole”, distressed borrowing to disaster. Unsecured lending is uncannily And that’s not the end of it: in addition to losing and defaulting on loans is rife. According to the similar in concept to the NINJA (No Income, the property, which the banks valued and accepted NCR, at the end of 2012, a quarter of unsecured No Job or Assets) loans that brought about the as sufcient security for the loan, they then face loans in value terms were 30 days or more in subprime crisis in the US and set in motion a massive shortfalls between the outstanding bond arrears, and 15.7% of unsecured loans were 121 global fnancial crisis the world is still trying to amount and the price achieved on auction. Tey days or more in arrears. South Africa’s biggest recover from. are forced to sign an acknowledgement of debt lender, African Bank, wrote of R445 million of to pay back this shortfall, leaving them with no bad loans and reported a 26% drop in frst-half And as we discovered in the June 2013 edition property, huge debt and, thanks to a blacklisted proft in April, resulting in a sharp decline in its of REI Mag, bad business practice among the credit record, limited opportunities to rent a home share price. Tis could have a ripple efect on other country’s banks is not a government problem. or get a job. unsecured lenders. Ultimately – as the Cypriots recently discovered – the buck stops the people: we will pay for the Just ask those whose loans have been securitised, Many experts have expressed deep concerns banks’ bad business practice. and yet the banks illegally repossessed their about the level of debt defaults that could occur homes and personal property. As we discovered Unethical and immoral debt collection if interest rates begin to rise, given that more in the May 2013 edition of REI Mag, it is illegal than 50% of South Africa’s 19.6-million credit Millions of South Africans have already paid a for a bank to repossess any property if the debt in consumers already have impaired credit records, high price for the banks’ reckless lending, thanks question has been securitised, because the bank no being three or more months in arrears with debt to unethical and immoral debt collection practices. longer has any rights to the “loan” which has been 14 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

UPFRONT securitised and now belongs to another entity. wait for government to protect or enforce our powerful strategy. For example, as BetterBond Recently, Peter Moyo from SABC3’s Special rights. And the fastest way we, the people, can explains: on an average home of R900 000, Assignment exposed the banks’ securitisation stop them is to cut of the demand, especially acquired with an 18% deposit on a 20-year loan practices on national television. Follow the story for “bad” debt, and to stop feeding their greed at an interest rate of 8.5%, the average monthly on NewERA’s website and have a look at some with obscene interest payments that enables bond repayment is R6 400 a month. If you pay of the responses proposed by the UBUNTU them to enslave people en masse and to place the only the minimum amount each month, you will pay some R800 000 in interest over the 20 “While most of the people and the media years of the loan. By contrast, if you pay just 10% are blissfully ignorant and unaware of the more than the minimum each month – or an additional R640 in this example – you will pay unlawful and fraudulent activities of the banks, of the loan in 16 years instead of 20, and save around R185 000 in interest. no one is untouched by their criminal activity” “Focus on repaying the debts with the highest interest rates quicker, but without neglecting Liberation Movement should a debt that has stability of the entire fnancial system at risk, your promises to pay on other debts,” adds Tanya been securitised be handed over by the bank to with no regard for the consequences that will Gerstner of Gerstner Attorneys Inc. lawyers to initiate legal action against you. afect every one of us. Even if you are not in complete fnancial dire Cut of the demand But these practices extend beyond the home straits yet, take a good look at your finances loan industry. The Star recently revealed that The fastest way to stop the banks without and realise that looming interest rate hikes hundreds of cars are being repossessed by destroying the entire fnancial system is to cut will send many more down the slippery slope agents employed by banks, who drive around off the demand, bluntly and absolutely. We of the debt spiral. Knowledge and discipline in unmarked cars fitted with number plate refuse to enslave ourselves to compounding are vital. “Through tools such as My Budget recognition cameras. According to the report, interest of 25% or even 30%. We refuse to Fitness, you can be educated, mentored and the banks and owners of the technology accept loans that we cannot repay. We start empowered to manage your fnances according claimed they were acting within the law, but the living within our means. to a budget prepared taking into account your repossessions are illegal. Only a sheriff of the actual income and expenses, to track each court can legally hand people court orders and Cut up your credit cards and your store account rand you spend on your mobile phone with the repossess their belongings. cards. Cut down on lifestyle expenses. Don’t mobile2budget tool, and to maximise savings spend what you don’t have. Respect the power of through debt consolidation to get out of debt Furthermore, a Third Degree investigation your “promise to pay” by using it only to acquire as soon as possible,” says Meyer de Waal of My recently revealed that, of a random sample of assets that will build fnancial independence, only Budget Fitness. 1 450 garnishee orders, only three were legal. at low interest rates and only when you can indeed Te rest were either defective or fraudulent. keep this all-important “promise to pay”. Blue Oaks Systems has launched a unique online tool called RESET, designed to assist Roughshodding over our rights? Pay of your existing debt debtors by analysing their debt. “Consumers are And all this is happening despite our advanced If the fnancial system – which is based on our not aware that a monthly savings may exist in Constitution and laws such as the NCA, because “promises to pay” – crumbles, every single one their current debt,” explains Teuns Hanekom not all credit providers play by the rules. As of us will be afected. We must ensure that our of Blue Oak Systems. “Given the average savings Michael Tellinger of the UBUNTU Liberation “promises to pay” are valid and trustworthy of R2 300 per month per consumer reviewed, Movement puts it: “While most of the people and so that the foundation of the system does everyone’s debt should be reviewed. Savings the media are blissfully unaware of the unlawful not collapse. However, we need to settle our such as these will signifcantly improve personal and fraudulent activities of the banks, no one “promises to pay” as fast as possible, to free cash fow, increasing savings or at least reducing is untouched by their criminal activity. More ourselves from the shackles of compounding the need to borrow more. If you don’t enjoy a than 20 million South Africans’ lives have been interest payments. monthly cash fow improvement that makes a destroyed by their draconian behaviour. Tey act real difference, sooner or later you’re going to with impunity and seem to be above the law. Teir At the very least, pay the minimum repayment borrow again.” actions go unpunished and are so well hidden and amount on time each month to avoid additional protected by a complex legal system that many interest payments and penalties that increase your Another option is get the help of a debt who have tried to expose them have been silenced debt burden further. counsellor, registered with the Debt Counselling in various ways.” Industry portal, theDCI.co.za, to reduce your But, because the minimum repayments cover debt burden. Professional debt counsellors will How to stop the rot mostly interest and very little of the capital negotiate more favourable repayment terms Te banks’ and other credit providers’ reckless amount borrowed, make every efort to pay more to help you manage your debt better and pay lending practices must be stopped. We cannot than the minimum amount required. Tis is a it of faster. “For a less formal process without www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 15

COVER STORY WHAT IF THERE WAS A WAY THAT intervention of the courts, get an attorney to court are regulated by statute and have a code to cut through the rhetoric and commit to fxing negotiate lesser payments with your creditors on of conduct. Tey may not mislead the public or the wholesale inadequacy and the secrecy that YOU COULD TAKE THE RISK OUT OF your behalf,” advises Gerstner. misrepresent themselves, or make unjustified pollutes the global fnancial system. Financial RESIDENTIAL PROPERTY LETTING? threats. The UBUNTU Liberation Movement transparency will aid growth and contribute If you are already in arrears with some of your notes that people have rights to prevent their to efcient markets. Te only people to fear a creditors, enlist the help of a debt counsellor property from being taken against their will. transparent fnancial system are law-breakers.” Today, some 2.3 million people rent property in South Africa. There registered with theDCI immediately. Do not As such, it has published a document “How to is huge potential in the rental property market – but every landlord wait until you receive a Section 129 notice Deal with the Sherif”, which is available on its So dire is the situation that even Pope or estate agent will tell you that there are also risks associated with letting residential property. from a creditor, because that will exclude the website. It suggests that legal and lawful rights Francis, in his first major speech on finance particular debt from the protection you enjoy in exists which allow citizens to pay the sherif with and the economy, during an address to foreign “Unethical conduct of to end the ‘tyranny’ of money. He attacked the legwork out of the letting process, and alleviate the terms of the NCA. ambassadors in the Vatican, urged global leaders What if there was a way that you could take all the Know you have rights fnancial institutions “dictatorship” of the global fnancial system and risks at the same time? No matter how deeply indebted you are, you have called for a more ethical fnancial system and Rentshield has introduced a new, first-to-market, “zero deposit” rights as a credit consumer and you should do can only continue if we curbs on fnancial speculation. residential letting tool that helps landlords and estate agents do nothing. The buck manage their property portfolios more efficiently and effectively. everything in your power to ensure your rights are respected and upheld. Here, at the southern tip of Africa, the heat is on stops with us – we too, with the UBUNTU Liberation Movement For example, the NCA caps the rates of interest must be the change hosting a public march in Sandton, Johannesburg creditors may charge. The in duplum rule, as early in July 2013, to expose the fraudulent activity we want to see” a pertinent case in point, prohibits interest of the banks and to deliver memorandums to the charges that exceed the amount of the principle major banks, their law frms, the Banking Ombud Benefits to landlords: Benefits to real estate agents: debt. In addition, if you cannot meet your debt a “promise to pay” or promissory note, which is and the Reserve Bank. • Eviction costs: Rentshield covers legal costs • Business growth: Rentshield offers rental repayments, section 129(1) of the NCA stipulates defined as “incorporeal property” and lawful up to R50 000 for the eviction of a non- paying agents a competitive edge, enabling them to that the bank and the client must ‘develop and means of payment according to the South African “Each one of us is completely enslaved by the tenant. They also manage the eviction process. grow their rental property portfolios. agree on a plan to bring the payments under the High Court Rules. global banking cartel and the banksters that issue agreement up to date’, but this is often simply privately printed money to enslave everyone alive,” • Loss of rental income due to eviction: • No extra costs: The rental agent incurs no ignored by the banks and other credit providers. “Also remember, if no legal action has been comments Michael Tellinger of the UBUNTU In line with the Consumer Protection Act, tenant additional expense by using Rentshield. eviction is a lengthy process, often taking as long taken against you in respect of an outstanding Liberation Movement. “The global banking • Increased rentals: Without the need for a as three months. Rentshield protects the landlord The Constitutional Court has ruled that it debt for three years, the debt may prescribe and cartel, of which the South African Reserve deposit, potential tenants’ interest will be against loss of income during this time, offering is unconstitutional for a bank to sell a home in can, in efect, no longer be ‘collected’”, says de Bank is a part, has become the largest organised increased, translating into more rentals and coverage of up to three month’s rent. execution where the debt is disproportionately Waal. “It is crucial to understand this, because if crime syndicate the world has ever seen. These fewer unoccupied properties. low compared to the value of the home or to you are unaware of this right, you may actually banksters control everything, including the legal • Loss of rental income due to absconding • No trust accounts: No deposit means no the amounts already paid in. In addition, only a nullify the efect of ‘prescription’ on a debt, ie if systems and most of the judiciary that is supposed tenant: In the event of a tenant absconding from trust account administration. judge - and not a high court registrar - can grant a a debt collector contacts you after four years and to uphold our human rights. Tis is completely the property before the stipulated rental period is judgment to a bank or issue a Writ of Execution, you agree to pay a debt that has prescribed, the unconstitutional and violates all our human rights complete, Rentshield will cover up to one • Protection of agent commission: In the and only once the bank has shown that the entire debt – through your agreement – comes to self-determination. We will not have complete month’s rent. event of a claim, the rental agent will still be sale of the property is justifiable, given all the due again.” freedom as the human race until we have complete entitled to their rental commission for those • Unpaid accounts and malicious damage: circumstances of the particular case. freedom from the economic tyranny and fnancial Utilities payable by the tenant that are in arrears, months covered by Rentshield. Get involved slavery imposed on us by the banksters, their such as electrical bills, as well as malicious • Less administration: Fewer hours spent on Whatever amount is outstanding, Scott Cundill Truth about the global financial system – and crooked lawyers and corrupt judges who uphold damage caused to the property by the tenant, administration means more time to manage of NewERA warns: “Be particularly wary of our local banks - can no longer be suppressed. their fraudulent activity.” will be covered by Rentshield up to a combined properties and source new business. the banks’ ‘quick-sell’ options for distressed In June, the International Consortium of amount of one month’s rent. homeowners and of signing any documents in Investigative Journalists (ICIJ) exposed how the RESOURCES • Credit vetting costs: Rentshield has a no- cost service for agents to credit vet potential which you admit indebtedness. Tese contracts fnancial system is being made to work against • Damages caused to property: Rentshield Blue Oaks Systems will cover up to one month’s rent for damages tenants. Their credit vetting facility is superior often contain clauses through which the banks the interests of ordinary citizens throughout the Gerstner Attorneys to the property caused by the tenant. to any other similar facility currently used in the obtain your consent to judgment or to an auction, world. “Te ICIJ information is further proof that My Budget Fitness South African property market. should your property not be sold on time. Tis way too many banks, law frms and accountants • Peace of mind: You can rest assured that National Credit Regulator Rentshield will take care of all the legwork • No more inspections: Rentshield takes leaves in you a serious quandary because you have conspire to rob countries of trillions of dollars of theDCI associated with property letting. care of in- and out-inspections at no cost to you. unwittingly signed away all your rights.” much needed revenue,” says Porter McConnell, Manager of the Financial Transparency Coalition BetterBond Many consumers have also faced sherifs of the (FTC). “Tis is neither sustainable nor tolerable UBUNTU Liberation Movement court who act without the correct documentation and must be fxed for the well-being not only of NewERA and with undue force, sometimes aided and the international fnancial system, but for national The Financial Transparency Coalition The cost of Rentshield is included in the total monthly rental paid by the tenant. To qualify, tenants must be South abetted by police officers, and who remove and local governments. We urge global leaders Rawson Property Group or attach property unlawfully. Sheriffs of the gathering for the G8 meeting in Northern Ireland African citizens and be able to afford the rent. All leases protected by Rentshield must be a minimum of 12 months. For more information, visit: www.rentshield.co.za or call 0861 DEPOST / 0861 376748. 16 July 2013 SA Real Estate Investor www.reimag.co.za

WHAT IF THERE WAS A WAY THAT YOU COULD TAKE THE RISK OUT OF RESIDENTIAL PROPERTY LETTING? Today, some 2.3 million people rent property in South Africa. There is huge potential in the rental property market – but every landlord or estate agent will tell you that there are also risks associated with letting residential property. What if there was a way that you could take all the legwork out of the letting process, and alleviate the risks at the same time? Rentshield has introduced a new, first-to-market, “zero deposit” residential letting tool that helps landlords and estate agents manage their property portfolios more efficiently and effectively. Benefits to landlords: Benefits to real estate agents: • Eviction costs: Rentshield covers legal costs • Business growth: Rentshield offers rental up to R50 000 for the eviction of a non- paying agents a competitive edge, enabling them to tenant. They also manage the eviction process. grow their rental property portfolios. • Loss of rental income due to eviction: • No extra costs: The rental agent incurs no In line with the Consumer Protection Act, tenant additional expense by using Rentshield. eviction is a lengthy process, often taking as long • Increased rentals: Without the need for a as three months. Rentshield protects the landlord deposit, potential tenants’ interest will be against loss of income during this time, offering increased, translating into more rentals and coverage of up to three month’s rent. fewer unoccupied properties. • Loss of rental income due to absconding • No trust accounts: No deposit means no tenant: In the event of a tenant absconding from trust account administration. the property before the stipulated rental period is complete, Rentshield will cover up to one • Protection of agent commission: In the month’s rent. event of a claim, the rental agent will still be entitled to their rental commission for those • Unpaid accounts and malicious damage: months covered by Rentshield. Utilities payable by the tenant that are in arrears, such as electrical bills, as well as malicious • Less administration: Fewer hours spent on damage caused to the property by the tenant, administration means more time to manage will be covered by Rentshield up to a combined properties and source new business. amount of one month’s rent. • Credit vetting costs: Rentshield has a no- • Damages caused to property: Rentshield cost service for agents to credit vet potential will cover up to one month’s rent for damages tenants. Their credit vetting facility is superior to the property caused by the tenant. to any other similar facility currently used in the South African property market. • Peace of mind: You can rest assured that Rentshield will take care of all the legwork • No more inspections: Rentshield takes associated with property letting. care of in- and out-inspections at no cost to you. The cost of Rentshield is included in the total monthly rental paid by the tenant. To qualify, tenants must be South African citizens and be able to afford the rent. All leases protected by Rentshield must be a minimum of 12 months. For more information, visit: www.rentshield.co.za or call 0861 DEPOST / 0861 376748. www.reimag.co.za

NEWS ALERTS BY MONIQUE TERRAZAS Expropriation Bill A Grave Concern The Good The Bad The Ugly Churches Unite Against E-tolls Erosion of Property Rights Global Carbon Emissions Hit Record High Once the Transport and Related Matters Experience throughout the world and To prevent climate effects such as crop failure Amendment Bill, already approved by The throughout history has incontrovertibly shown and melting glaciers, the rise in global average National Council of Provinces, is signed into law that secure property rights are essential for temperature needs to be limited to less than 2°C by President Zuma, e-tolling in Gauteng will economic stability, growth and well-being of this century. Tis would require emissions to be kept commence. But some good has come of this... any society. For this reason, the latest draft of the to about 44 billion tonnes of carbon dioxide (CO2) Expropriation Bill should be a grave concern to equivalent by 2020. However, the International In May, the Catholic Church slammed the all South Africans. It is – according to Advocate Energy Agency (IEA) recently announced that tolling project, saying people should not buy e-tags Johan Kruger of the Centre for Constitutional China led a rise in global CO2 emissions in 2012 or collaborate with e-tolling in Gauteng, due to the Rights – “arguably so loosely formulated that to a record high, dashing hopes of limiting global lack of transparency and the unfairness of tolling its enactment might result de facto in a severe warming to what scientists regard as an acceptable an existing road without providing alternative erosion of property rights as protected in terms level and underscoring the reality that the world is routes. Shortly afterwards, other churches of section 25 of the Constitution”. on a path to an average temperature rise of between expressed their support for the Catholic Church 3.6°C and 5.3°C, which will unleash unprecedented and joined it in speaking out against the e-tolls Kruger notes that the proposed Bill has to climate chaos. – including the Central Methodist Church, the balance the right to private property ownership Evangelical Lutheran Church in Southern Africa with the right to infringe upon that right – The IEA has urged governments to adopt four (ELCSA), the Union of Orthodox Synagogues striking a proportionate balance between policies as a matter of urgency: improving energy and the Dutch Reformed Church, which said that these two opposing rights. He argues that this efficiency in buildings, industry and transport; e-tolling poses a moral, ethical dilemma. Of course, balance cannot be achieved without a much more limiting the construction and use of inefcient power government could hardly ignore such an outcry. precise defnition of the ‘public interest’; a much plants; halving methane emissions; and partially Deputy President Motlanthe met with religious more restrained defnition of what constitutes phasing out fossil fuel subsidies. These policies leaders representing the South Africa Council of property – as ‘property’ is not limited to land; will ensure climate goals can be reached without Churches and the South African Catholic Bishops’ and a much clearer idea of the role and powers of harming economic growth. “Once again we are Conference (SACBC), which is a positive sign, expropriating authorities. reminded that the gap can be closed this decade, even though government did little more than using proven technologies and known policies, and acknowledge their concerns and reiterated that Says Kruger: “As the draft Bill now stands, an without harming economic growth in any region,” these concerns “had been adequately addressed”, expropriating authority at any level of government said UN climate chief, Christiana Figueres. although that is clearly not the case. Nevertheless, would be able to initiate expropriation proceedings it is certainly encouraging that diverse religious related to any property of any person if they But we cannot wait for government – the groups in the country have found that collectively believe – in their arbitrary view – that it would be latest carbon emissions data clearly shows that they can make an impact. It is only when civil in the ‘public interest’ to do so. Tey could take governments are unwilling or unable to take the society and the people of South Africa stand possession of the property with immediate efect appropriate action. We, the people, must take together as one that we can bring about real change. after having given notice and before payment of action now. The technology and the know-how Hopefully speaking out – in unison – against e-tolls any ofer of compensation that they might think are available to improve energy efficiency in our is just the beginning of civil society – regardless of appropriate. Tis would result in the expropriated buildings, industry and transport. We can slow race, religion or language – collectively taking a party having to wait until a court determines fair global warming and prevent catastrophic climate stand against government tyranny and demanding and equitable compensation – which might take change, but not if we wait for any government to accountable and responsible government. years to achieve.” take action. 18 July 2013 SA Real Estate Investor www.reimag.co.za

NURCHA’s Affordable Housing Programme has been actively involved in ensuring the delivery of 33.990 housing units over the last 10 years. The programme forms the cornerstone of the NURCHA Lending Portfolio, which has further programmes in infrastructure and subsidy housing. Since its inception, the Affordable Housing Programme has fnanced over R4.8 billion worth of projects across nine provinces. The client base extends from the largest JSE listed and non listed affordable housing developers to emerging contractors. In house development experts ensure that funding structures are tailor made, recognising that no two deals are the same. NURCHA has partnerships with a variety of leading commercial fnanciers and asset managers. As a Development Finance Institution (DFI) we are fully committed to addressing the critical housing backlog that exists in South Africa. The funding facilities offer fexibility, competitive rates and are designed to provide risk mitigation measures to our clients. NURCHA’s service offering extends from funding for site acquisition to construction of top structure. Emphasis is placed on developments where the end unit selling price is below R500 000. www .nurcha.co.za Contact Nurcha: 0861NURCHA/0861 687 242 | Email: [email protected] Registered Credit Provider (NCRCP 959) www.reimag.co.za

RESIDENTIAL HOT SPOTS PROVINCIAL PERFORMERS Highlighting the top performing suburbs in the major provinces, based on highest rate of annual inflation and indicated for e ach value band. Mid Value : R250k – R700k High Value : R700k – R1.5mil Luxury : R1.5mil + Gauteng Gauteng Gauteng Cosmo City Ext 7 - City of Johannesburg 25.38% Vaalmarina Holiday Township - Midvaal 16.30% Fernridge Estate - City of Johannesburg 17.60% Cosmo City Ext 6 - City of Johannesburg 23.82% Kent View - City of Johannesburg 15.62% Eastgate - City of Johannesburg 11.33% Western Cape Western Cape Western Cape Summerville - City of Cape Town 27.70% Avalon Estate - City of Cape Town 31.25% Schoneberg Estate - City of Cape Town 17.25% Coniston Park - City of Cape Town 23.16% De Molen - Swartland 13.90% Valmary Park - City of Cape Town 11.10% Eastern Cape Eastern Cape Eastern Cape Michausdal - Inxuba Yethemba 22.24% Headlands - Buffalo City 10.88% Bonnie Doon - Buffalo City 10.61% Tyutyu North - Buffalo City 21.45% Nahoon Valley Park - Buffalo City 10.52% Vincent - Buffalo City 8.33% Kwazulu Natal Kwazulu Natal Kwazulu Natal Shakaskraal - Kwadukuza 16.52% Stanger Manor - Kwadukuza 10.16% Zinkwazi Beach - Kwadukuza 12.12% Shastri Park - Ethekwini 16.47% Hospital Park - Emnambithi/Ladysmith 9.23% Dunkirk Estate - Kwadukuza 8.12% Free State Free State Free State Merriespruit - Matjhabeng 27.59% Olive Hill - Mangaung 18.61% Woodlands Country Estate - Mangaung 8.25% Phuthaditjhaba-A - Maluti A Phofung 21.16% Jordania - Moqhaka 15.61% Hillsboro - Mangaung 5.40% FREE STATE Presenting the Top 5 suburbs per area value band in the Free State based on the highest rate of inflation for a 1 and 7 year period. The median represents the current median value for the suburb. # Suburb 1 year Median # Suburb 7 year Median Mid Value : R250k – R700k Mid Value : R250k – R700k 1 Merriespruit - Matjhabeng 27.59% R 550,000 1 Phuthaditjhaba-A - Maluti A Phofung 285.57% R 420,000 2 Phuthaditjhaba-A - Maluti A Phofung 21.16% R 420,000 2 Merriespruit - Matjhabeng 211.33% R 550,000 3 Welkom Ext 19 - Matjhabeng 15.32% R 350,000 3 Petrusburg - Letsemeng 205.77% R 450,000 4 Ehrlichpark - Mangaung 14.40% R 620,000 4 Jagersfontein - Kopanong 202.77% R 420,000 5 Marquard - Setsoto 14.29% R 370,000 5 Welkom Ext 19 - Matjhabeng 194.37% R 350,000 High Value : R700k – R1.5mil High Value : R700k – R1.5mil 1 Olive Hill - Mangaung 18.61% R 760,000 1 Olive Hill - Mangaung 164.69% R 760,000 2 Jordania - Moqhaka 15.61% R 970,000 2 Sasolburg Ext 4 - Metsimaholo 121.70% R 820,000 3 Panorama - Moqhaka 12.41% R 1,150,000 3 Harrismith Central - Maluti A Phofung 117.66% R 780,000 4 Bergsig - Maluti A Phofung 8.88% R 1,300,000 4 Panorama - Moqhaka 110.79% R 1,150,000 5 Eureka - Dihlabeng 8.83% R 1,150,000 5 Jordania - Moqhaka 109.85% R 970,000 Luxury : R1.5mil+ 1 Woodlands Country Estate - Mangaung 8.25% R 2,450,000 1 Woodlands Country Estate - Mangaung 111.18% R 2,450,000 2 Hillsboro - Mangaung 5.40% R 1,500,000 2 Hillsboro - Mangaung 75.41% R 1,500,000 Disclaimer: Lightstone applies advanced statistical methods to a comprehensive property data base - compiled from the Deeds Office, the Surveyor General and other sources - to generate property market data, insights, trends and forecasts. Despite the statistical and actuarial rigour applied, Lightstone cannot guarantee the accuracy and reliability of the data. Furthermore, any information provided does not amount to advice and may not be applicable in some cases. Lightstone does not take responsibility for any losses incurred as a result of any person acting or omitting to act as a result of the publication of this information. www.reimag.co.za

REI REI Residential Residential Guarantees For Rentals Concern Over Home Loan Protect Against Non- Legislation Disclosure Property investors who invest in short-and long-term rentals face big challenges when The Banking Association of SA has warned In terms of the Consumer Protection Act, the tenant leaves. Often they fnd the security against interference in the ‘stable’ banking sector, as it stands right now, says Lanice Steward, deposit doesn’t cover damages to the property, fearing banks may be forced to make home loans managing director of Knight Frank Anne or a tenant absconds and they lose that income to clients who do not qualify. Concern has arisen Porter, all sellers of residential properties must until they secure a new tenant. Tere have been following Human Settlements Minister Tokyo sign a condition report on the property that cases in the holiday rental market where property Sexwale’s intention to ‘deracialise’ residential they are selling, providing all known details of damages have cost the property owner anywhere suburbs, using the Home Loan and Mortgage defects on the property. from R200 000 up to R700 000. Disclosure Act, among other measures. Te Property Practitioners’ Bill, which is being What has happened in the short-term rental Association head, Cas Coovadia, warned that drafted by the Estate Agency Affairs Board market is that due to changes in the macro the government should not interfere in the and will govern all estate agents and real estate environment, a one month security deposit has sector. ‘We have the second most stable banking principals in South Africa, will include this as become insufcient. With the demand now for sector in the world. We shouldn’t do anything a requirement from all agents, to bring it in line two to three month’s rental as a security deposit, to destabilise it,’ Coovadia is quoted as saying. with the Consumer Protection Act. it is difcult to conclude rental agreements. But Xolani Xundu, Sexwale’s spokesperson, However, it is imperative now, said Steward, On Friday 17th May GEXsa ofcially launched denied the Minister intends to force banks to that all sellers sign this condition report when in Cape Town – Guarantee Exchange South give home loans to people who do not qualify. they list their property. Tis should be supplied Africa provides much-needed guarantees to long- “Te legislation obliges banks to give loans to by the agent with whom they are working and and short-term rental owners and agents should a people of all races. It creates dialogue between should become part of the agreement of sale. tenant abscond or leave the property in a bad state. the Minister and the banks.” This condition report is to protect the seller against non-disclosure, she said. Valuable Input Laurie Wener, MD Paul Abbott, Bill Rawson, Johann le Roux, Martin Goodman, Pam Golding Group Franchisee, Rawson Chairman, Rawson Executive Director, Director, Rentshield Propell “Tere has been a “Landlords today, “Two R1 million units “If you’re considering “It’s the perfect time resurgence of investor appreciate that a good will probably give a buying a sectional to be in the property interest and buyers rental agent, using the better return than title unit for the frst rental industry – of second homes in ‘tools’ available to such one at R2 million. time, there are many as indicated by all suburbs, but most people (Payprop, TPN Similarly, three at things to consider Rentshield’s research notably those along and Search Works) R700,000 will probably and investigate before survey, the demand the coastline. Middle are able to weed out bring in a better return choosing the scheme in for rental properties market family homes 99% of unreliable and than one at R2,1 which to buy into.” outstrips supply.” are in demand in areas irresponsible tenants.” million.” which ofer good schooling.” www.reimag.co.za July 2013 SA Real Estate Investor 21

SMART MOVES BY KOOS DU TOIT You Don’t Need Money To make money Repaying the loan Getting the money ost of us have grown up with the belief that “you need money to make Of course it is all good and well if the bank Of course, the banks have significantly Mmoney”. While hard cash may be gives you a bond, but how will you repay the tightened their credit criteria, and it is not as a requirement for most traditional savings bond every month? Another outstanding easy to obtain a 100% bond as it was fve years and investments, this old adage is indeed a feature of buy-to-let property is the fact that ago. But this does not mean it is impossible. Te myth when it comes to buy-to-let property you are not simply investing in a property banks do still grant 100% bonds, particularly on investment. that will appreciate in value over time, you their properties in possession. are acquiring an asset that is also generating The reason is simple: buy-to-let property an income each month – the rental. And it It does mean that investors need to approach allows investors to use the fundamental is this immediate rental income that allows their loan applications with professionalism, fnancial principle of “leveraging” or “gearing”, ordinary people to invest in property without ensuring their applications comply with the which is widely used by institutional investors hard cash, because the rental income from a banks’ stringent criteria in terms of afordability and wealthy individuals to overcome the well-chosen property will cover most – if not and acceptable security, that their cash fow can challenge of not having enough hard cash all – of the monthly bond repayments and indeed support the repayment of the loan and to invest in a good opportunity. It is a very other costs involved with owning and renting that the value of the property – as the security for powerful principle, as Archimedes reminded us a property. the loan – will in fact cover the outstanding loan hundreds of years ago when he said: “Give me a should the investor default or sell. In doing so, Making money without having money lever long enough and I shall move the world”. investors may fnd the services of a professional So, in the end, an investor can acquire a buy-to- bond originator that specialises in buy-to-let Using other people’s money let property with the bank’s money, and then property, such as P3 Bonds, indispensible. In very simple terms, leveraging or gearing is use the rental income paid by the tenant to pay simply using other people’s money, instead the bank each month. Once the bond is paid If you present the banks with a viable of your own, to invest. And the ability to of – and it is possible to do so within as little proposition that is well researched, thoroughly leverage or gear an investment is one of the as ten years - you will have a property worth and accurately motivated, neatly and correctly most outstanding and unique features of a buy- much more than R500 000, thanks to capital presented, and respects their lending criteria, to-let investment strategy. What few people appreciation, as well as an ongoing monthly you will make it easy for the banks to approve the understand is that you don’t need R500 000 in income that increases in line with infation year fnance. It may require a bit more work, but the hard cash to buy a buy-to-let property valued after year. And this was achieved without a efort will be thoroughly worth it, allowing you at R500 000. You can borrow money from lump sum investment, and without a substantial to harness the power of leveraging - or gearing as the bank in the form of a home loan to buy monthly investment. the fnancially-savvy call it – and enabling you to the property. By obtaining a 100% mortgage make money and create wealth, even when you or home loan, the investor would ‘gear’ the It means that you can indeed make money – don’t have hard cash to invest. investment 100%. In the current market, you earning capital growth and a growing monthly may need a 10% deposit of R50 000, which income from a buy-to-let property – without RESOURCES would amount to 90% gearing. having money to invest. P3 Investment Group 22 July 2013 SA Real Estate Investor www.reimag.co.za

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STRATEGIES BY KOOS DU TOIT Investigate thoroughly Before you buy-to-let t is widely known that selecting the right the property expenses and break-even point is implementing changes that could increase investment properties is fundamental to the reached. Calculate what the monthly shortfall the yield? Can you subdivide, extend the unit, Isuccess of your property investment business. will be each year and how long it will take to renovate or add a garage? The benefits of choosing the right property reach break-even, to ensure you are able to fund are legion: you can be almost assured that you these shortfalls comfortably and that the period it 10. Bank valuation – Does the bank validate will enjoy good capital growth for many years, will take to reach break-even point is acceptable. your decision to acquire the property by that you will be able to attract the right type of granting a mortgage bond? tenant, that the property will rarely - if ever - be 4. Condition of the property – Te older the vacant, and that the maintenance and upkeep building, the higher the maintenance and repair These 10 crucial variables should be costs will be reasonable. costs are likely to be. And, in general, the better investigated for every single property you the condition of the building, the higher the evaluate. If it seems like too much work or Yet, one of the biggest pitfalls that property rental potential. efort, it might be better to harness the skills investors step into is buying a property without and expertise of a professional property conducting a thorough investigation. This 5. Vacancy – Te rental demand in the area investment organisation, who have dedicated may be because investors rarely understand in which the property in located is crucial, teams scouring the market for properties that what a thorough investigation encompasses. but even where the demand is high, smart meet these requirements, from which their For this reason, the P3 Investment Group investors calculate a vacancy factor into their members can select the most promising for has narrowed down their stringent criteria for cash fow calculations. further investigation. a good investment opportunity to 10 crucial Use technology variables that all investors can apply to their 6. Area – What is the general condition investment decisions. of the area in which the property is situated Another powerful tool investors can use to and its longer term prospects for growth and ensure they can make the right choice is state- 10 crucial variables to investigate development? Tis will determine the capital of-the-art and custom-designed software, such 1. Price – Given the spectacular returns an growth rate you can expect on the property over as the P3 Property Wealth Manager, which investment in a buy-to-let property produces, the years. allows investors to “look into the future” and to it isn’t necessary to hunt for “bargains” only. assess the quality of the investment opportunity However, you should never pay more than the 7. Levies and taxes – How much will you quickly and accurately. reasonable market value. have to pay in levies, rates and taxes and how do these compare to similar areas? Te Smart property investors consistently 2. Rental income – Contact several rental levies, rates and taxes on a property can have and diligently investigate every property agencies in the area to establish what the average a significant influence the bottom line of a investment opportunity, by following a rental for the property under consideration will property investment. proven system underpinned by tailor-made be, as well as whether there is rental demand for software that allows them to apply the same such a property. 8. Afordability in terms of cash fow – Can stringent selection criteria to every property. you comfortably fund the initial shortfalls, This not only ensures that they select only 3. Break-even – Most investment properties as well as interest rate increases, vacancies, the real opportunities, but also enables them will require the investor to carry an initial a defaulting tenant, emergency repairs or to select the best option when faced with a monthly shortfall, the difference between the unexpected maintenance? number of opportunities. rental income and the property expenses. As the rental increases year after year, this shortfall 9. Control – How much control will RESOURCES amount diminishes until the rental covers all you have over the property in terms of P3 Investment Group 24 July 2013 SA Real Estate Investor www.reimag.co.za

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MANAGING BY JOHN ROBERTS Wooing room and undertaking those repairs you have Invest time and effort into analysing every been ignoring for months or years. Door and the Market window handles, garden gates, balustrading, built-in cupboards, tiles and air-conditioners all require regular maintenance and repairs, so get it done before putting the house on the market. Replace worn items with new ones. Pay attention to detail by reviewing your home from a buyer’s perspective. Worn light switches can easily be replaced; bathrooms need to be spotless; old silicone strips and fresh white beads are essential to selling. Shower foor and doors need to be immaculate and glass hobs and With your home extractor fans should be as good as new. Avoid anything that could provide strong HERE can be few people who doubt the chance to make a frst impression. Te curb, as odours including items that relate to cooking or residential property market currently the property’s sense of arrival, is essential in pets in the home. Animal smells are extremely Tfavours buyers and that sellers, faced shaping visitors’ perspectives - and that means of-putting and while you may be oblivious to with extensive competition from alternative show house ready includes ensuring the garden doggy odours emanating from your carpets, options, must do everything possible to present or landscaping is tidy, manicured and inviting. buyers will not be. their homes in the most appealing fashion. If the gates sag, the driveway is broken and Tis is exactly the type of problem an honest A sound way of determining if your house the unkempt garden full of weeds, schedule friend should share to allow you to do the is market-ready is to ask yourself: would you some maintenance before putting it on the requisite cleaning to make your home market- buy your own home? It is a question requiring market. Remove obstacles and repair or replace ready. Remember that smell is a powerful sense honesty, best answered through an objective anything that could be distracting - broken roof so use it to your advantage by including fragrant analysis of its best and worst features. tiles, loose gutters, cracked paving tiles and scents in the rooms and cupboards. poorly maintained garage doors or driveways If being objective is difcult, get input from can be distracting. However, it is also critical to remember that someone else who will be honest, since honesty buyers prepared to upgrade or renovate properties is how to determine a realistic selling date and It is now that a repaint should be considered. are in the vast minority and are unwilling to achievable price. Sellers generally do not see Painting is one of the most effective ways of pay a premium for a property for fear of over- their homes with the same eyes as prospective sprucing up a property, but, while your favourite capitalising. It is thus imperative that sellers ask buyers - broken windows, peeling paintwork, colour may be purple, choose a neutral shade to themselves what they would expect to get for their missing roof tiles, sagging gates and mould in broaden the appeal. money and then, if their home ofers this. the shower tend to become common place. Internally, neutral colours provide buyers with While shortcomings like location are Yet, they are detractors that will stand out a blank canvas on which to place their signature. unchangeable, there are budget-friendly a mile to buyers who will either be put of the improvements that significantly improve the property completely or use those issues to justify Cluttered rooms have a negative impact on property’s appearance and appeal. a low ofer. potential home buyers, so another critical part of show house preparation is removing excess Sellers should tour their neighbourhood to see Property professionals constantly see sellers furniture, cleaning out garages, neatening other properties on the market; establish the repeating mistakes, directly impacting on the studies and cleaning out cupboards. competition and ascertain asking prices. pricing they achieve or even reaching the point in the negotiations where an ofer can be placed People also love light, meaning bright Te bottom line is that if you want the top price on the table. interiors sell homes. Typically older homes for your home, you have to give the market a top have heavy curtaining, so attempt to bring in product. In not doing that, buyers will simply What then would be some pointers for as much light as possible. If natural sunlight is move on to the next property. achieving the ideal show house and thus limited, ensure the lighting is new and bright. bringing potential buyers to the door? For viewings ensure every light is turned on and make sure the bathrooms are well lit and RESOURCES Gary Player famously stated you only get one bedside lamps actually work. Just Property Group 26 July 2013 SA Real Estate Investor www.reimag.co.za

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GETTING STARTED BY ANGELIQUE REDMOND Commissions, house into one that involves images, videos and social and multi media. And an estate agent Costs & Your Bond who understands and can use these tools is an invaluable asset. When you are looking at buying a home, before you even enlist the help of an estate agent you need to know what sort of price range you are going to be looking at, and that is where a bond comes in. Unless you are able to pay cash for the property, you will need to investigate getting a bond. Below we look at options and important facts you need to know about getting a bond. Linda Rall, ooba KZN Sales Manager, takes you through the need-to-know information. Costs you will incur In addition to paying a deposit there are a number of other upfront costs involved such as legal costs, transfer duty, bond registration fees and bank fees. Repayment terms Te average repayment term is 20 years, however the repayment term can go up to What should you expect? 30 years. How much does this amounts to, what interest are you likely to pay? hether you are buying or selling partner in getting your property to sell at the your home, you will at some point best price possible in the best time frame. Te For a R1 million bond paid over 20 years at Wencounter estate agent’s commission fee should be clearly discussed at the beginning 8.5% interest, you will pay R2,082,775 by the and the process of applying for a bond. But what of the marketing process and should be done end of the term (interest portion is R1,082,775). exactly do the two entail? Let’s take a look at after the home has been valued. Te agent is Banks are calculating interest based on a variety estate agents commission frst and what exactly paid depending on what the home sells for, so of factors and each transaction is individually they do to earn their commission. it is in their best interest to get the best possible priced but it is important that homebuyers price for your home. realise that current interest rates offered Inside Estate Agents & commission are mostly positioned above the prevailing Estate agents sell or let residential or When an agent is asked to come and value prime rate rather than below it so prime plus commercial properties, businesses or land your home, the Estate Agency Afairs Board rate offerings are more common now and for their clients. The role generally involves requires that the agent must provide the seller concessions below prime was the norm in years valuing properties, which includes looking with a marketing plan specifying exactly how gone by. at the property’s condition and comparing it the property will be marketed and which The legal jargon that is used and what to others in the area to get the best price for services will be provided. In return for the estate it means the client. Tey also market the property and agent’s commission, you will get an extensive negotiate deals on behalf of their clients. While marketing campaign for your property. When you buy a property, the property is you might consider going it alone, before you Professional photos will be taken and posted on purchased “voetstoots” or as is. Tis means that do, consider what value an estate agent adds the realtor’s website and adverts will be placed any patent defects (visible problems) and latent to the process of both buying and selling your in various newspapers, property websites and defects (problems you can’t see) are the buyer’s home. Estate agents generally charge a fee of magazines, which does carry a cost. How well concern – unless the seller hides or does not up to 7.5%. Tis fee is not set and there is no your home is displayed and marketed has a disclose the problem before the sale whilst he/ regulation in South Africa on what an estate huge impact on when and for how much your she should have had reasonable knowledge of agent can charge for commission. This fee home sells for. With the advent of the Internet the problem. should be looked at as an investment, as not and new platforms and technology, selling only is the estate agent investing in the process your home or buying a new one has evolved However, there are some assurances for the of selling your property but is also an invaluable from the process of a for sale sign outside your buyer. The law requires that the seller must 28 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

RESIDENTIAL Talking digital with Stuart Chait, provide the following certifcates: products that may be available for smaller • An electric compliance certifcate deposit requirements under R150 000 and there Founder of Homes2go • A gas compliance certifcate (if there is gas are also options of pension-backed lending on the property) facilities in certain instances where buyers • A plumbing certifcate (for properties in the belong to pension or provident funds that allow City of Cape Town municipality) such lending with their pension fund being • An electrical fence certifcate (if there is an ofered as security. Government departments electric fence) also have the opportunity of applying for a • A beetle-free certifcate (this is usually only paper guarantee provided to the banks against provided in coastal areas, and may be left of the pegging of the individual pension fund by agreement between the buyer and the (guarantee known as the Z573). Tis document seller). will however indicate the maximum bond or loan that the client may buy up to, alternatively These certificates will have to be signed the guarantee falls away. off by a registered or certified contractor In terms of a guarantor, what do they who is authorised to issue them, to be valid. do, when can you use them, how can For transfer to take place, the seller has to they help/hinder you home loan? have obtained a clearance certificate from 1. Where do you see the digital industry going the municipality confirming that the rates Tis is referred to as a suitable surety and not all both internationally and locally? payments are up to date. Both the seller and the banks will accept the ofer of surety by another The growth of the digital industry has been buyer will have to show that their tax afairs are party in order for the purchasers to increase exponential over the past few years, and seems in order for SARS to issue the transfer duty or their chances of approval. Where banks will set to carry on that way. We have seen huge exemption receipt. accept a surety to improve changes of approval developments in the local digital space, and we the surety must be able to qualify for the fnance wanted to capitalise on this. The reduction of Another commonly used term is Home in their own right and often need to have a print media is a direct result of the digital market Owners Cover. If a fire, flood or any other direct interest in the property such as a spouse increase. unforeseen disaster were to damage or who is living on the premises etc. Certain banks 2. What online tools do you personally completely destroy your home, you’d be faced insist that they will not accept surety and the endorse? with the stress of having to rebuild and find party offering surety must become the co- We have integrated a property valuation tool into alternative accommodation. You’d also be applicant on the ofer to purchase. our website which is provided by Lightstone. This forced to pay a bond instalment on an asset that enables users of the site to obtain a valuation of no longer exists. Terefore this insurance is a “Use an expert originator their property from the comfort of their desks, for statutory requirement if the property is bonded. the bargain price of R50. The valuations are 97% You have the freedom of choice to obtain this to get you the best deal on accurate and we think that it is an invaluable tool cover from any accredited insurer. for homeowners looking to sell their property your home loan” online. When is it legal and binding? 3. While people search online, they still like Safeguard yourself throughout the The sale agreement is a legal and binding to see and view the property; do you see this process and ensure a good outcome document between the parties and can be changing anytime soon? enforced once all the conditions set therein Use an expert originator to get you the best For most people, buying a home will be the have been met by the parties concerned within deal on your home loan. Getting a home loan biggest and most important purchase that the time provided. i.e. if the sale of a property is approved involves lots of paperwork, some of they will make during their lifetime. Given the subject to a bond being issued by a bank before which can be very confusing. It gets even more magnitude of the investment, we understand a set date then this condition will be considered complicated if you apply to more than one why so many buyers are insistent on viewing concluded once such a bond has been granted bank. Because of this, it’s a good idea to use the properties before they commit to buying. within the time period provided. services of an expert originator, like ooba, to Obviously there are exceptions, but for the most submit your application to multiple banks. part we do not see this changing in the near Who is liable for the deposit? future. It is important for buyers to feel at ease Te buyer is liable to provide the deposit. The process of buying and selling a house during the process of purchasing a home, and is a stressful experience, but with the right viewing a property provides a certain peace of What can you do if you cannot aford knowledge and people helping you, you can mind that viewing online simply cannot. The the deposit, what are your options? streamline the process and save yourself time digital platform also provides an opportunity for If the buyer is not successful in obtaining a and money. buyers to sift through potential properties before 100% loan (full purchaser price) from one of narrowing them down to the few options which the fnancial institutions then deposit options RESOURCES they would then go and view. must be considered. Tere are short-term loan ooba www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 29

FINANCE BY NEALE PETERSEN Get Yourself Off The Blacklist Part 2 What to do when you’ve been blacklisted ollowing on from last month’s article on be presented to credit bureaus for removal of clinic to understand the judgment. Institutions how to deal with debt and get yourself the listing. include Johannesburg University Law Clinic Fof the blacklist, we take a closer look at (011-559 6506), or the Stellenbosch Law how you can go about removing a judgment Unfortunately, it takes a little more time Clinic, (021-808 3600). against you. depending on what it is you are trying to clear. If there are court processes involved, it can take b. Request the Outstanding Balance Statement Step 6 - Rescinding an administration up to 3 – 4 months. Te credit bureaus however (OBS) on the account owed from the creditors order (notices) do have a duty to remove adverse information who brought the judgment against you. a. If you are in a situation to settle your debt from the ‘blacklist’ within 20 days after they faster than the current administration order – have received a rescission order. c. Once you receive the OBS, you can negotiate then get a list of the credit providers who are a settlement amount in order to get consent for Step 7 - Removing a judgment included in your administration order rescinding (cancellation) of the judgment. against you b. Compile an afdavit stating your reasons to It is important to establish which court has a d. After paying the account the next step is cancel the administration order. Your reasons record of the judgment as you have to apply to to present the consent for rescinding of the need to be convincing enough to prove your the same court to have your name cleared. judgment at the same court where the judgment ability to independently pay creditors. was given. Tis is done by way of an application Normally if judgment was given, it would for rescission of the judgment. In certain c. Show that your financial situation has be clearly indicated on the credit report. If not courts, a mere written consent is not sufcient, improved since you applied for administration. clearly indicated and you are doubtful, it is a and an afdavit from the creditor is required. Ideally, in your afdavit, include a budget that very good idea to find out. You could always Sometimes, you have to provide an afdavit by you have drawn up which shows your income, contact the credit provider to make 100% sure. yourself. Diferent courts often have diferent expenditures and also a surplus that proves you requisites. The steps would be able to pay your credit providers. a. Get an attorney who specialise in this type e. You will be issued with a Rescission Court d. Once your case is heard in court and you of work or if you cannot aford such attorney, Order (RCO), which you then present to gain a favourable outcome, the court order can then talk to an attorney through a free legal the credit bureau and the judgment will be 30 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

RESIDENTIAL removed. Some credit bureaus require that you to make a note on the credit bureaus’ sites to have enough assets or any assets, which could also complete a Rescission Form. Remember, indicate (warn) that the consumer is under be liquidated in the sequestration process. the credit bureaus have up to 20 business days debt administration. to remove the information. The Magistrates Court Act 32 of 1944 This action by the credit providers is limits the amount of debt to be placed under f. Bankruptcy/insolvency is a last option to usually a measure to ensure that they do not administration at R50 000. consider only in extreme circumstances if extend any further credit to the consumer, Step 9 - Opting for debt counselling or you cannot settle the payments or come to without knowing that he/ she is under debt debt review a negotiable settlement, but it is an option. administration and / or without obtaining the Sometimes a person may fnd that he cannot written consent of the consumer’s appointed Debt counselling or debt review is another be sequestrated as he does not have sufcient administrator [it’s compulsory to obtain consent process through which over-indebted assets to prove to the court that there will as per the NCA – S89 (2)(a)(ii)]. consumers are assisted. In these cases, there is be a benefit for creditors when his assets no limit on the amount of debt, which could be are liquidated and distributed amongst his Usually consumers, who are placed under placed under debt review. Te NCA also obliges creditors and then a court may refuse to grant debt administration, are those consumers who debt counsellors to register consumers under a sequestration order. Normally you could cannot be helped through debt counselling, as: debt review on the sites of credit bureaus (this frst opt for debt review, debt administration 1. the installments that they are able to ofer is done via the NCR). or assistance in payment arrangements by an could be too small; attorney. 2. one or more of the credit providers have Contrary to debt administration matters already taken legal action and as such those where additional debt is allowed as long as Step 8 - Opting for Debt Administration accounts cannot be rearranged through debt the administrator consents, with debt review Meyer de Waal says that an application for counselling; matters, the consumer is not allowed to obtain debt administration does not constitute a 3. there are one or more garnishee orders against any further credit whilst under debt review. 100% proper blacklisting. So what actually the consumer and the only way to address those happens? specifc debts (and have the garnishee orders So get out there today, take action and free cancelled) is through debt administration. yourself from the burden of restricted fnances. When the consumer applies for debt administration, a copy of the court application Typically, the consumer who is placed under RESOURCES is served upon the consumer’s credit providers. debt administration is not an ideal candidate Gerstner Attorneys Usually, at this point, the credit providers opt for sequestration, as the consumer would not My Budget Fitness Q&A with Brendan O’Brien, CEO of Urban Space 1. Why should you buy of-plan property? friendly utilising energy technologies to reduce the When you buy an Urban Space home of-plan, you impact on the environment. are able to personalise your home by amending the design and layout of your home and selecting 3. What is the of-plan market like now? all of the fnishes including kitchen and bedrooms Overall, selling of-plan in this market is difcult for cupboards, foor fnishes, sanitary ware, electrical the lower to middle sectors of the market. However, fttings and wall tiles to suit your own taste. as we are ofering such a rare commodity in the very top end of the market, we have consistently sold of- The value of a home invariably increases between plan throughout the recession, based largely on the the time you sign contract documents and the simple fact of limited supply and high demand for overall will continue to increase in line with infation time your home is complete. Having a brand new, this type of product. over the next couple of years and will only start to substantial home within a security estate in a frst- increase in real terms after that. class location is a very rare commodity indeed and 3. Tell me a bit about where you feel this will always command a premium. market will go in the future? 4. What trends in property do you see I see the sector of the market in which we operate emerging? 2. What vision do you have for the buildings increasing in value consistently over the years to I see a huge increase in densifcation of urban areas of the future? come, based purely on the limited supply and the providing secure, manageable sized properties. My vision of buildings of the future is primarily that ever-increasing demand for quality homes within This will include the densification of areas up till they become more and more environmentally security estates in prime locations. I feel the market now considered “rural” but within the urban edge. www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 31

IMPROVING BY ANGELIQUE REDMOND Bathroom Remodelling From bare basics to absolute excess showers | | balustrades doors | he thought of remodelling your adding a new coat. Make sure before you paint sluggish water pressure. I once lived without bathroom will either fll you with joy or that there is no sign of mildew, if you spot some hot water and a trickle of water coming out my | stacking Thave you crying in the corner. Regardless mildew, add a mildew inhibitor to the paint shower for 2 weeks because the new shower of which image enters your mind, you can turn before you start on your walls. fittings were too modern for the old pipes. your loo and bath into a luxurious centre of calm. It took my plumber one hour to remedy the Sand them down Tere are 13 top trends in bathroom remodelling situation and restore the fow of hot water to my you can apply to your home. If you have existing bathroom cabinets, sand showering experience. them down and either paint them or stain Remodelling on a budget them, depending on what look you are going Accessorise! If you are constrained by a budget then don’t for in your bathroom. Another idea is to Throw out all the old threadbare towels, the despair: there are a number of ways you can whitewash them, and keep the colours in your mismatched curtains and worn rugs. It’s time make your dreary bathroom look almost new. bathroom neutral. Whatever paint you use to go shopping for new towels and hampers and The first thing to look at is your floor, if you make sure it’s waterproof. maybe even a few pictures or plaques on the have a tiled foor, then fx old, cracked or broken wall. You don’t have to buy matching sets, but Fix the fxtures tiles. It doesn’t take long to learn how to fx a try and keep the colours complimentary. Buying tile or grout, the main thing you need to have is Replace all your hardware fxtures. New cabinet new towel racks and bathroom organisers can patience and accuracy. Tere is no point fxing or door handles and towel racks and light also add that special touch to your bathroom. the tiles only to have gaps or skew tiles mar your fxtures will transform your bathroom without When budget is not an issue: efort. costing a fortune. Your new could be someone tubs or showers? else’s old, so look at online auctions or markets A new coat for either antique fxtures or modern fxtures at While it is ideal to have both, if you have limited A new coat of paint can instantly revitalise your a bargain price. space it’s better to go with either a large airy bathroom. If your bathroom walls are covered shower or a soaking tub. Gone are small little It’s all in the plumbing in wallpaper, get rid of it, hire a steamer and cubicles with curtains or sliding glass doors, take it down, then apply a fresh coat of white It’s no good updating the whole look and the showers of today are big and open, with paint to the walls, this will open up the space feel of your bathroom only to have painfully either partial walls or none at all. Instead the and instantly update your bathroom’s look and slow dribbles of water ruin your bathroom entire tiled bathroom is turned into an open air feel. If the paint needs a new coat, then ensure experience. If you have a water pressure shower, or has just one wall. You can even have you don’t just paint over faky, sticky or peeling problem, get a plumber to have a look at it, it a custom shower built per your specifcations, paint. Rather remove the old paint before may be something quite small causing the with wall-mounted showerheads, hand-held Tel: 016-933 0483│ Fax: 016-933 3306 │ email: [email protected] |www.geminiframeless.com 32 July 2013 SA Real Estate Investor www.reimag.co.za

showers | | balustrades doors | | stacking Tel: 016-933 0483│ Fax: 016-933 3306 │ email: [email protected] |www.geminiframeless.com www.reimag.co.za

IMPROVING SOME TOP TIPS can do a lot with just the right amount of light, either via windows, skylights or having a wall of • Some hardware stores and home glass where your normal wall would be, making improvement stores ofer free “how your bathroom bright and light flled. to” classes on everything from Go granite painting to tiling. • You can refresh a shabby linoleum One big splurge item, which will enhance foor by bleaching it to get rid of your bathroom, is granite, think countertops stains and grime. and foors. Born from molten magma, granite • If you buy new tiles for your foor or is a much more durable and functional stone tub enclosure, buy enough to have than marble. Granite’s crystalline structure is extras on hand in case you need to far more resistant to abrasions, staining and make repairs in the future. discolouration than most marbles. Denser and • Avoid cluttering your bathroom stronger than all natural stones, granite is an with toiletries, pictures, gimmicky excellent choice for high traffic areas where things, etc. This makes a bathroom class and style are desired. look less spacious and puts of Granite feels at home in a country farmhouse potential buyers (and guests). as well as a modern high rise. The variety of • Don’t skimp on the paint. Spend a colours and textures are traits that set granite little extra and get a good quality apart from the rest. paint that is mildew-resistant. Sink about it Apply a primer and at least two coats of fnish colour. How many sinks do you want? While you may be tempted to get two sinks, the addition of another sink to your bathroom can raise the roof quite common in master bathrooms, but today’s on remodelling costs and you may have to limit remodels are taking the concept to a new level. counter and mirror space. You have to decide if Flat screens are becoming more popular and you really have to have that second sink. in-mirror models, where the television is visible showerheads, shower tiles, rain bars, body only when it is on, are another option. Utter luxury sprays or steam showers. If you opt for a bathtub, think more along When it comes to extras in a master bathroom A bathroom is more than just a place to the lines of a deep, insulated tub where you can remodel, look toward the luxurious. Hang an shower and get clean, it is a refuge from a busy stretch out and relax. extravagant chandelier over a soaking tub; add and hectic lifestyle and often the only place you built-in warming drawers for towels or install a can relax and unwind. Make sure you know Let the light in pass-through freplace for ambience and warmth. exactly what you want, and then consult a Depending on where your bathroom is, you Sound systems and televisions have become professional about your bathroom remodel. 34 July 2013 SA Real Estate Investor www.reimag.co.za

BR BRANCHES:ANCHES: CAPE TOWN - CAPE TOWN - 021 511 3125 • JOHANNESBURG - 011 462 4640 • DURBAN - 031 459 0049021 511 3125 • JOHANNESBURG - 011 462 4640 • DURBAN - 031 459 0049 www www.tiletoria.co.za.tiletoria.co.za www.reimag.co.za

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REI Commercial Government Gets Green Stars Concern over SETA Saldanha Bay Set For Industrial Regulations Action? Te new Department of Environmental Afairs Te SA Property Owners Association (SAPOA) Progress is well underway towards the declaration (DEA) head office in Pretoria has received announced it has a serious concern with of Saldanha Bay as an Industrial Development a 6 Star Green Star SA Office Design v1 government’s amendments to the SETA Grant Zone (IDZ) and reports indicate that the move certifcation from the Green Building Council Regulations. Government has cut mandatory will create not just overall economic growth in the South Africa (GBCSA). grants, or refunds, to companies that undertake area, but also many opportunities for investors This is the first government building in sector education training, from 50% to 20% of its in property. Te town is located around 120km South Africa to achieve a 6 Star Green Star skills development levy. Te skills development north of Cape Town. The intention to declare SA rating, as well as being the first 6 Star levy companies pay is 1% of payroll and they the IDZ was gazetted in November 2012, with rated green building in the City of Tshwane. have been able to claim a proportional refund of a public comment phase closing at the end of A further stellar accomplishment was that the the levy to the extent they have incurred cost on January this year (2013). Trade and Industry project achieved the highest score for a large training and development. Minister Rob Davies will consult with the rest commercial office space of this magnitude SAPOA President, Estienne de Klerk says: of the Cabinet before making a final decision, awarded by the GBCSA to date. “Tis can only be negative for skills development expected within a matter of months. “Te IDZ “This is an exceptional illustration of in SA. It obliterates a key incentive for our process has identified three main sectors for the public and the private sector working members to train and develop employees and further development,” says Stephanie Wynne together to deliver an outstanding example flies in the face of the National Development Cole of Pam Golding, “namely renewable energy, of green building,” said GBCSA CEO Brian Plan’s policy of fast, inclusive growth through oil and gas and maritime ship-building, and steel Wilkinson. skills development. It also neglects the and minerals. It is estimated that the project will collaborative approach between government create at least 4 500 direct jobs in its frst year, and and companies to close the country’s yawning up to 15 000 in subsequent years.” Valuable Input skills gap.” Erwin Rode Izak Petersen, CEO, Jonathan Klimek, Gill Marcus, Ian Anderson, CIO, CEO of Rode & Associates Dipula Income Fund Leasing Consultant, Reserve Bank Grindrod Asset JHI Governor Management “Te growth in industrial “Since listing in August “With reduced ofce “To date, the pass- “Listed property rentals is slowly heating 2011, Dipula has closed rentals resulting from through from the companies have up, seemingly benefting deals that will, once all the recent economic exchange rate to been raising new from the lagged impact assets are transferred, downturn, corporates infation has been equity capital at an of declining industrial more than double the seeking appealing ofce relatively constrained, unprecedented rate and it property vacancy rates.” size of the fund.” space ofering good value particularly compared was only a matter of time in the Johannesburg to previous periods before these issuances area are currently able to of high volatility and would have a negative choose from a number of currency weakness.” impact on prices.” appealing options.” www.reimag.co.za July 2013 SA Real Estate Investor 37

LISTED BY IAN ANDERSON Brace Yourself... Te ride might get a little bumpy outh Africa’s listed property sector has May, from 5.9% at the end of April), but still debt maturing in the short term will beneft from succumbed to a weaker Rand and higher expect distribution growth to average between the lower interest rate environment. Sbond yields. During May 2013, the 7% and 9% per annum over the next three years. sector declined by 11.1%, led by substantial The lower cost of capital available today declines in many of the larger, more liquid However, investors should brace themselves presents an opportunity for listed property companies that are widely held by institutional for a bumpy ride in the short term. Te increase companies to undertake income-enhancing and foreign investors. in foreign ownership of South Africa’s largest acquisitions, developments and redevelopments. listed property companies exposes the sector Initial income yields on these projects are often Over the past two years, South Africa’s listed to signifcant volatility due to the short-term, more than 1% or 2% above the company’s property sector has benefted from declining opportunistic nature of these investments. Any cost of capital and create significant value bond yields and a reduction in ofcial interest deterioration in South Africa’s fundamentals for shareholders through an increase in the rates. However, during May, bond yields in and the resulting change in foreign investor company’s income base. South Africa rose due to higher yields in the sentiment would lead to further capital losses US and country specifc issues that manifested in the sector. While the listed property sector is enjoying themselves in a substantially weaker Rand. access to cheaper capital, many private Based on management guidance, the outlook investors are being completely shut out by The decline in listed property prices was for the rest of 2013 and 2014 has moderately banks unwilling to lend to smaller players in the exacerbated by Growthpoint’s R2.5 billion deteriorated. Similar views have been expressed property market. Tis has reduced competition equity raise, which was announced on 21 May by retailers who have witnessed a slowdown in for property acquisitions and should enable 2013 and preceded much of the downturn sales volumes, particularly among less afuent listed property companies to continue in prices. Listed property companies have customers. This may put pressure on retail improving the overall quality of their property raised or announced their intention to raise rentals in the medium-term, although most portfolios. approximately R10 billion in equity capital listed property companies expect to be able to so far this year, having raised more than push through modest growth in rents paid by Today, an investment in South Africa’s R30 billion in the preceding two years. The their retail tenants. listed property sector ofers the prospect of an capital has been raised to fund income- attractive initial income yield (almost 7%) and enhancing acquisitions and redevelopments, The office and industrial markets remain the opportunity to experience both income and which should drive longer-term value creation. tough and most management teams expect capital growth in excess of infation over the But, the quantum of equity issuance has little growth in market rentals over the medium long term. In the short term, the sector is likely satisfied a significant amount of investor term. Retaining tenants and flling vacant space to experience higher levels of price volatility demand for listed property and exposed the in a tough leasing market has resulted in an until the Rand stabilises and bond yields sector to short-term volatility. increase in concessions, like rent-free periods. consolidate or start falling. Each pullback in prices is another opportunity to gain exposure Importantly, last month’s price action was not On a more positive note, the cost of debt capital to an asset class that provides an adequate driven by a change in property fundamentals is reducing as interest rates remain lower and level of income and hedges income and capital or a substantial change in the prospects for more companies broaden their access to the debt against infation in the long term. distribution growth. Investors can now invest capital markets. With interest rates expected in the listed property sector at a substantially to stay lower for longer, despite the increase in RESOURCES higher initial yield (almost 7% at the end of infation, listed property companies with fxed Grindrod Asset Management 38 July 2013 SA Real Estate Investor www.reimag.co.za

URBAN GENESIS MANAGEMENT ADVERTORIAL Why Urban Management As property owners, residents and tenants, you see the potential for your space- a vision of a thriving place where people work, live, shop and dine around the clock. To help meet this potential you need a management company that shares your vision. At UGM, we see the same potential and we have the resources and experience to turn your space into a place that attracts people and keeps them there, a place that people return to time and time again. Tailor made solutions By listening to and understanding the unique needs of property owners, residents and tenants, UGM acts as a strategic intermediary between the private sector and the city to develop solutions for a wide range of urban obstacles. In this way UGM has built a solid reputation of consistently exceeding expectations by striving to create well-maintained districts that are safe and welcoming. Our core business is the establishment and management of areas, precincts or improvement districts and the provision of strategic support services. Urban Management General management Precinct management Financial management Urban Operations Public Safety Urban cleaning Urban maintenance CID Establishment CID legislation Public participation Stakeholder involvement Areas managed by URBAN GENESIS: • ABSA PRECINCT (MMID) • BENROSE IMPROVEMENT DISTRICT • BRAAMFONTEIN IMPROVEMENT DISTRICT • CENTURION IMPROVEMENT DISTRICT • ELLIS PARK IMPROVEMENT DISTRICT • END PARK PRECINCT • FASHION IMPROVEMENT DISTRICT • ILLOVO BOULEVARD MANAGEMENT DISTRICT • KRAMERVILLE MANAGEMENT DISTRICT • MABONENG PRECINCT • NEW DOORNFONTEIN IMPROVEMENT DISTRICT • PARKTOWN IMPROVEMENT DISTRICT • RETAIL IMPROVEMENT DISTRICT • RIVERSIDE PRECINCT (NELSPRUIT) • ROSEBANK IMPROVEMENT DISTRICT • SLOANE PRECINCT • SANDTON CITY IMPROVEMENT DISTRICT • SANDTON BUSINESS IMPROVEMENT DISTICT • WIERDA VALLEY MANAGEMENT DISTRICT • WITS UNIVERSITY SAFETY CORRIDORS • WYNBERG IMPROVEMENT DISTRICT For more information contact Tel 011 447 8841 • [email protected] www.urbangenesis.co.za www.reimag.co.za

FINANCE BY JONATHAN SMITH Derivatives... Te key to reducing interest rate risk uring the past few weeks readers The core problem when deciding upon a incumbent within their present loan agreement would have noticed extensive hedging policy is to strike a balance between by entering into an agreement with a third party Dvolatility in our Rand/Dollar and uncertainty and the risk of opportunity loss. It is who provides a fxed (or capped) interest rate Rand/Pound exchange rate and this has led in the establishment of this balance that we must derivative product. to some concern over both our infation and consider the risk aversion and the preferences of interest rate outlook. the investors. Establishing and implementing In either circumstance, the property company an hedging policy is a strategic decision of the obtains the benefit of a fixed interest rate on Although South Africa’s economy is soundly utmost importance that can determine a property its borrowings for a specifed period and can managed at present, our country is part of company’s success or failure. guarantee shareholders a smooth return. the group of developing economies and, as Derivative instruments can be divided such, sufers from volatile interest rate activity South African borrowers can beneft from a deep into two groups as world markets punish or reward other (extensive and wide) and liquid hedging market developing economies for their poor or good that can secure interest rates for up to ffteen years, Forward products: which products fix fscal discipline. although most property funds only do so for a the borrower into a forward rate of interest maximum of three to fve years as SA conditions (regardless of market fuctuations) and which, Even in an emerging market, such as South can change relatively quickly, compared to the consequently, fx the repayment for which the Africa, property companies can make use of a European and American markets. Te result of borrower is liable during the loan period. Tese wide variety of derivative (interest-hedging) a property investment company’s participation products can be termed interest rate swaps or instruments to protect themselves against in such structured schemes is that their earnings forward rate agreements. interest rate fuctuations. are smoothed for a defned investment period, making investor participation an attractive Option products: which products introduce The purpose of using derivatives for the option (to investors) and creating certainty in an flexibility into the repayment arrangement purpose of defning a gearing (loan) strategy uncertain and volatile universe. and which allow the borrower to repay the is to provide a hedge against volatile interest loan at the borrower’s option. Normally, The use of interest rate derivatives rate activity and, now that there is a possibility such an option attracts a cost premium allows geared property companies to: of interest rates rising – somewhat extensively (of approximately 2%) in view of the risk if our Rand continues to slide and inflation (i) repay their foating rate loans and obtain a which the lender faces by having to face the skyrockets as a result – such hedging becomes fxed rate loan from a new (alternative) fnancier possibility of an early repayment of the loan a critical consideration for commercial for a specifed period; or value. Tese products are termed caps, foors property investors. (ii) swap out of the floating rates agreement and collars. 40 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

COMMERCIAL The borrower’s decision as to whether to A downward sloping yield curve indicates that deviation of an investment can now be reduced obtain a forward or option product will depend short-term interest rates are high and, as money to a narrower range as a result of the very small on the borrower’s view of the market rates into becomes more available as a result of investment (fnancial) interest rate risk. the future. in the bond and money markets, lenders expect the cost of money to decrease over time. Naturally, property portfolio investments Market shift instigators, such as commodity- are even more reliant on such forward rate price shifts, disinvestment, catastrophic events In an infationary environment, such as South agreements and interest rate swap agreements as or price shocks, can cause the confidence in Africa may experience in the coming months, the portfolio risk extends to many shareholders an economy to decline in such a manner that the yield curve is positively sloped, indicating and asset managers have to do all they can to the cost of money rises steeply. Such rises are that the cost of medium- to long term funding limit such risk. refected in the yield curve of our bonds from can be expected to increase. Calculating the cost of interest time to time. derivatives Investors in the property sector would be well The market’s perception of future inflation advised to monitor the yield curve on a regular South Africa has a large array of useful and is the factor which determines the slope of basis and to ensure that their asset managers are interesting hedging and derivative instruments. the yield curve: if the market anticipates that compensating for interest rate fuctuations by inflation shall increase, then the market is obtaining the beneft of derivative products. The essential issue with regard to hedging suggesting that there shall be (as a result of such or derivatives is that, through a series of increased infation) less money circulating in “Te beneft of a hedging calculations, lenders or funders can work out the economy. a fat interest rate for as long as ffteen years, mechanism or a derivative which fxed interest rate will be payable by the If there is less money circulating in the agreement is that the borrower borrower for the length of the loan period. economy, the resultant under-supply shall result in a higher demand for bonds, forcing the yield pays a fxed interest repayment Te outcome of this is that the equity investor of bonds upwards. during the agreed period” can expect to receive a flat earnings yield throughout the period of the investment, Having established how the yield curve creating a certainty about his or her investment Matching principle works, we are now able to relate this (yield) in what may have otherwise been an uncertain curve to a borrower’s desire to borrow funds Financiers are able to match the cash fow needs investment paradigm. with some certainty. of the borrower by determining with accuracy the borrower’s requirements and funding The benefit of a hedging mechanism or a By calculating the value of the amount the amount required in a carefully calculated derivative agreement is that the borrower pays available for loan repayment, one can calculate manner which provides the borrower with a a fixed interest repayment during the agreed both the value of the loan that can be taken steady or smooth cash stream. period and his or her repayments are not subject and maximum interest rate the borrower can to interest rate fuctuations: this is because the tolerate. Te repayment is matched to the residual lease interest rate is fxed throughout the loan period. income over the loan period after interest rates Tis means that the borrower can agree a fxed are pegged. You will recall having read that there are two interest rate over a ten year period which will groups of derivative instruments which we need establish a fxed (certain) cash fow during the Bearing in mind the two alternative derivative to consider. Forward interest products (such as ten year period. arrangements which are available, the borrower interest rate swaps and forward rate agreements); can fund the property development through and option type products (such as interest cap As discussed above, the yield curve – a a fxed rate loan or through an option capped agreements or caps, foors and collars.) summation graphical representation of the loan. The latter allows the borrower to repay certain 3, 6, 9 and 12 month money market the loan in the event that such repayment is Choices between the two are related to the rates as well as the benchmark government prudent. borrower’s need to attain certainty (in his rates payable in respect of the RSA 157, RSA repayment schedule) and his perception of future 168 and RSA 196 long-bonds – is an indication In the case of an option product, the borrower interest rate fuctuations. During the past twenty of where rates are expected to lie during the renews the loan periodically and the lender years, the fastest growing global fnancial market investment horizon. guarantees that interest rates – over a medium- has been the futures and swaps markets. Tese term period of 3 to 5 years (and even over markets allow borrowers to manage the risk Te yield is normally sloped upwards (positively a longer period of 15 to 20 years will remain associated with interest rate volatility. sloped) in order to portray the lender’s desire to within a (narrow) band (or spread) of values. obtain a higher rate for longer period loans. Tis higher rate compensates the lender for infation This has positive implications for the risk RESOURCES and business associated risk. profile of the investment as the standard Courtwell Consulting www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 41

RETAIL BY ANGELIQUE REDMOND Embracing New Trends Rural retail on the rise he basic ingredients for life are food the place to be. It is where the population is and Some towns have up to 600 000 people, and clothing, and for small towns where the growth is. Tere are still opportunities and consumer demand for convenience as Tand townships, rural retail stores for smaller retail centres with a convenience well as steady population growth ofers major are meeting this need more predominantly. element”. South African townships have prospects for retailers. In South Africa, Townships and smaller towns generally do not undergone a series of transformations since the people living in rural areas and townships (or have great transportation systems and are not 1990’s, and public and private sector investment second economy locations) spend more than in close proximity to large shopping centres, has increased, with townships becoming an ever- R308 billion annually, representing 41 percent further increasing the preference for rural retail present part of the urban landscape in South of total consumer spending. “Townships and stores and malls. Africa. Te residential elements of a township rural areas in SA have emerged as a new market are old township houses, hostels, RDP houses, for national retailers as we see an upward Keillen Ndlovu, head of Property Funds for informal settlements and vacant land suited for movement amongst township communities in Stanlib says, “When it comes to retail property residential purposes, as well as houses which terms of expendable income”. Says Ndlovu. investment, the lower income market is still double as informal shops and homes. Pronounced spikes in shopping at month ends and early stages match payments of government social grants and salaries for the growing working middle-class, less reliant on discretionary spend, providing more stable trading densities in rural retail. With approximately 16 million people currently on social grants in South Africa, the market for rural retail has a large base from which to draw its customers and has created a strong demand for more retail centres in areas where previously there were none. Clearly social grants paid by the state are encouraging growth in rural retail and are helping retailers in township shopping centres weather the current economic conditions. “Tis movement has resulted in a considerable increase in shopping mall development in these previously untapped areas.” Says Marc Edwards of Spire Property Management. 42 July 2013 SA Real Estate Investor www.reimag.co.za

COMMERCIAL Outlying towns in the Eastern Cape such “Shoprite has backed rural development for Following the traditional ribbon cutting, as Sterkspruit – situated just before the the past 15 years, before these areas were seen hundreds of trolley-pushing, cheering people Lesotho border, and Mthatha and Tsolo in as investment hotspots. We have seen land in streamed into Kenako Mall, most notably into what was formerly known as the Transkei, are places that are considered ‘no-go areas’ develop Shoprite. Te positive comments and posts on experiencing an increased demand for retail into attractive ... stores.” the Kenako Mall Facebook Page, with nearly space, reports Amanda de Lange, portfolio Diepsloot and Tembisa were not the only 7 500 “likes” already, is indicative that the manager of JHI Properties, based in Port township areas that were experiencing property timing and location for Kenako Mall was spot Elizabeth. JHI operates in the area along the investment, he said, pointing to investors’ on, flling a need in the community. Eastern Cape from Mthatha through to East confdence in townships and high-density areas. London, King Williamstown, Sterkspruit and “The increase in expendable income in Queenstown. “It is specifcally retail that creates the base of townships and rural areas has opened up a new development node that other initiatives a new market for national retailers,” says “Currently we are receiving a high number can then beneft from, including Bridge City in Pointbreak’s Pieter Laubscher. “Kenako Mall of enquiries for retail space in Sterkspruit the KwaMashu area in KwaZulu-Natal, which gives its target market access to South Africa’s and Mthatha, mainly as a result of a pent-up was built over a commuter railway station and leading retail and fashion brands. In terms demand as well as growing passing trade. It has a new magistrate’s court and a hospital of creating a pleasant shopping experience, also appears that national retailers, who may being built.” And with a signifcant increase in we invested in a beautiful centre layout and perhaps have saturated the market in major the development of townships and rural areas, quality fnishes.” Te 19 000 m² mall is ideally centres, are now looking at outlying areas with this is a new market for national retailers. placed in one of Port Elizabeth’s biggest potential,” says de Lange. townships, with a catchment area of more A growing rural retail lanscape than 340 000 shoppers and an estimated One example of a retailer who has acted Kenako Mall in Port Elizabeth is setting retail potential of R1,2 billion. Besides the 4 with foresight in this regard is Shoprite. With new standards and creating a good example 000 m² Shoprite, other top brands as tenants over 1500 stores, it is Africa’s largest grocery when it comes to township and rural retail include Truworths, Ackermans, Pep, Clicks, chain and is in a prime strategic position as it developments. Pointbreak’s John Hamman Mr Price, Tekkie Town, Capitec, Standard has already penetrated the rural market quite adds: “Tis is a long-term investment and we Bank, Hungry Lion, McDonalds, Jet, Edgars effectively. Two Shoprite stores owned by a have made provision for potentially expanding Active, Identity, Legit, Fashion IQ , etc. At community property fund, in Diepsloot and to 30 000 m² in the future. Apart from the the opening, Kenako Mall had 88% tenants, Tembisa, enjoyed the highest turnover per value which Kenako Mall offers investors, with 76% being nationals and a keen interest square metre of any Shoprite outlet in SA over we’ll also be looking at increasing the value in the remaining 12% of the mall. the past two years. Futuregrowth portfolio that the mall brings to the community.” Te manager James Howard said Shoprite has a opening of Kenako Mall was met with much RESOURCES long history of investing in township and rural excitement. Te parking lot, with just under Stanlib, JHI, Pointbreak property even before returns looked promising. a thousand bays available, was fully packed. Spire Property Management www.reimag.co.za July 2013 SA Real Estate Investor 43

REDEVELOPMENT BY ANGELIQUE REDMOND Changing the face of JHB’s inner city AFHCO meets the challenge ollowing on from the article on the mass levels of growth have not happened, the city by the city’s status as the economic hub of exodus from Johannesburg’s inner city, is still growing at an estimated 1.9 percent per South Africa.” Fto the suburban area, the questions that annum, twice the national rate. “We’ve still But what are the challenges? remains is what will become of the inner city got a backlog in terms of addressing needs like now? Once a bustling hub of activity and a housing,” said Prof Phil Harrison, a member of While there are tax incentives for inner renowned business district, can Johannesburg’s South Africa’s National Planning Commission. city redevelopment in terms of the Urban CBD come back fghting? Te answer lies in “It might actually be a blessing if growth Development Zone, which allows companies the companies and people who are, building isn’t as fast as was anticipated.” Investing to write of the cost of construction spent on by building, changing the face of the inner city, in the inner city is well worth it from a a project over a period of fve years, this only and stimulating activity. financial point of view, Paul Lapham, the equates to 20% per annum. Renney Plit of chief executive of Citiq, explains: “ an inner- AFHCO explains: “ as great as it sounds, the Enter AFHCO and it’s Chief Operating city apartment purchased in 2000 would incentive does not drive inner-city investment. Officer, Renney Plit, who have numerous have delivered capital appreciation of 11.5 Te benefts of this tax write of with typical successful projects under their belt, and many percent (conservatively speaking) over the returns investors are able to achieve, are very more on the cards. long-term. After servicing the debt interest on “Tere is also the hope that your project, you are not likely to see any beneft Johannesburg was one of the many cities that from the UDZ for probably at least the frst 5 government and council faced massive urbanisation as people flocked to 8 years. So I don’t think many investors see towards the city for work, swelling the number will become more engaged.” it as a real driver of investment decisions.” One of residents and creating a massive housing way forward for investors is for government to backlog, which in turn created massive over- review this allowance and come up with a way crowding and turned once lively, sought-after past 12 years, while similar townhouses in to impact the short-term beneft for afordable areas into crime hotspots, such as Hillbrow. suburbs such as Greenstone, Halfway House, housing investors. Loren Landau, director of the African Centre Winchester Hills, Northriding, Olivedale for Migration and Society at the University and Weltevreden Park would have generated Another challenge faced by afordable housing of Witwatersrand, says: “While the rates of capital returns of 10.5 percent a year. All developers is anti-landlord or punitive legislation migration may not be as high as some feared, property markets go through cycles. Te last coupled with a very slow and uncertain legal the growth rate when translated into absolute six years have seen pedestrian and, in some process. There is a poor enforcement of home numbers nonetheless represents an important cases, negative growth nationally. In fact, affairs policies leading to a proliferation of demographic and political challenge to local 2012 was the year that saw the lowest number slum and hijacked buildings, many of whose authorities and others mandated to provide of both inner city and suburban townhouse occupants are illegally in the country. for the urban poor.” Cities like Johannesburg sales since 2000. But, even during the slump, remain a magnet for migrants from inside and apartments in the inner city of Joburg have Renney says, “we have a building that we outside the country and while the expected remained a solid investment choice, supported bought, occupied by rent paying tenants, but 44 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

COMMERCIAL ABOVE LEFT: Greatermans Department Store Before Refurbishment ABOVE RIGHT: After Refurbishment in shocking condition, which became hijacked topic as residents become fed up with the lack of towards public transport, bicycle routes and after we gave notice to the residents to vacate service delivery, will this bring about change? pedestrian walkways”. so that the building could be refurbished. We have been involved in court battles trying to Johannesburg Executive Mayor Clr Mpho The Executive Mayor said the new spatial obtain an eviction, for about four years. Besides Parks Tau said in his State of the City master plan would “transform apartheid the holding cost on the investment value, other Address that in the 2013/2014 fnancial year settlement patterns and build and vibrant costs such as legal fees, security costs and alone, the City would spend R7.3 billion on middle-class environment, where everyone Council charges build up very quickly.” infrastructure, a 37% increase compared with can feel safe”. Despite the vow to clean up the the current year’s infrastructure spend of crime and grime, it still remains to be seen “Te courts have ruled that the City Council is R4.6 billion. Expenditure on the maintenance whether this will be implemented effectively responsible to provide alternate accommodation of the current infrastructure would be increased and maintained, after all it doesn’t matter what to the low-income occupants, but they fail to from 2.5% to more than 7% of the city’s annual plans are implemented if there is little or no do so, and the process drags on. While Council budget, he said. follow through. has hardly delivered to this market sector despite being told to do so by the Courts, it has The massive infrastructure spending Despite these challenges there is still a lot also unfairly become the burden of the Joburg will result in Johannesburg competing of positivity surrounding the CBD and the Council and the Joburg ratepayers to foot the favourably with other major cities on the inner city as developers continue to change bill for the huge urbanisation taking place in African continent, where seven of the world’s the face of the inner city and provide much the country, and also the huge migration from fastest growing economies are found. Of the needed afordable housing. Te urbanisation of Africa into Joburg, both legal and illegal. Joburg R7.3 billion that would be spent on Johannesburg’s CBD has had a positive effect inner city is seen as a place of opportunity to infrastructure in the 2013/2014 fnancial year, on the city, it has become the permanent abode make money, and trade in the city is massive,” which starts on July 1, R450 million would be of hundred of thousands of residents and their explains Renney. channelled into the inner city to address issues children. The slogan “Live Play Work Shop” such as crime and grime, poor urbanisation, defines the city. There is also the hope that Along with these problems come the very overcrowding and safety. government and council will become more visible problems faced in the inner city of engaged and work together with developers and service delivery and the billing system of the As part of the 10-year R110 billion each other to see real change happen. Renney Johannesburg City Council. A city, which is infrastructure expenditure programme, the says: “The City is changing and redeveloping dirty, poorly maintained and mismanaged, city is to introduce a high-density residential at a rapid pace, despite the lack of Government creates a poor environment for investment. development – described as the new “Corridors and Council assistance. Imagine what could be Any capital interventions by the Council tend of Freedom” – that would not only change achieved if these two public bodies performed.” to deteriorate, as there are simply no on-going Johannesburg’s urban landscape, complete with maintenance plans. Despite service delivery new transport arteries, but would also represent RESOURCES protests and this issue becoming a hot news “a decisive move away from private vehicle use AFHCO www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 45

SMART MOVES BY BRIAN HAYWARD Eastern Cape Property Market Rising from the ashes he exclusive Eastern Cape seaside resort of capital into the area. Sales in that area are late 2000s, demand is once again starting to pick of St Francis Bay is one of the unlikely picking up again.” up, Rademeyer said. “Tere has defnitely been Tplayers in the region’s residential robust growth this year. In fact it started last property market turnaround, after devastating Another investment area to watch, according year, after a very fat 2011,” said Rademeyer. fres gutted 75 properties on the town’s pristine to Rademeyer, was the Settler city of “In 2006 residential property growth was canals in November last year. Grahamstown. Its unusual mix of a high demand up to 25%, but because of the recession we for accommodation by Rhodes University experienced a negative growth rate. According to property professional Jaco students, and limited development space given Rademeyer, owner of Jaco Rademeyer Estates, the city’s location, has seen the area’s property “But we are definitely coming out of that the town is experiencing a property market prices steadily grow despite the recession. now. Although economists say nationally we boom thanks to the funds from insurance are still in a bad place in terms of residential companies to rebuild the gutted properties. About 40% of homes sold in Grahamstown property growth, in the Bay we are coming out between March last year and March this of that, although the growth is very area-based The town’s property values are rising again year were priced between R800,000 and also very dependent on what has been done to as builders stream in for the construction of R1,5 million – a sign of confdence in the market, the house.” newer, modern homes along the sought-after Rademeyer said. canal. Some of the homes razed were valued at Because of the high number of people between R4 million and R6 million. Tis did Nelson Mandela Bay, too, was experiencing a defaulting on their bond repayments and the not include the value of their contents. surge in residential property demand, although subsequent home repossessions by banks, prices remained fairly stagnant, said Rademeyer. supply of residential property outstripped Tis rejuvenation has made the town one of Residential property demand and interest among demand in the city – but that is changing. the province’s key property investment areas, buyers has jumped to more than 20% so far this Rademeyer said. “Tere is a defnite property year, he said. “Demand is picking up again. More people boom in St Francis Bay since the fires. The are visiting properties and putting pen to whole the area’s property market has been dead The upward trend was reiterated in the 1st paper. Te amount of deals going through is since the recession in the late 2000s, when the Quarter 2013 FNB Estate Agent Survey, which up about 25% from last year,” said Rademeyer. frst property people got rid of was their luxury showed a noticeably stronger picture of domestic “Nationally the trend seems to be that a house homes,” said Rademeyer. residential property demand nationally than sits on the market for four months before being the preceding quarter. Tis came after the fnal sold, but here, if priced correctly, we are seeing “Now that we’re coming out of the recession, quarter of 2012 had shown a slight decline. properties move in two months or less.” people are again looking at investing in lifestyle A city on the rise properties. Added to that trend is the economic For Rademeyer, business has doubled when growth because of the rebuilding. Contractors In the Bay, where property prices went into compared to the same period last year – a trend in the town have work and there is an influx negative territory thanks to the recession in the that was being experienced throughout the city 46 July 2013 SA Real Estate Investor www.reimag.co.za www.reimag.co.za

COMMERCIAL to varying degrees, he said. “I deal with a lot of “People from outside the city coming from Meanwhile, the R1.5 million to R3 million agents in town, and many experienced a record Joburg and Cape Town are interested in estate house price range saw “a completely different month in April, which shows business is fnally living, where security is provided 24 hours and buyer”, Rademeyer said. “It is usually a buyer who improving since the recession.” there is a focus on holistic lifestyle qualities. wants to upgrade on their lifestyle. Te sellers are They are looking for big plots and house in under stress because they upgraded during the Coega’s market boost secure estates with homes going for R3-million boom years and overextended themselves and With the take-off of business in the Coega and over.” now we see some of these properties being sold Industrial Development Zone, where at less than what was paid for during the boom.” Still a buyer’s market companies such as Famous Brands are setting up R400 million factories and the anticipated The biggest growth in the Nelson Mandela Although prices have remained stagnant, there PetroSA oil refnery is mooted for the area, the Bay market has been in homes priced up to has been 20% year-on-year growth in demand residential property market has been reignited, R1.5 million. for these properties, he added. “I often say to Rademeyer said. clients if they bought this type of property in “Tis because people in that price range are 2006/7 and didn’t do major renovations, given He said the developments at Coega had seen your middle-class salary earners. It’s easier for the recession, they would be lucky if they get an infux of wealth from outside the city – from these buyers to get bonds for the properties, as anything more than what they paid for it. SA and abroad – as top businesses relocated top opposed to self-employed buyers who struggle experts to their operations at Coega. more to obtain bonds. Tese buyers are usually “These homes are generally valued at salaried employees with a combined household the same price that they paid for it. These This has seen areas like Uitenhage and income of about R35 000 a month – they can properties generally sit for four months or Despatch experience booms in residential secure these sorts of bonds,” Rademeyer said. longer on the market.” demand, as contractors move to the city for projects at Coega. The trend has been even “That’s what is good about properties in In the R3 million and over category, “buyers more pronounced in the suburb immediately the Bay: you can a decent home with three generally don’t need bonds: they usually have bordering Coega, Motherwell NU5 and NU6, bedrooms, a double garage and sometimes even a big deposit or it’s a cash transaction,” said said Rademeyer. a swimming pool for up to R1 million.” Rademeyer. “Sometimes it’s an upgrade of lifestyle, so the deal is subject to selling “Tere used to be uncertainty around Coega, Increasingly popular areas in the city include aother property.” but now that it is taking of and people are buying the suburbs of Lorraine, Mangold Park, instead of renting,” he said. “With Coega, we are Westering and Kabega where demand has Activity in this price bracket was up 10% in the going to see more of an infux of high earning grown a massive 30 to 40% from last year. Bay, Rademeyer said, although it generally took foreigners to the Bay. six months to sell the property. “Here we are dealing with a very specifc buyer who knows exactly what they want. Tese buyers know their money is growing better in other investments than in property at the moment. Tey aren’t putting their money into property at the moment. Tey rather rent and let their money grow faster in other investments.” Close to home Escalating living costs have forced many Bay families to relocate to be closer to schools and the workplace, said Rademeyer. “A lot of people are selling to try and get closer to schools and work because of fuel and living costs,” he said. At the same time, the buyers’ market meant that families with liquidity were also upgrading to larger homes. Buyers were not having to pay as much to upgrade as they would have in the boom years, although those looking to extend their bonds were scrutinised closely by banks, he said. RESOURCES Jaco Rademeyer Estates www.reimag.co.za www.reimag.co.za July 2013 SA Real Estate Investor 47

STRATEGIES BY PAUL BARROW Commercial Property Uncovered Te head of the Barrow Group shares some insights he Barrow Group in Johannesburg is a family-owned, fifth-generation Tcommercial property and construction company. Paul Barrow heads up the property side of the business and has identifed some of the following trends and made some observations about the commercial property sector. • Government’s planned rollout for infrastructural spend, upgrading of roads and improvement of services will hopefully stimulate the economy, providing work for property professionals. • The office letting market remains tough, although the pressure remains mainly on B- and C-grade buildings in marginal areas and entire ofce block that’s empty and not income- as to keep costs down. Tis is the advantage this sector is expected to remain stagnant. producing. Dividing it reduces risk and increases of new buildings, which have been designed the likelihood of it to be rented out sooner. with energy-saving in mind. This leads • Interest continues to be good in the A-grade to responsible developments and it is also category, as well as in new buildings. Tis trend • Houghton is experiencing an uptake in important that tenants are seeing developers will continue and improve. demand for commercial property, following on as ‘doing the right thing’. the heels of Rosebank, the latter’s revitalisation • Vacancy levels in our ofce portfolio are as having been a major catalyst. • The landlord/tenant relationship is more low as they have ever been – around 3%. Te important than ever and landlords are listening demand for ofce space in decentralised, safer • The demand in Bryanston, where lower- more to tenant requirements. Due to moving and more upmarket suburbs continues, and is a rise ofces are the norm, is to be located in a costs and a shortage of good rental deals, global phenomenon. Proximity has always been hub that has easy access to the surrounding tenants are not likely to move around much. crucial and continues to be so. residential area. It’s about working in close proximity to where you live. • One of the trends predicted for 2013 has • Due to improved public transport in been the dropping of rental deposits. This is Rosebank and Sandton, these suburbs will • The demand from overseas investors only sustainable for large institutions because continue to gain popularity and there will be a looking to establish a presence in South Africa they rely on critical mass. Barrow doesn’t see stronger demand for ofce space. continues. Their interest is in AAA-grade it as a trend for the other players. Dropping buildings in Johannesburg and locations that deposits will remove the incentive for tenants • Not many developers cater for the are secure, where transport is not an issue. to leave buildings in a good condition and with requirement of smaller office space in the paid-up utility bills. A-grade sector. However there’s a demand • There’s also a demand from South among many well-established smaller businesses. African businesses that need a presence • Advice to developers: they should stick in Johannesburg. Businesses in Sandton, to what they know; their niche in the market • There’s a demand and an appeal among not near the Gautrain, or located in older and not diversify in the hope of more proft. It’s companies to entirely lease an ofce building for buildings are looking at better placed ofces tougher to succeed if they diversify. themselves alone, to give them a presence that is in new buildings. not diluted by sharing with other companies. • Te construction industry has been through • With the cost of electricity continually some challenging times, but is seeing signs of • Some older office buildings are currently rising and companies now more educated improvement. being divided – they were designed for a single about energy-saving, they want to see the tenant and have lost that tenant. Tey now need latest in technology to reduce consumption RESOURCES to renovate and divide, as it’s difcult to sell an (especially air-conditioning and electricity) so The Barrow Group 48 July 2013 SA Real Estate Investor www.reimag.co.za