Jump to content
House Price Crash Forum

Freelance Mycophagist

  • Content Count

  • Joined

  • Last visited

About Freelance Mycophagist

  • Rank
    HPC Poster

Profile Information

  • Location
    South Africa
  1. http://www.realestateweb.co.za/realestatew...8&sn=Detail Internal property company memo shocker Lew Geffen 04 June 2008 Sotheby's boss tells family member to chop 25% off property price; warns that banks now require huge deposit in anticipation of price tumble. Letter from Lew Geffen, head of Lew Geffen Sotheby's International Realty, to his agents - and released to the media this week. Recessionary Strategies - State of the market As you know the recession is biting even deeper and strategies of 3 months ago are no longer relevant. The mere fact that the banks are requiring 25 % equity indicates strongly that they have factored that the market will drop another 25% on top of what the market has already come down i.e. plus, minus 15%. To my mind that means that the market will come down 40% from the highs of last year which is hugely significant. Take into account that today a man who wants to purchase a R2 million property which is the average selling price in our company will have to earn in excess of R87 000 gross per month in order to qualify and if the market drops by 25% that same person will need to earn R65200 gross which is also no picnic. There are 60% less buyers in the market than recorded at the same time last year. Attendances at showhouses are generally poor (Echoes of Sharpeville) and only when the Agent has convinced the seller to use the most aggressive parameters i.e. 40% below asking price, does the showhouse receive 10 couples or more leading to a subsequent sale. All the guns are loaded against us in this market and it will take your own courage and perspecuity in order to survive. This morning I told a member of my own family to drop his price by 25% in order to get a quick sale and I would advise you to tell your clients the same. It's a question of being truthful to your clients to save them severe pain by procrastinating and not accepting the offer today. Today's low offer is tomorrow's miracle price. This market is not going to recover anytime soon. The tough must get going! Signed LEW GEFFEN
  2. Most Aussies are true to their roots - they work behind bars... ...I'll get my coat.
  3. http://www.realestateweb.co.za/realestatew...0&sn=Detail Joburg property: cheaper now than last year Jackie Cameron 22 February 2008 Top estate agency group reveals property prices are dropping – and could have much more to go. Cause for alarm? A big bank which tracks residential property prices and a top estate agency group have revealed that home values in some Johannesburg suburbs are on the decline. They say they can see, from recent deals, it is cheaper in some areas to buy now than it was this time last year. Although it is very difficult to accurately track residential prices - because the same assets don't repeatedly change hands like, for example, listed shares - it is possible to get an idea of trends based on similar properties changing hands. Bank statistics have generally been pointing to a property market in which price growth has been slowing, rather than prices actually declining. But, this week, FNB admitted that some areas are indeed showing price drops. However, the bank statistical experts did not want to divulge the names of the suburbs. They told Realestateweb that the statistical samples were too small to prove anything conclusive in some cases - and in others the figure was being swayed, by for example many sales of much lower priced properties pulling the average down. Generally, the bank still believes prices are growing, albeit at a very modest pace on average. It also has figures that show many suburbs around the country with double digit price growth. Estate agents are often best-known for talking positively about, or "talking up", property prices. So it is unusual when an industry player suggests property prices will not necessarily keep heading upwards. Lew Geffen, who heads the Lew Geffen Sotheby's International Realty estate agency group, told Realestateweb that he sees prices have dropped. Looking at the figures that are crossing his desk, "I can see a 6-8% shift in prices" for Johannesburg in general, he said. Geffen believes that this is potentially just the start of a drop in prices. He predicts that prices could plummet as much as 20-30% in the next two to three years if interest rates do not come down and sentiment about the country remains negative. Geffen said the boom years earlier this decade were "like living in an unreal world", though of course South Africa's prices have been playing catch up to elsewhere. Unlike many, Geffen said he is not contemplating emigration. "I am very committed to South Africa. I've got huge investments in South Africa. I would like to see it come right," he said. As at other estate agency groups, Lew Geffen Sotheby's International Realty is seeing many new listings as a result of families' decisions to emigrate. "In the past they wouldn't come out and say this directly. Now they are," said Geffen. Estate agents, meanwhile, have also told Realestateweb that times are challenging. Myrna Powell, rated very highly by the chief executive officer of a listed company on Realestateweb's Rate Your Agent tool, said that business conditions are "tough" right now. Nevertheless, the Jawitz Properties' agent said she remains positive that this is "a cycle we are going through and we'll come out of it". Others have said there are still many sellers who have unrealistic expectations of what they can achieve - while the shrinking pool of buyers is made up largely of bargain-hunters. Estate agency boss Berry Everitt, of Chas Everitt International, is more upbeat about where property values are heading. He believes residential prices will generally remain stable for now, as predicted by economists at the big banks, and are expected to head up in line with inflation over time. Property could easily be 60-70% more expensive in four-five years than it is now. Of comments that more than 85% of sellers are offloading properties below asking price, he said: "That has been the case for the last 50 years". Most sellers don't achieve the price they want, he said. Everitt said he is confident that property remains a good investment for the investor, who has a longer-term investment horizon than the risk-taking "speculator". "Bricks and mortar has always been a good investment for my family," said Everitt of returns made over the past three decades. He said he too remains optimistic about the longer-term economic picture for South Africa - and in particular the returns from residential property. * Are property values dropping in your area, or just going up more slowly than they have in the past? Tell us about your local market conditions, below this article. Or send us an email.
  4. http://www.realestateweb.co.za/realestatew...8&sn=Detail The R50 000-a-month property shocker Realestateweb reporter 07 February 2008 That’s what you need to earn, as a minimum, to qualify for a very ordinary home – interview. If you are wondering why you can't afford an ordinary home, look no further than your salary slip. The introduction of the National Credit Act (NCA) has meant that you need to earn at least R50 000/month and be frugal with your cash if you have any hope of qualifying for a bank loan for the average house - and that now costs R962 000, according to Absa. Before the NCA, banks could look at your income and give you a percentage of this. Now, however, they can only grant you a loan based on what you have left in your account after you have paid all your bills. Speaking on the Moneyweb Power Hour on Wednesday, Absa property analyst Jacques du Toit confirmed that you have to have about R36 000 in after-tax income to be in a position to buy the average house. That, in turn, would mean you need a pre-tax income of about R50 000 - a figure that is very far from average in the South African context. On R962 000, a 100% mortgage will set you back R12 300/month, said Du Toit. Economists don't see prices plummeting, even though the economy is under pressure and fears are growing in some quarters that we may be heading for a recession. Instead, Du Toit told Moneyweb Power Hour host Alec Hogg: "People will most probably have to look at smaller, more affordable high-density properties in future." While new developments have characterised the property landscape in recent years, expect to see fewer new offerings. "If electricity cannot be provided or guaranteed, many new developments will probably not take place, which will have supply and demand issues focusing on the existing segment of the housing market," said Du Toit. Absa's latest House Price Index shows that the residential property market is at its lowest rate of growth since December 1999 - and things could still get worse.
  5. Yip, exactly. I was discussing the real fall of 7.9% pa with a bull I know - it was a completely new concept for him!
  6. http://www.realestateweb.co.za/realestatew...3&sn=Detail Residential property stops in its tracks Gordon Bell 01 February 2008 Lack of affordability puts the brakes on house price growth - latest figures. JOHANNESBURG (Reuters) - South African residential house prices were unchanged for the second month in a row in January as higher interest rates dent affordability, a survey showed on Friday. The monthly Standard Bank property gauge put annualised house price growth last month at 0.0 percent, reflecting a general slowdown in the demand side of the economy. "The weakness prevalent in the residential property market is a function of the deterioration in the affordability of housing," the bank's property economist Sizwe Nxedlana said. "The affordability of residential property, in turn, has been adversely affected by the surge in house prices, which commenced in 2003 ... (and) was exacerbated by the increases in interest rates since July 2006." South Africa's central bank left its repo rate at 11.0 percent on Thursday, noting signs that consumer spending was cooling in response to previous increases, and that economic growth may be easing. The decision follows eight increases totalling 400 basis points since June 2006 to combat rising inflationary pressures. The higher rates helped to tame a four-year bull market that pushed property prices sharply higher. Nxedlana said that due to the elevated prices and increased rates, the average instalment on a mortgage covering the full cost of a property was about 30 percent more than 20 months ago. A new credit law aimed at clamping down on excessive bank lending was also impacting on demand. "There is evidence that the increased rigour in the granting of credit, as a result of the National Credit Act, is curtailing the demand for residential property and contributing to the softening of house prices," he said. But, still positive -- although slower -- economic growth could support the market and provide a floor for residential prices. "As a result, in the short term, low growth will be recorded with the potential of negative year-on-year growth in some months, mainly as a result of base effects," Nxedlana said. South Africa's economy has expanded by around 5 percent for the past three years, but expected slower global growth, weaker household spending and an electricity crisis in likely to drag growth down this year.
  7. http://www.fin24.co.za/articles/default/di...1518-25_2260653 Forced home sales surge 75% Jan 29 2008 11:33 AM Joan Muller Johannesburg - The number of over-stretched SA property owners losing their homes under the hammer rises to record levels. Alliance Group CEO Rael Levitt says so far this month, forced property sales are up 75% compared with January 2007. The group, one of SA's largest auctioneers, has handled more than 1 200 distressed sales/month since October last year. These include sales in execution (bank foreclosures), homes where mortgage repayments have been in arrears for at least three months and insolvent estates. A large chunk of these sales are multi-million rand holiday homes in posh seaside resorts such as Plettenberg Bay, Knysna, St Francis Bay and the KwaZulu-Natal north coast. Levitt says he has never seen so many luxury, leisure properties - typically priced at R7m plus - on the distressed sales book. Further forced sales expected He expects the number of forced sales to rise further over the next few months as higher interest rates continue to filter through to the market. It seems that many of these sellers are new entrants to the property market who bought at the height of the boom and never anticipated higher interest rates and slower house price growth. Says Levitt: "Before the National Credit Act was introduced, banks were providing easy money for people to buy rental properties and second homes. Inexperienced investors happily overextended themselves expecting property values to continue to rise." Although Levitt doesn't expect a "massive" drop in house prices, he maintains that too many South Africans mistakenly believe that values will move in a one-way direction forever. Levitt notes that some top-end homes are already being sold on auction at a 25% discount to original asking prices. "Property valuators will clearly need to adopt a more conservative approach than the over-exuberant one that has been the norm in recent years." Levitt has already told his valuators to be more cautious when using historical housing data to determine market values, a move that will no doubt force both sellers and estate agents to become a tad more realistic in their asking prices over the coming months. - Fin24
  8. http://www.realestateweb.co.za/realestatew...8&sn=Detail “Better to rent than buy” Jackie Cameron 25 January 2008 Think you should sell up? The pros and cons – two respected economists weigh in on either side of the debate. With property prices relatively high and interest rates not showing signs of coming down any time soon, many people are wondering whether it is time to sell up and rent. You can get more for your money, in terms of house size and location, if you are a tenant rather than an owner. And, property price growth is slowing, so your home isn’t likely to produce quick capital gains for you like it did earlier this decade. The case for renting Erwin Rode of Rode & Associates is a respected property economist who believes that you will make more money by becoming a tenant and using the spare cash that would have gone towards paying off your home loan for another investment. Rode does not work for a bank so you could argue he does not have a vested interest in talking up property prices. Remember, banks make money by charging you interest on home loans. The more enthusiasm there is for property, the stronger the appetite for the mortgages that make them money. Rode does not see residential property prices going up like they did a few years ago. In fact, he says houses are in for a period of “no growth”, though we could see prices drop for a couple of months. Although home-owners elsewhere in the world have seen prices slump and there is concern that the US sub-prime fiasco could affect the South African property market, Rode does not see a property crash looming. “For a crash you need the economy to collapse. There is a big difference between the financial markets and the real economy,” he points out of why South African property owners needn’t panic about stock market losses. He says it was “high time” for a market correction, but that does not mean the real economy will crash.Economic woes in the US will have a “ripple effect on the world economy and South Africa”, but like all ripples by the time it reaches our shores it should be fairly mild. And, property markets tend to be country and market specific. Rode believes your money may be better off in a bank, like in a money market account, than in residential property for the next few years. He is more bullish on non-residential bricks-and-mortar, which he says has not overheated.The prospects for capital growth out of residential property are “very slim”, so he wouldn’t buy now. “As an owner-occupier it is better to rent than buy. I don’t expect property prices to grow by much,” says Rode. With the huge disparity between mortgage instalments and rentals, Rode says it is better to invest elsewhere. The case for buying Sizwe Nxedlana is a respected economist with Standard Bank. He agrees with Rode that now is generally not a good time to buy residential property if you are a buy-to-let investor. This is because rentals are unlikely to cover bond repayments, which have gone up a lot in recent months, so you will be subsidising a tenant to a significant extent. Residential prices may drop, though a crash is not likely, says Nxedlana. Looking at median property prices (the price such that half of all houses are more expensive and half are less expensive than that price), houses are “stuck in a range” of between R550 000 and R620 000, says Nxedlana. There is “no fresh impetus” likely to boost prices upwards for now, like a change in interest rates, but there are economic factors that support residential property at current prices. If you are thinking of buying in order to rent, remember that now is not a good time to sell. You could have sold for more a year ago than you could expect to sell at today. If you bought three, four or even five years ago you can expect to make a profit, but you will not be making much of a profit if you bought last year. It is, however, a good time to buy if you want to own your own home, says Nxedlana. This is because buyers can get a good deal now, by negotiating with sellers who are finding conditions tough. If you rent your home instead of buying it, this will benefit you in the short term. But in about 18 to 24 months time, when we see the next downward phase of interest rates, you can expect property prices to ratchet up again as more people find they can afford to buy. “If you can afford to buy now, do it,” says Nxedlana.
  9. Not to mention a president-in-waiting and a police commisioner facing racketeering and corruption charges! On the whole though, we always seem to weather whatever crises are thrown our way, so I'm not pessimistic about our future. SA also seems to get a bad rap in the press - much of what is reported is overblown (that's not to say we don't have serious issues).
  10. I don't think it's a question of SA's economy following the UK's. We have simply experienced a speculative boom fuelled by cheap credit, just like the rest of the world.
  11. Indeed - car and house sales have plummeted, prices will surely follow. Estate agent clients of mine say the market is dire, with y-o-y growth reported at 0% in December.
  12. From: http://capetownbubble.blogspot.com/ (go to site for graphs) 22 January 2008 Standard Bank: Year-on-Year House Price Growth for Dec 2007 Was 0% From Standard Banks Residential property gauge(PDF): House price growth as measured by Standard Bank’ median house price1 index was recorded at 0.0% y/y in December 2007. In level terms the median house price was recorded at R550,000. The December outcome brought the five-month moving average growth rate to 5.6% y/y. Here are some graphs from the report (All copyrights remain with Standard Bank). First up house price growth: If you bought a R1 000 000 house in December 2006 with no money down, you've just given the bank R140 000 to rent your house. You've made no capital gains and all the money you have paid has gone to pay off the interest. To recover those losses house prices have to rise 14% at least, but forecasts for next year on in the low single figures, if not negative (which is looking more possible every month). Which means you'll lose even more money in 2008. Even putting a 20% down payment has cost you R123 000, and that's money you have a very slim chance of getting back unless you tough it out in your new purchase for at least 7 years. Next up looks look at mortgage advances: Mortgage advances are still sky high. The close to 25% of bondholders who took out mortgage advances in 2007 who assumed rising property prices would cover them taking on new debt are going to be in for a suprise. If they try and sell in the near future I would guess they have to bring money to the table to cover the shortfall on what they owe and what the house is now worth. And finally here's a graph of debt rations and insolvencies: Notice how the 'Debt repayment to income ratio' grah has usually been a leading indicator(1999-2003). In 2003 the housing bubble kicked in and debt started a uphill trundle while insolvencies remained low. This is probably related to the private sector borrowing graph above. Everyone was "Hey I don't mind getting in debt because rising house prices will cover me taking money out the bond". Oops. The disconnect between rising debt and insolvencies has been marked in the last 4 years but with housing prices at a virtual standstill that trend will not continue.
  13. http://www.property24.com/Property24/News/...ec=Agricultural Is a homeloan 'debt'? 2007/02/21 Today's budget will affect us for the next year. Is your homeloan really a 'debt', or not? Property has a proven track record for being a solid investment, and potential investors should not fear raising debt to acquire properties, says Trafalgar chairman Neville Schaefer. His comments come as South Africans adjust to a rising interest rate cycle following a four-year period when bond rates dipped to their lowest point in a quarter century. "The upswing opens opportunities for investors to acquire sound investments in developing neighbourhoods," he says. According to Standard Bank economist Elna Moolman, the question of whether to raise debt or not should depend upon an individual and his specific situation. "However, it is relatively comforting that interest rates are not likely to rise any further for the time being," she says. "So if an investor can afford a mortgage at these rates, there is not much risk further down the line." Dennis Dykes, chief economist for Nedbank, agrees that a positive spin off from the latest round of interest rate hikes is that they enable investors to more realistically gauge the affordability of property. "Counter to that though is that when interest rates go up, there is less price performance in the ensuing period," he says. "This is not necessarily the case, but as affordability becomes an issue, it does tend to moderate price performance – at least in the short term." Furthermore, Schaefer says attitudes to debt should take cognisance of age, with anyone under 30 years being prepared to service 100% bonds on their new investments. "People in that bracket are still young enough to begin again if the venture does not succeed. Their financial responsibilities are not as onerous as their older counterparts," he says. He believes investors up to 40 years old can sustain bonds between 80 to 100% on their properties as the chances are they have families and other financial responsibilities to consider. Those in the next age bracket should limit their bonds to 60 to 80% and once investors reach 50 years old, they should aspire to put down a 50% deposit on new properties in their portfolio. Anyone acquiring property after 65 years of age can not expect to raise a bond on their new investments. Moolman has a different take as she believes a potential investor should rather look at how much time he still expects to be employed for, especially taking into account the fact that many people are living far longer than previously. "I would not see age as being the critical factor in determining the proportion of the loan to the value ratio," she says. "So for example, if someone is 40 years old and can afford to take a 100% mortgage, which he believes he will be able to pay before he retires, that's fine." Dykes is of the opinion that it is not advisable for someone over 65 years of age to take out a 100% mortgage bond. "At that stage in life, one should be using property as an asset rather than an expenditure item," he says. "So age does come into the equation to some degree, but having said that, prospects do also play a role. So likewise if one is young with no prospects, there is no point in taking out a 100% loan." According to Schaefer, property yields have consistently outweighed cash or bonds, meaning there is scope for investors to secure a solid annuity income from their properties and to benefit from appreciation and market growth when the asset is sold. He warned potential investors against buying and selling properties too rapidly though due to the high costs associated with entering and exiting the market. Schaefer adds that investors should leverage their property portfolio to buy further properties. Banks recognise the value of the assets and allow investors to borrow against them to grow the portfolio. – Kara Michaels
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.