Property news for the Bundublog community

Auction big-gun Rael Levitt has made the following predictions around the property and business markets in 2012:

 

This was a tough year for South African real estate and, after three years of trudging through a severe downturn, the year did not present a path to recovery. As buyer-demand cooled, concerns about global sovereign debt heightened and weak prospects for the local economy worried investors. “From an auction perspective, we saw a distinct cool off in demand from the third quarter. In an industry, well versed in cheery talk about prospects, no-one can claim that the property market has endured anything other than a bruising 2011,” says Auction Alliance CEO, Rael Levitt. Despite this, Auction Alliance concluded the year with an excess of R6 billion worth of sales.

“Early in the year we said that the outlook for the residential market would be perturbing with a predicted “double dip” in house prices after 2010’s short-lived uptick,” explained Levitt. During December last year, Auction Alliance stated that: for the next 18 months, improvement in house prices seemed unlikely, given huge uncertainties over the strength of the economic recovery. “In fact, there has been neither an economic nor a property recovery.”
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Conventional knowledge dictates that high risk investments will produce high returns, and similarly, low risk investments will yield low returns. Dr Koos du Toit, CEO of P3 Investment Group explains why this adage does not hold true when it comes to buy-to-let property, a low risk investment producing exceptional returns.

While it is certainly true that no investment is without risk, some investments are less risky than others. For example, an investment in equities is riskier than an investment in bonds. Traditionally, higher risk investments are associated with higher returns, while lower risk investments generally produce lower returns.

The reason for this is simple: No one will invest in a high risk investment vehicle – with a significant possibility that you might lose your money – unless a promise of a high return is attached to it – a possibility that you could make a lot of money. Unfortunately, high risk does not guarantee a high return – it only provides a possibility that you could make a lot of money, with far less emphasis on the fact that you might not… and that you might actually lose your money.

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FNB Housing Finance today called on homeowners to consider a fixed interest rate on their home loan, so they can better absorb possible interest rate increases.
Recently consumers have experienced a number of changes in the economy with increases in the petrol price, food and electricity.

“Fixing the interest rate on your home loan is one of the best ways to weather a financial storm,” say Marius Marais, CEO of *FNB Housing Finance.
At the start of the fixed period the initial interest rate may be 1 to 2% higher than the variable rate at that time. However in the longer run variable rates may increase much more than this.

A fixed interest rate means that the monthly repayment will remain unchanged even when interest rates increase; allowing customers to have a more stable monthly budget.
Fixed rates are normally offered for periods up to 5 years.

“Fixing your interest rate may be prudent when the future economic outlook is uncertain and increases in living costs are difficult to predict,” concludes Marais.
Whilst the small ‘saving’ in the monthly repayment may look attractive in the short term, when rates move up swiftly these customers may suffer severe financial strain – even sadly losing their homes.

Investment returns have never been more volatile or uncertain, but one thing remains an absolute certainty: whatever returns are generated, the taxman will take his slice. Buy-to-let property investment, however, presents investors with one of the most tax efficient options – if you do it right.

As a South African citizen, you have the right to structure your affairs in such a way as to ensure that you pay the least amount of tax. This is not the same as avoiding tax you are liable to pay, which is illegal. It simply means that there are structures, allowances and tax breaks available to citizens and legal entities, designed to ensure that the tax burden is spread equitably and fairly, and taxpayers are entitled to use all of these to their benefit. Property investment offers ample opportunity for investors to optimise their tax liabilities.

“The objective of buy-to-let property investment according to the proven P3 investment strategy is to generate an ongoing passive income that keeps pace with inflation,” explains Dr Koos du Toit, CEO of P3 Investment Group. “This income, like any other income, is subject to tax, but many of expenses related to such an investment are tax deductible.”

In the South African Income Tax Act, income derived from the rental of a property is defined as a taxable income. However, certain expenses “incurred in the production of income” may be deducted from this taxable income to reduce the tax liability.

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There is a misconception in the property market that its woes are being exacerbated by a lack of bank lending.

But, says BoE Private Client’s Adele Arnott, bank finance has not dried up. She says all that has happened is that banks have sharpened their lending criteria, making it more difficult for some would-be borrowers to get finance.

“In the heydays of the property boom, prior to 2009, many entrepreneurs became property developers or investors. Many of them had no expertise, prior experience or sufficient cash flow to see them through the normal peaks and troughs of the property cycle. The global market crash forced banks to relook at how they lend money and what risks they are prepared to take.

“In order to best measure the risks, bankers have found it has become critical to understand the client behind a specific transaction, the property, the cash flows that the property can produce and the clients’ own cash flows outside of the specific property investment.”

She says it is critical for banks to approach funding with a far greater understanding and entrepreneurial insight.
“BoE Private Clients’ structured lending team goes far further than normal lenders in that it includes its private bank and investment specialists’ insights when analysing deals.

“We typically analyse the client’s financial structure and balance sheet and often we are able to improve the investment returns by better leveraging off the borrowings.  Not only is this great for our clients as s it allows them to see the investment picture more holistically ( instead of focusing only on the specific deal) but we can even help them see the lending requirement against a top40 share portfolio or a development bond.”

She says a good financier can add further value by being part of the deal making process for property entrepreneurs and sometimes even brings parties together in order to facilitate deals.

“As an example one client might have non-performing vacant land on his balance sheet and by linking him to the right partner (either an existing client within BoE Private Clients or someone from our network) we are able to maximize returns and create opportunities for investment and better returns on assets.

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Investec Property, a division of Investec Bank Limited and one of South Africa’s best recognised property operations, today announced its re-entry into the listed property sector through its intention to list the Investec Property Fund Limited on the “Real Estate Holdings and Development” sector of the JSE on Thursday 14 April 2011.

Sam Leon, Investec Property Fund Limited chief executive officer, said: “We look forward to our return to the listed property sector through the listing of the Investec Property Fund. As big trees grow from small seeds, so too do we see this fund as a platform from which we can grow and expand our asset base and optimise returns in the medium to long term as we have done before.”

“It has been gratifying to see the broad based investor support we have received, particularly from major property investors in South Africa. We are pleased to have them on board and look forward to continuing to nurture these relationships into long term partnerships” continued Leon.

Salient features of the Investec Property Fund Limited include:
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The Myth Busters have done much to debunk some of the widely-held myths among viewers around the world, some of which had endured for hundreds of years. For savvy investors, it should raise the question: which other myths do I believe that keep me from achieving my financial goals?

Dr Koos du Toit, CEO of P3 Investment Group agreed to step into the role of Myth Buster and reveal the truth about some of the most widely-held property investment myths, many of which are perpetuated by so-called “investment experts”, whose interests lie in selling consumers financial products that have proven highly ineffective in creating wealth, or even a comfortable retirement.

Myth 1: You need money to make money – BUSTED!

One of the most outstanding features of buy-to-let property investment is that it allows you to use gearing or leverage to its full potential. “Gearing” or “leverage” in the simplest terms means that you don’t need R500 000 in your pocket to buy a R500 000 property. This is because the bank will lend you the R500 000 based on your monthly income.
Of course, this money must be paid back to the bank. But with a buy-to-let property investment, the rental paid by your tenant is used to repay the bank! Thus, if you get a 100% bond from the and the rental charged covers the monthly expenses – such as the bond repayments, water and electricity, rates and taxes – you can acquire a R500 000 asset without using a cent of your own money! Rest assured that no bank will lend you R500 000 to buy shares!

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The Competition Commission referred a case of market allocation in the retail property market to the Tribunal for adjudication on the 15 March 2011.

This referral follows an investigation into allegation that Erf 179 Bedfordview (Proprietary) Limited (“Erf 179”), Liberty Group Limited (“Liberty”), Bedford Square Properties (“Bedford Square”), and Win Twice Properties (Pty) Limited (“Win Twice”) colluded to divide markets by allocating customers and territories through two deeds of restraint.

All of these respondents compete in the retail property market around the Bedfordview area. Erf 179 owns Village View Shopping Centre, financial service group Liberty owns Eastgate Shopping Centre,  Win Twice and Bedford Square are subsidiaries of HBW Group (Pty) Ltd both of which own Bedford Square Shopping Centre.

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Many people, swayed by sensational media reports about malicious tenants, sad stories of ruined property syndication investors and misreported returns that do not take the power of gearing into account, mistakenly believe that buy-to-let property investment is a high risk strategy, reserved only for the well-connected, the educated or the rich. This could not be further from the truth…

“The truth is that buy-to-let property investment remains one of the greatest and simplest wealth creation tools and is accessible to the ordinary man – or woman – in the street,” says Dr Koos du Toit, CEO of the P3 Investment Group. “Essentially, buy-to-let property investment allows you to use the bank’s money to acquire a property and to repay the bank using a tenant’s money. This property asset will not only generate an ongoing passive income, which keeps up with inflation, it will also appreciate in value over time. It is a well-established system of wealth creation ! that offers numerous benefits and one of the only strategies that offer low risk with high returns.”

1.    Simplicity
You don’t need special education or special talents to engage in property investment – it is a simple, tried-and-tested system that anyone can learn to use. All the knowledge, tools and systems are easily and affordably accessible to anyone.
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Toyota South Africa Motors (TSAM) has, in consultation with Investec Property Limited (IPL), acquired an 18 hectare tract of land near OR Tambo International Airport for the development of a major new distribution and export centre in Gauteng to service the whole of South Africa and several export destinations in Africa and Europe. Investec Property received this mandate from TSAM in 2009. TSAM has spent millions of rands in the past five decades, in partnership with its dealer network, to develop its dealer network and facilities, but this is the largest investment into property by the group in Gauteng.

“Site selection was critical due to location, size and accessibility. It has been a lengthy process and we believe that the right site has been selected to accommodate Toyota’s current and future warehousing requirements,” commented David Rosmarin of Investec Property. The site forms part of the Lancaster Commercial Park and is located adjacent to OR Tambo International Airport. The site is easily accessible from the R21 and the N12 motorways and will be improved further by the proposed PWV15 which will border the property and serve as the eastern airport ring road.”

First phase development comprises 40 860m2 of warehouse, 3 475m2 of offices and 7 300 m2 of covered loading area and will take approximately 12 months to develop. Investec Property will be constructing the platform for a potential future expansion of a further 38 000m2 of warehouse and 7 000m2 covered loading area.

“The successful development of this world class facility is one of the cornerstones of our strategy to cement our position as an international supplier in the Toyota network. We believe that it also signifies our commitment to South Africa as a major vehicle manufacturer and exporter,” says Dr Johan van Zyl, President and CEO of Toyota South Africa Motors and Managing Officer of the Toyota Motor Corporation.

“We are proud to be associated with an international company such as Toyota on a development of this nature. We look forward to continuing a long partnership with them,” continued David Rosmarin.

Investec Property, a division of Investec Bank Limited, is one of South Africa’s largest and best recognised property operations, specialising in trading and acquisitions and developments.