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| South Africas Conversion to REITs |
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The conversion to a best-of-breed REIT (Real Estate Investment Trust) structure is being proactively pursued by the sector
Investment property as an asset class has distinct characteristics. The capital value of investment property assets is typically secure and not volatile, and the trend is for capital values to increase in line with or in excess of prevailing inflation rates. Likewise, investment property produces predictable cash flows escalating in line with or in excess of inflation. Capital stability and reliable cash flows allow for cost-effective gearing against investment grade property. In most conditions, the effect of this gearing is that it reduces the entry price to equity investors in property and enhances the returns to equity investors.
| Madison Property Fund Managers - Property Innovation, 20-03-2007 |
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| Growth in Mortgage Advances Still Strong |
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Property Trends - Mortgage Advances
According to data released by the South African Reserve Bank, mortgage advances by the monetary sector increased by 30,1% year-on-year in January 2007. This brought the total amount of mortgage advances to R694,1 billion in January.
Taking into account the continued strong year-on-year growth, which has been around
the 30% level since March 2006, the 200 basis points worth of interest rates hikes since
June last year appear to have done little to curb mortgage advances growth. However, on
a month-on-month basis, mortgage advances growth edged gradually lower from 2,5% in
October last year to 1,4% in January this year. This could be an early indication that the
higher interest rates are starting to take effect and that year-on-year growth in mortgage
advances is set to move to lower levels in coming months.
| Absa Group Economic Research, 01-03-2007 |
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| It is R1billion Boom-Time in Buffalo City |
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An unprecedented building boom pushed the value of building plans passed by the Buffalo City Municipality last year to over R1billion for the first time in history
Property experts say the boom has been fuelled by new housing and shopping centre developments as well as investment flowing into the East London Industrial Development Zone.
The total value of 2006's plans was a touch over R1 billion compared to 2005's R708 million. And they predict more to come this year.
Explaining the 41 percent increase over 2005, BCM mayor Zintle Peter said the city was experiencing a period of positive growth not seen in decades.
"There are many factors responsible for the building boom, including a stable macro-economic environment and low interest rates, but I am heartened by the people of Buffalo City who are now confident to invest in the property market," she said.
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| South Africas Biggest and Most Profitable Shopping Centres |
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More than a million square metres of new shopping space is currently planned or under construction in the country and half of it is in Gauteng
The conditions driving this boom in shopping centres and making others extremely lucrative are set to continue.
According to the latest statistics from the South African Council of Shopping Centres (SACSC), 24 shopping centres with a total area of 553 000m˛ are being developed in Gauteng.
In addition, the SACSC states that South Africa currently has shopping space of 0,3m˛ per capita, compared with about 2m˛ per capita in the US, Britain and countries in Europe.
"This indicates that South Africa still has huge potential for the further expansion of shopping space," said Absa's senior economist, Jacques du Toit in the bank's latest residential property perspective.
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| Property Industry Welcomes Budget |
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Players in the property industry have welcomed Finance Minister Trevor Manuel's Good News Budget
In addition, R11 billion will be spent on social housing, while teachers' salaries are to increase by R8 billion. Both these factors will boost the property market, because teachers, as a consumer segment, are a very important house-buying segment.
This is indeed a good news budget by any standard. Government expenditure, coupled with powerful economic growth and tempered inflation will augur well for house sales and rises in house prices during 2007 and beyond.
In turn, rentals continue to rise at more than 8% per annum. This will assist investors who are currently required to subside costs of property by as much as 30%, in the form deposits, in order to break even.
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| Debts, Loans In The Property Industry |
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Property has a proven track record for being a solid investment, and potential investors should not fear raising debt to acquire properties
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."
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| Regulator Will Ensure National Credit Act Promotes Fair Access to Credit |
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Concerns have been expressed that the National Credit Act (NCA) — which has been gradually enacted since 1 June 2006 and will come into full effect on 1 June 2007 — will hamper economic growth and housing development in unintended ways
Some housing developers fear that financial institutions will be setting unreasonably strict requirements for applicants to qualify for project finance, while others worry that the checking of the credit exposure of future borrowers required by the Act will be a protracted process that will slow down home-loan approvals, resulting in lost sales.
In response to these concerns, the National Credit Regulator (NCR), which was established by the NCA in June last year, gave the assurance that countering concerns through educating the credit applicants about their rights and the implications of the Act, investigating and solving complaints and settling disputes, were precisely what the Regulator has been tasked to do.
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It seems the sale of Cape Town’s Waterfront to an influential offshore consortium has reignited sentiment for the local property market
The most significant of the deals (and probably one spurred by the new ownership
developments at the V&A Waterfront) took place ‘just down the road’ with the Hospitality Group
paying R105 million for the 4-star Protea Hotel Victoria Junction.
The deal was struck at an
effective 10% discount to the R116 million value accorded to the property by independent
valuators JHI Real Estate.
It seems Hospitality Group have clinched a rather good deal with
forecast earnings from Victoria Junction penciled in at R6.8 million for the six months to end
June 2007 and R11.3 million for the full year to end June 2008.
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| Volatility Ahead in the South African Property Market |
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Catalyst continues to favour funds that exhibit high-quality and sustainable income streams, excellent disclosure and transparency and management with a proven ability to perform
Last year, listed property funds gave a total
return of 28,6% to December 31, down from 50,04% in 2005, when they were the best-performing
asset class. That's according to calculations by Catalyst Fund Managers.
Octodec, one of the
two funds managed by Alec Wapnick and his son Jeffrey in Pretoria, was the top performer (with an
income return of 9,61% and a total return of 56,66%, assuming payouts were reinvested), followed
by Des de Beer's Resilient (7,76%, 48,25%); the FM's tip for 2006, ApexHi B in the Madison
stable (9,62%, 45,58%); the Wapnicks' other fund Premium (8,29%, 45,17%); and Sanlam's Vukile
(9,91%, 41,94%).
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| Cape Town Stadium Given the Green Light |
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Plans to build a new stadium in Cape Town to stage matches in the 2010 World Cup were given the green light when the provincial government dismissed a series of appeals against its construction
Tasneem Essop, planning and economic development minister in the Western Cape provincial government, said
that a rezoning application for the land where the 68,000-seater stadium should be built had also
been approved.
"Far from having a substantial detrimental effect on the environment, overall
the new stadium and urban park on the Green Point Common will have a beneficial impact on the
local environment and will benefit the broader Cape Town community," she told reporters.
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