Gauteng trumps coastal prices

The high interest rates environment is expected keep property prices in coastal regions lower than those in Gauteng due to a higher degree of non-essential investment and holiday buying in the coastal markets, a property strategist said on Tuesday.“Activity levels, as viewed by estate agents in various regions, are lower in the coastal regions compared with the Gauteng market,” said John Loos, property strategist at FNB.

He added that it was no surprise, as coastal regions had a far greater component of holiday and investment buying activity, which was more sensitive to interest rates and economic cycles.

But Gauteng’s market is dominated by less cyclical and primary residential demand, making it essential for buyers to come into the market despite a higher interest rates environment.

Loos noted that property prices in KwaZulu-Natal were the weakest among major coastal cities, while in Gauteng, Tshwane was setting superior capital growth and activity levels compared to other major metros in the province.

- Tiisetso Motsoeneng, I-Net Bridge 

Don’t delay your property plans

The property market is still on track for a recovery - possibly as early as the third quarter in 2008 - notwithstanding the latest interest rate increase.That’s the view of Gerhard Kotzé, CEO of the ERA South Africa property group, after canvassing analysts and commentators in the industry.

“The general consensus is that the market will move sideways for about 12 months, but thereafter, it should start to recover and gradually build up a head of steam going into 2009,” he says.

“Interest rates will have been lowered slightly by then, pent-up demand will need to be satisfied and salaries and wages will have caught up with home prices to some extent, making property more affordable. Also, the final run-up to the 2010 Soccer World Cup will be in full swing, resulting in injections of money into the economy that will translate into further demand for property.”

“Given this scenario, the various stakeholders in the industry should apply certain strategies. Sellers should not delay. The price you receive now will buy a similar standard of property, provided the sale date and purchase date are not too far apart. In other words, the buy/sell market pricing mechanism balances out.

“For buyers the message is identical: Don’t delay your plans if at all possible because prices are continuing to rise, albeit it more slowly.”

Similarly, Kotzé says, buy-to-let investors may be tempted to wait for bargains to appear, but the difficulty is being in the right place at the right time.

“On the other hand, the rental market is recovering, partly due to the National Credit Act (NCA) which has made it more difficult to obtain bonds.

“Investors should however assemble larger deposits to reduce bond costs, be selective in their choice of property and be prepared to wait for prices to harden again before re-selling.”

Basically, he says, all stakeholders in the market should actively use the breathing space afforded by the current property market slow-down to position themselves for the next upturn. 

Check new properties for snags

Off-plan properties are an attractive option for many people, but who protects the buyer from unsightly finishes, visible defects and homes not built according to the original plan?In the face of interest rate hikes and slowing property prices, the building industry remains steady with an ever increasing demand for properties built off-plan. These properties are an attractive option for many people, especially first-time homeowners, for a number of reasons. Most of the properties progressively appreciate, buyers save on transfer fees, are often allowed to choose their own finishes and they are afforded the protection of a secure complex.

But who protects the buyer from unsightly finishes, visible defects and homes not built according to the original plan?

Today’s market demands tighter deadlines which involves contractors employed “on price”. This has produced a trend to cut corners and therefore lower the standards of workmanship. Some new developments are also built by sub-standard tradesmen who have very little supervision or quality control. All of this can amount to a homeowner taking occupation of a dwelling that is riddled with defects and well below the accepted standard.

“Buyers need to understand the importance of snagging their new home,” says Eric Bell, CEO of Inspect-A-Home, a professional inspection company often called in to carry out professional snags.

Snagging is where the property is checked thoroughly for defects and poor finishes. This can be anything from poor paintwork to badly hung doors, broken window-catches and faulty sockets.

“Our inspectors have found floor tiles with no expansion joints, geysers not installed according to regulations, roof trusses not braced securely and a host of other defects.”

“Buyers mistakenly believe that they are covered when buying a new build from a reputable developer. What they don’t realise is that the developer often sub-contracts to building contractors, who are under pressure to complete the units within a certain timeframe. This results in short cuts being taken and best building practices not always being followed.”

“We often list between 100 – 200 snags per dwelling and have found some new homes with far more than that.”

Bell recommends a snag list is completed prior to occupation. This ensures that no defects or poor finishes are hidden by furniture or appliances. He says that it is best to go through the property a few times before completing the snag list as often a second visit will reveal further snags.

Once completed, the snag list should be handed over to either the site supervisor or the site agent so that the items listed can be attended to. This can create its own share of headaches as the builder often has moved on to the next phase of housing or to a completely new development.

“Developers put pressure on buyers to pay in full and then only complete a snag list after they have taken occupation. Obviously this serves only in the developer’s best interest.”

“Buyers should consider inserting a ‘retention clause’ in their contract,” mentions Bell. “This is where a sum of money is held back until all the snags in a property are put right. They should speak to their attorneys about including this when they sign the initial contract. It is a way of holding the developer accountable, ensuring their snags are dealt with and that they receive the quality home they were expecting.” 

Cement firm upbeat about market

A leading South African cement manufacturer is upbeat about the prospects for the market, despite the fact that the recent rise in interest rates is likely to have some impact on residential construction in the coming year.Releasing its annual results, Pretoria Portland Cement (PPC) said it believes that low-cost housing projects will continue growing.

“In addition, the level of infrastructural investment planned by government, Eskom and other sectors is gathering momentum, and we therefore expect continued demand growth in the year ahead,” the company said.

It added that these views are confirmed by construction and engineering customer groupings who all talk of full order books.

As a result of positive indications that industry growth will continue well past 2010, most local cement manufacturers are busy with or have announced expansion projects to increase capacity.

In addition, Orascom, an Egyptian cement company, announced plans to establish a cement plant near Mafikeng in the North West province of by late 2010.

“Indications are that these investments will allow industry demand to be met by local producers from 2011 onwards, and this will eliminate or reduce the need for imports,” PPC said.

PPC’s Batsweledi capacity expansion at Dwaalboom is planned to be commissioned during the second calendar quarter of 2008 and should ramp up to full production by the financial year-end. Consequently, the benefit of additional cement production will be limited to the second half-year dependant on how quickly the ramp-up is achieved, it added.

In the meantime, PPC will continue to supplement any cement shortfall with an imported Surebuild product, albeit at little or no margin.

Additional cement milling capacity will also come on stream during 2009 in the inland region. In February 2007 the board approved a R604m project for a new milling facility at the Hercules factory in Pretoria.

The Riebeeck West expansion and modernisation project study for the Western Cape is progressing well but has been delayed by the environmental impact assessment and regulatory approval process.

“Whilst this delay is unfortunate, we have continued with the specification of equipment, plant layout and engineering design. Over the last year there has been no growth in cement demand in the Western Cape and therefore this delay should not have any major impact on either the project or our ability to supply the cement requirements in the province over the medium-term,” it said.

The positive market outlook, combined with incremental cement output in the second half of 2008, should enable the company to report improved performance and a strong operating cash flow for the ensuing year.

“We are on track to commission the new Batsweledi capacity at Dwaalboom early next year which will increase our output during the second half and therefore reduce the need to import. We are confident about achieving another improved performance next year,” CEO John Gomersall said.

 - Jacqueline Mackenzie, I-Net Bridge