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.” 

Cape crisis for the aged

The critical shortage of retirement accommodation in the Western Cape and waiting lists of up to fifteen years is resulting in investors putting their names down in their early forties. According to a number of retirement specialists, there is a critical shortage of retirement accommodation emerging in the Western Cape.

There are a number of factors contributing to this problem including increased life expectancy and a trend towards earlier retirement within the middle to higher income sectors.

A research survey conducted by the Central Statistical Service revealed that in 1995 the Western Cape had the highest life expectancy of all the provinces in South Africa, at 67.7 years of age, with the national average being 62.8 years of age.

“Many people now have access to improved medical assistance and are able to adopt healthier lifestyles. These people are living longer lives. It is also a known fact that fewer babies are being born every year. This, coupled with the increasing life expectancy of certain sectors of the population, results in a higher percentage of our population being over the age of sixty,” says Billy Rauch, CEO of the Cape Peninsula Organisation for the Aged (CPOA).

There is also a trend amongst those from the higher income brackets to retire earlier.

“In a new retirement development, the Schonenberg Retirement Village, we are seeing individuals and couples as young as 50 years of age looking to purchase retirement accommodation for immediate occupation. These people are seeking a change in lifestyle that only retirement villages like Schonenberg can offer – physical and financial security, healthcare facilities for later in life, social clubhouses, convenience and location,” says Russell Masters, project coordinator of Schonenberg Retirement Village, who has been involved in the development of a range of retirement villages in the Western Cape including Woodside Village, Silvermine Village and Oude Westhof Village in the northern suburbs.

Billy Rauch concurs: “There is a massive shortage of secure retirement villages in the Western Cape and nationally. Many younger couples are realising that they need to plan their retirement early and are applying to these facilities in their forties and fifties. The emerging upper middle class in South Africa is also increasing the number of retirees that can afford premium retirement accommodation.”

As a consequence, there is an acutely increased need for retirement facilities, villages and complexes as more people enter the retirement market earlier.

According to a recent scarce skills study by the HSRC, which encompassed a range of highly skilled professions including managers, educators, nurses, doctors, scientists engineers, academics and computer-related professionals, between 0.5% and 1.7% of the workforce in each of these professions retired over a five year period from 2001 to 2006.

This means that in the highly skilled professions covered by the study alone, nearly 43 000 people entered their retirement years over the five year period.

In the case of the more upmarket retirement facilities, waiting lists can be hundreds of names long and can lead to fifteen to twenty years of waiting. According to Billy Rauch, CPOA villages and complexes have waiting lists up to thirty years long.

“It is vital that people realise the severity of the problem. If an individual or couple only begin to seek retirement accommodation at the age of 50, they will find themselves at a loose end until they turn 60 or 65,” says Masters.

Additionally, property prices in the retirement market are escalating. According to Masters, eighteen to twenty percent increases per annum are not uncommon in the retirement market. With the more upmarket facilities, this can mean anything from a R150 000 to R400 000 increase in price over one year.

“Having worked in the retirement industry since the early nineties, I’ve seen the shifts first hand. I now encourage potential buyers to purchase as soon as possible so that they can benefit from these price increases to avoid becoming priced out of the market,” says Masters.

“I also advise people to invest in the new developments as they are built, provided the developers are stable and reputable and that the village is managed in accordance with the Retirement Act. These new developments do not have waiting lists and usually offer a range of price options to suit various budgets.”

Masters, together with Rick Minchener hosts regular talks on retirement for those planning their own or their parents’ leisure years. For more information call (021) 852 0821 or 083 457 2007.
  

Buying a home? Have it checked

When buying a second-hand car, most people will have it checked by the AA or a mechanic to make sure it is in good working order. So why then, when a property is one of the most expensive purchases a person can make, do purchasers not get their homes checked out properly before they commit to buying?The most common defects in residential homes are found in the roof structure and the foundations. Eric Bell of Inspect-a-Home says many of these are structural defects are severe, but are patched cosmetically and don’t look serious to the untrained eye.

“I recently inspected a 35-year old home where there were serious roof problems. The owner had put a layer of sawdust in the ceiling to prevent leaking when it rained and of course when the sun came out, the sawdust dried up, and no one would be the wiser.”

In many cases the structural beams in roofs are rotten and need extensive repairs but this is a problem that will be discovered only if the roof is properly inspected.

Bell explains that cracks in walls are also a common problem and it is often caused by blocked drainage which affects the foundations. Many sellers then simply use polyfiller to cosmetically repair these cracks, when in actual fact the foundations need to be underpinned.

Underpinning a home is a fairly expensive process where the weight of the building on the foundations needs to be transferred to special pads to stabilise the crack. The plaster then needs to be taken off the walls so that 90° grooves can be cut across the crack. The cracks are further stabilised by metal stitching. The crack is then filled with epoxy and mortar, further strengthened with chicken mesh before it can be replastered and painted.

In one case Inspect-a-Home supervised a repair job on a house that cost the owner in excess of R50k to metal-stitch and repair the cracks in the walls.

Bell talks about a variety of horror stories and although he has been in the business for nearly 20 years, he is still shocked at how trusting people are when buying a home.

“Buyers should not take what the seller says about the condition of the house at face value. They should always have the home inspected by a professional before committing to purchase.”

There was a recent case in which a house in Pietermaritzburg had a huge problem with cracks and the whole kitchen had shifted by 45mm. The engineering report had found nothing wrong with this home before the owner purchased, but now he is stuck with about R373k worth of damages that he has to repair.

The swimming pool area was of concern as no expansive joints around the pool edge or between the pool and the house were installed during construction. Due to normal expansion and contraction, the ceramic tiles laid were guaranteed to crack and de-bond without any expansion joints being installed.

Bell warns that the “voetstoets” clause in many sales agreements protects the seller exclusively and that often, whether maliciously or unintentionally, the seller and/or the agent do not disclose the defects.

Bell says if the buyer can prove latent defects, then the seller could still be held liable for any damages or cost of repairs.

“All those who are looking to buy a property should ensure that the offer to purchase is subject to a favourable report by a qualified inspector. Once any defects have been disclosed to the owner/seller, it is fraud if it is not disclosed to the buyer,” says Bell.