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September 2010. R15,00 incl. VAT

World Cup
Our feast of soccer caused a
loss of appetite for property,
but interest is picking up

Moving Offshore
Interest in Central London property

A Pa m G o l d i n g P r o p e r t y G r o u p P u b l i c a t i o n
 Hoedspruit, Limpopo Province, Kruger Park Region, South Africa

                                                                                    STANDS NOW SELLING FROM R1,2m
                                                                                       For illustrative purposes only – this photograph depicts a typical Jordan Properties bushveld home.

  Your home in the heart of Africa’s wildlife
   Hear the call of the wild. Experience the magic of Leadwood Wildlife Estate surrounded
                   by abundant game against magnificent mountain vistas.

 Leadwood Wildlife Estate offers 95 1 ha stands on 984 ha of prime                    The secure, managed estate is ideal for everyday living and also
 Lowveld big game bushveld. The estate forms part of the Blue                         suitable as a second home or holiday home. The modern town of
 Canyon Game Conservancy, a 15 000 ha game reserve nestled                            Hoedspruit, just 7 km away, gives access to shopping centres, schools,
 between the Kruger National Park and the Blyde River Canyon.                         medical facilities, restaurants, world class spa and other amenities.
 In addition, an optional traverse is available on 1 300 ha of the
 conservancy neighbouring the estate. Leadwood is 450 km drive
 from Johannesburg and 25 mins from Eastgate Airport.

Want to know more about Leadwood Wildlife Estate?
Susie White 082 882 9391, Johannesburg Office 011 380 0000, Hoedspruit Office 015 793 0471, or
                                                                                                                       2                  In Passing
                                                                  The country awaits a final balance sheet on the Fifa Soccer World Cup . Will it be profit or loss?

                                                                                                       3                   Andrew Golding
EditOr                                                                                We’ve shown what we are capable of. Now is the time to seize the moment.

Stuart Murray

Cape Town 021 710 1800
                                                                                                     4                  Property Outlook
                                                                                                 The peak in house price growth does not fully apply countrywide.

AddrESS                                                                                     Also, different methodologies in data capturing make analysis difficult.

Monterey, 12-14 Klaassens Rd
Bishopscourt, 7708
                                                                                                  6                  Regional Roundup
                                                                                                 Our feast of soccer caused a general loss of appetite for property.
PO Box 53012
Kenilworth, 7745                                                                                 Meanwhile, the Western Cape leads the provincial activity league.

Monika Benseler
                                                                                                                      7                  Mortgages
                                                                                               The interest rate cuts of last year helped boost the housing market.
                                                                                         But the effect has worn off and consumers need another shot in the arm.
CO-OrdinAtOr And
AdvErtiSing EnquiriES
Michelle Swindale
                                                                                                       8                   The Turbo Rand
                                                                                                     SA’s strong currency is worrying some sectors of the economy.
021 710 1700

                                                                                                                                15                    Taxes
                                                                SARS is offering a helping hand on two matters – properties in companies, trusts and forex fiddles.

                                                                                                           16                   London Focus
                                                                                       The strong rand will assist South Africans who wish to buy property abroad.
                                                                        PGP has two central London developments which offer attractive investment opportunities.

                                                                                                         18                    Foreign Buyers
                                                             We haven’t had many overseas buyers of late, but they’ll come back. Some basic legal advice for those
All articles, unless stated, are written by Stuart Murray.
                                                                                                                      who are considering a South African lifestyle.

Intellectual Property reserves the copyright of its
content. No articles, reports, graphs or diagrams,
or portion thereof, may be reproduced without
                                                                                                        19                    The Write Way
the express permission of Intellectual Property.                                          Beware of word of mouth agreements when changing written contracts.

Intellectual Property is not a financial adviser and
accepts no responsibility for any decisions made
by any reader on the basis of information of                                                                   20                    Commercial
whatever kind published in this magazine.                              Income streams may have dipped, but growth potential still makes this JSE sector attractive.

                                                                                                                  intELLECtuAL prOpErtY September 2010            1
                                                                                                                                                       In Passing

                                                                                       A Ball Park Figure
                                                                                   Trying to finalise a soccer world cup balance sheet is going to take time –
                                                         perhaps as long as it takes to reap the benefits; maybe longer. Was it worth it? Of course it was!

ACCLAiM fOr SOutH AfriCA’S hosting                              An interesting aside from Blackmore is that         destination. That’s a pretty optimistic view, but
of the Fifa Soccer World Cup is still waving over
                               TM                            he reckons that the total infrastructural spend        there is no doubt that South Africa has been
us like a tsunami and it’s a very pleasant feeling.          – new stadiums, stadium renovations, transport         rebranded.
In a practical sense, let’s hope that success really         and communications – was around R800 billion              The big question in many minds is what are
does breed success.                                          and that this helped shield South Africa from the      we going to do with the new stadiums? Are
    Prior to kick-off, the newspapers were awash             worst of the global recession. The question is,        they destined to become white elephants? How
with projections of the cost of the soccer festival,         can we keep up the delivery? Can we carry on           on earth can we amortize their cost? Another
with the over-runs being updated with monotony.              building new roads and sorting out those pitted        growing concern is their maintenance. The
Initial estimates put the bill, including the new            with potholes? Can we deliver homes, basic             surround park alone at the new Greenpoint
stadiums and the updated and renovated ones,                 services, healthcare and education? Where will         stadium in Cape Town will cost R500 000 a
at between R2 - R3 billion. Revised estimates –              the money come from?                                   month to maintain, according to reports. That
after adding a couple more stadiums – came to                   Can we handle life without Fifa? Can we fill        excludes the stadium itself – and there are seven
R5,6 billion. Now the latest national estimate I             the vacuum?                                            other monoliths. Already there are squabbles in
can unearth is R11,87 billion. On the other hand                There has been disappointment that fewer            terms of attracting sporting events. Provincial
I am reliably informed that Cape Town’s bill for             tourists than expected turned up. In the long          rugby diehards, such as in Durban and Cape
                                                                                                                    Town, assert that their supporters are happy
                                                                                                                    where they are. Port Elizabeth has landed one big
                                                                                                                    international rugby fixture for next year. The three
                                                                                                                    remaining Tri Nations 2010 rugby matches will be
                                                                                                                    held in South Africa this month onwards – only
                                                                                                                    one was held in a world cup stadium, South Africa
                                                                                                                    vs New Zealand at Soccer City, the others feature
                                                                                                                    in Pretoria and Bloemfontein, at the conventional
                                                                                                                    rugby grounds.
                                                                                                                       Talking of rugby, a scathing article appeared
...until the homework has been completed, it’s                                                                      in a New Zealand national newspaper recently

anyone’s guess as to the final balance sheet.                                                                       lambasting South Africa for what it suggested
                                                                                                                    was profligate spending on the Fifa Soccer World
                                                                                                                    CupTM. The report claimed that the New Zealand
the stadium and surround plus all the other                  run, this probably helped make the event more          authorities responsible for organising next year’s
developments came to R4,5 billion. So I suppose              manageable and contributed to its organisational       Rugby World Cup had budgeted to spend a total
until the homework has been completed, it’s                  success. Nevertheless, the tourism rate was 20%        amount equivalent to half the cost of one of our
anyone’s guess as to the final balance sheet.                higher than usual for that time of the year. The       new stadiums. The All Blacks are determined, it
    What strikes me as interesting is that the               Gautrain exceeded expectations – 3 000 to 6 000        seems, to remain in the black.
magnitude of the pre-Cup cost projections,                   commuters a day was the projected number; the             What I want to know is whether we can take
analyses, criticisms and economic comment with               reality was 13 000 on week days and 20 000 at          our vuvuzelas? Can they be our answer to the
which we were bombarded has not been equalled                weekends.                                              Haka?
by post-event assessments. Try as I will, there’s very          There is widespread acceptance that the
little on record so far. One comment from KPMG               benefits South Africa will gain from its magnificent                           The ediTor,
senior economist Frank Blackmore suggests that               handling of the soccer bonanza lie ahead. Some,                                STuarT Murray
the Cup pumped R93 billion into the local economy,           like property, may take years to materialise.                        
equivalent to 0,5% of GDP. But that was the SA               A survey by research group African Response
Reserve Bank’s projection for a GDP boost some               found that 96% of visitors would possibly return                               Stuart Murray is
                                                                                                                                            co-founder and former
time before the games began. Another guesstimate             to South Africa, while 92% would recommend
                                                                                                                                            editor of Finance Week
suggests a R130 billion shot in the arm.                     this country to friends and family as a holiday                                magazine.

2         intELLECtuAL prOpErtY September 2010
                                                                                                               Carpe Diem
                                                                                                   The residential property market must seize the moment,
                              taking advantage of the goodwill derived from the World Cup to promote this country’s advantages and attractions.

tHE SOCCEr WOrLd Cup has come and                       international community of investors it is in the      debt levels are high, running costs are climbing
gone, and as our heads clear from the sheer             afterglow of, in the words of Fifa president Sepp      ever higher and interest rates are still a formidable
excitement of the spectacle there is a widespread       Blatter: “The best World Cup ever.” For the most       hurdle. There is a large pool of stock for sale, but
feeling of anti-climax. In some quarters there is       part, those foreign visitors will see South Africa     fewer buyers than sellers.
disappointment, even resentment. What did we            as an opportunity and in return will bring much-          There is still a proportion of distressed sellers.
get out of it? Where are the benefits?                  needed foreign direct (and fixed) investment,          But for the market as a whole, pricing remains
   In the property market there were no                 creating jobs and ultimately contributing towards      unrealistic and has contributed to the lengthening
immediate fields of gold. In fact, the beautiful        stable economic growth.                                time it takes for a property to sell. It is a time
game so enraptured South Africans and visitors             Currently foreign capital is flooding in to         when astute investors capitalise on the situation
alike that commercial prospects took a back seat.       South Africa as investors buy our bonds and            by making considered acquisitions and achieving
The fans, players, officials, even the media, enjoyed
the sport, the excitement, our hospitality and
organisation, to the extent that as far as buying       Never before has South Africa
things, beyond the general fun of the fair - not
forgetting vuvuzelas – the soccer throngs were
                                                        been presented with such an
far too distracted to be bothered with anything         ideal opportunity to promote
as mundane as buying a house, flat, or whatever.
Results filtering through this last month from our
                                                        the country to foreigners...
agents around the country indicate that the 2010        We need to seize the moment...
Fifa Soccer World CupTM, to give it it’s proper
appellation, actually put a damper on residential
property sales.                                         equities and the so-called “carry trade” takes         significant returns. The leisure market, which will
   And why not? We were all caught up in World          full advantage of our attractive interest rates. But   clearly take longer than the primary market to
Cup Fever.                                              that is short-term capital; it can flow out just as    recover, is a case in point. Prime coastal property
   The positive side of agents’ appraisal is the        quickly as it pours in. We need fixed investment.      for sale currently presents a desirable investment
expectation of things to come; that the spectacle       And that is attracted to stability, both political     opportunity.
has firmly put South Africa on the map and that         and economic.                                             Another opportunity has been created by
the commonly held view of the Republic as yet              On that subject, there is little doubt that         the country’s massive infrastructure upgrades.
another run down third world country in the             South Africa delivered. Now it is up to all of us      These have provided improved transport nodes
“Dark Continent” has been firmly dashed. The            to capitalise on future opportunities. The Cup         and created new, attractive and convenient,
organisation, the smooth running of matches, the        has opened a lot of new doors. We may even             residential development opportunities. With the
joyful atmosphere, the friendliness of the locals,      have a chance of winning the 2020 Olympic              new Gautrain station precincts clear examples
most certainly have burnished this country’s            bid, although that is a long shot indeed. But the      of these, I anticipate that this trend will only
image and transformed it, not just as a place to        Olympic Committee certainly sat up and paid            increase as these nodes become fully bedded and
visit, but a place to be.                               attention. Would it have prior to the Cup?             the true value and convenience of these transport
   Already there are signs of payback, confirmed           As to the residential property market right         hubs becomes fully appreciated.
by a massive increase in foreign visits to the Pam      now, we need to realise that we are in a new
Golding Properties website. We have experienced         scenario, which is about prudent bank lending,
enquiries and visits from people in 190 countries.      modest house price growth and hesitant buyers.                                  PaM GoldinG
Hollanders lead the log, followed by potential          At the peak of the market around 25% of buyers                                  ProPerTy GrouP
                                                                                                                                        Chief exeCuTive,
buyers from the UK, US, Germany, Canada,                were speculators; today they are very thin on the                               dr andrew
Belgium, Australia, France, Switzerland and the         ground. There was also a bigger foreign market –                                GoldinG
United Arab Emirates.                                   which hopefully will return.
   We need to seize the moment, because if ever            Nevertheless we are at a tipping point, two
there was a time to present our credentials to the      years into a downward cycle. Credit is hard to get,

                                                                                                               intELLECtuAL prOpErtY September 2010               3
                                                                                                                                   Property Outlook

                                                            Running Out of Steam
                                                                Analyses differ around the country and between the various data capturing entities
                                                      as to the extent of house price growth. But generally speaking the market could be peaking.

ALL tHE MAin COMMEntAtOrS in the                      the medium and large house categories.                sufficiently to boost property growth just yet, but
residential property market are cautioning that          Property research group Lightstone reports         the rate of deterioration is slowing. Households
the steady rise in house price growth appears         that the most lucrative sector remains the mid and    are beginning to shed debt in arrears that have
to be peaking. According to Absa’s August             affordable bands. Freehold properties have also       gnawed at real disposable income, providing
House Price Index, the average real value of          outperformed their sectional title counterparts.      increased scope for discretionary purchases. With
small medium and large houses increased by a             The latest Rode Report on the property             the market remaining affordable from both an
weighted 7,2% in July (year on year). FNB’s most      industry says that in real terms house prices are     inflation and borrowing cost perspective, further
recent figure for house price growth brought it in    still very high relative to previous periods. In      improvements are envisaged.”
at 7,6% in real terms. Standard Bank looks ahead      terms of going forward, Rode echoes the general          At the current rate of improvement, Standard
to only 6% nominal growth this year – and 1,2%        sentiment in the industry that, given the general     Bank reckons, factoring in seasonal effects, the
in real terms.                                        need for potential homebuyers to gear their           market is set to show average nominal growth of
    In terms of interpreting these figures one        purchases, easing credit standards by banks will      around 6% this year.
should bear in mind that they reflect the purchase    help the recovery in house prices.                       FNB’s property analyst John Loos comments
price of houses in terms of the banks’ mortgage          However, that is not happening at present,         that the arrival of a residential property slowdown
books. Standard Bank, for example, has around         and is a real brake on the housing market. Current    so soon after the start of a strengthening phase
27% of this bond market and it computes data          SA Reserve Bank data showed sluggish mortgage         may have surprised some. He believes that a few
                                                                                                            big structural changes are required to get the
                                                                                                            next impressive property performance going.
Households are beginning to shed debt in                                                                    He says: “In the likes of the US, the UK and a
                                                                                                            good few other developed countries, a period of
arrears that have gnawed at real disposable                                                                 austerity and slow economic growth is necessary

income, providing increased scope for                                                                       in order to work off the massive debt burdens…
                                                                                                            in some instances by the household sectors, in
discretionary purchases.                                                                                    some instances by government – and in many
                                                                                                            instances both.”
                                                                                                               Basically, demand relative to supply has
on a median basis in contrast to an average basis,    advances growth is hovering around 2% - 3%            remained weak during the recent recovery cycle,
as done by the other banks. This tends to make its    and has flattened after some significant growth       never having got anywhere near the levels of
numbers lower than the others.                        earlier in the year. Absa Bank says that growth       2004/2005 period at the peak of the property
    One also has to bear in mind that these figures   is expected to remain in single digits for the rest   boom.
are national and are thus affected by the highs       of the year.                                             Loos continues: “We remain firmly of the
and lows of different sectors of the country where       However, Standard Bank reports that July           view that the latest decline in the FNB House
mortgage lenders may each have varied exposure.       marked the first month of real growth in its          Price Index’s (house price growth) inflation rate
There are depressed areas of the housing market       median property price index and, it says, this        is the start of a slowing trend in what we term a
and relatively vibrant ones. Within geographical      provides confirmation that the recovery is still      ‘mini-cycle’ for residential property. As such our
boundaries there are market segments – large,         on track. It’s Residential Property Report for        projection for house price inflation is lower – a
medium and small homes.                               August says: ”Fundamentals are also improving,        revised 8,2% average for the whole of 2010.”
    A very good example of how rounded up             mirrored by increasing discretionary spending,           Absa’s senior property analyst Jacques du
averages can distort data is the fact that the        such as passenger car sales which rebounded           Toit’s assessment is: “Year-on-year house price
small house market (80 m2 - 140 m2) has boomed        to 27,6% year-on-year in July from 14,4% the          growth is forecast to slow down further in the
in recent months. According to Absa, the value        previous month. Weak employment conditions,           month towards year-end, largely driven by the
of small houses increased by a nominal 33,6%          poor income growth and high debt levels have          base effect of a recovery in property prices from
in July. This, of course, accelerates the average     contributed to both weak demand and hesitant          the second half of 2009.”
nominal house price growth figure substantially       credit supply conditions. This by no means suggests      Standard Bank economist Danalee van Dyk
and indicates considerably poorer price growth in     that the employment environment is improving          advises: “Confidence in the property market is

4         intELLECtuAL prOpErtY September 2010
returning. Standard Bank expects the second half           nearly one third of all declines have a chance of                Absa House price indices - Nominal y/y % change
of the year to yield higher growth in the median           being approved by another lender,” says Geffen.               y/y % change
price, with average nominal growth envisaged at               “While the bank decline ratio for July did show       35
around 6% for the year.”                                   a marginal year-on-year increase of 0,5%, this is        30
                                                           a function of the volume of applications for 100%        20
OOBA upBEAt                                                bonds in the current period, which have far lower        15
   In spite of comments by some of the major               approval rates than applications with deposits.
lending institutions that the uptick in the housing        As the data for the comparative period last year          0
market may be peaking, leading mortgage                    excludes 100% loans, which were not generally            -5
originator ooba’s latest statistics indicate that the      available from the banks then, there has in effect            04        05         06    07         08          09    10

recovery, which began in the second half of last           been a significant year-on-year improvement in                Small           Medium            Large
                                                                                                                         Source: ABSA
year, has continued to take hold.                          the decline ratio.”

                                                                                                                              Absa House price indices - Real y/y % change
                                                                                                                         y/y % change
...ooba’s latest statistics indicate that the                                                                       40

recovery, which began in the second half
of last year, has continued to take hold                                                                            15
   According to ooba CEO Saul Geffen, the                     Ooba’s statistics also revealed a 15% year-on-        -5
monthly trends tracked by ooba suggest that                                                                        -10
                                                           year increase in the average bond size while the
positive conditions for the housing market will            average deposit size fell by 17,8%.                           04        05         06    07         08      09        10

continue into this second half of the year. Ooba              Meanwhile Stats SA reports that the building               Small           Medium            Large
                                                                                                                         Source: ABSA
tracks movements in house prices, approved                 of new residential units remains slow. Value of
bond sizes, deposit requirements and bank                  plans approved dropped by 5% year-on-year                                     Affordability of housing
decline ratios.                                            – especially in the segments of housing less                     Index: 2000=100
   The oobarometer price index recorded a                  than 80 m2 and higher density flats and small
9,8% year-on-year increase in the average house            townhouses.                                             150
purchase price in July. The average purchase price            Depending on your point of view, this                140
made by first-time buyers showed an 8,5% rise.             slowdown could in fact assist the market to
   “The ratio of applications declined by one              grow as demand for low-cost housing in the one
lender, but granted by another, showed a continued         segment of the market that has really shown             100
improvement, says ooba, up 9,7% year-on-year to            improvement.                                                90
                                                                                                                              00         02        04          06           08        10
29,4% of all declined applications. This means that
                                                                                                                         Repayment/HHDI                 House price/HHDI
                                                                                                                         Source: ABSA

Oobarometer property Market recovery Analysis - second half of 2010

                                                                                                                                                                 Change month
                                                                                                 Change year on year
 Indicator                                              July 2010                July 2009                                         June 2010                        on month
                                                                                                  (Jul 10 vs Jul 09)
                                                                                                                                                               (Jul 10 to Jun 10)
 Avg purchase price                                      850,763                  775,172               9.8%                        837,599                           1.6%
 Avg purchase price of first time buyer                  591,643                  545,487               8.5%                        611,611                          -3.3%
 Avg approved bond size                                  685,503                  592,512               15.7%                       695,381                          -1.4%
                                                          19.4%                    23.6%                                             17.0%
 Avg deposit (as % of purchase price)                                                                  -17.8%                                                        14.1%
                                                        (R165,260)               (R182,660)                                        (R142,218)
 Avg age of applicant                                      37                       37                No change                          37                         No change
 Avg decline ratio                                       47.8%                    47.3%                 0.5%                            48.8%                        -1.0%
 Ratio of applications declined by one lender
                                                         29.4%                    19.7%                 9.7%                            24.8%                         4.6%
 but approved by another

                                                                                                                  intELLECtuAL prOpErtY September 2010                                     5
                                                                                                                                            Regional Roundup

                                                                                           Birth of the Blues
                                                                                                   The great soccer event did not promote property purchases.
                                                         Rather, potential buyers were too busy having a good time. But we’re getting back to normal.

tHE WEStErn CApE residential property                         FNB’s report points out that the Western              but in Stellenbosch, where there is a limited supply
market appears to be outperforming the national            Cape’s economy has moved out of recession and            of land for further development, we have achieved
market, according to First National Bank’s August          is expected to grow at around 3% this year. This         R6 million for a vacant plot and R11 million for a
Property barometer. House price growth has been            has supported the modest recovery in residential         luxury home in the De Zalze golf estate.
around 2% greater than the national average                property through assisting recovery in household            “As expected we did not experience an increase
says the bank, but adds the caveat that signs of           disposable income growth.                                in foreign buyers over the World Cup period and
a slowdown are now apparent. However, FNB’s                   At present, of course, the Western Cape is in         property enquiries in the region are still made up
property analyst John Loos says we mustn’t be too          its winter “hibernation” period. So a falling off        from buyers wanting to scale down, up-country
hasty in presuming any long term downward slide.           is the norm. But John Loos says the decline was          buyers – mostly from Gauteng and KZN – and
He comments: “Agents suggest that the World Cup            discernable earlier, with a flattening of growth         clients wanting to exchange city life for a country
may have had something of a negative effect on             rates in the second quarter of this year which, he       town with good schools, easy access to amenities,
demand through ‘distracting the nation’.”                  argues, supports the notion of a peak in the cycle       less crime, and a more relaxed lifestyle.”
                                                                                                                       Pretoria’s Schutte also highlights difficulty in

World Cup euphoria... drew focus entirely away                                                                      getting mortgages, particularly 100% loans for
                                                                                                                    sales in the R600 000 - R1,1 million bracket. “The
from property and it is proving slow to recover.                                                                    banks are valuing below offer price so 100% bond
                                                                                                                    applicants have to come up with deposits, which
    In terms of cities as opposed to regions, property     and the start of a slowing price inflation trend to      most buyers in this price range don’t have.”
research group Lightstone reports that Cape Town           come. This weakening trend is expected to last well         KZN regional marketing manager, Leigh
and Johannesburg have shown the steadiest                  into 2011, he says. “Therefore we expect Western         Foaden, reports that activity has picked up since
increase in house prices of all the metropolitan           Cape price growth to recede back into single digit       the World Cup slowdown – but not price levels.
areas. Although Johannesburg led in annualised             territory by the year end, and remain there through      Stock turnaround time on well-priced stock has
month to month house price growth this year,               2011 as the country and the region goes through a        improved from 60 days to an average of 30 days
the city’s figures took a dip from 8,7% growth in          slower economic period.”                                 and advertising response has doubled compared
January and 9,2% in February to 8,6% in March,                Laurie Wener says difficulty in obtaining             with the month of June. Says Foaden: “The market
says Lightstone, Cape Town did not suffer the same         mortgages, even with excellent past credit               is heavily price-driven and affordability is still the
reversal. Figures for the Mother City were 7,7% in         references, job uncertainty, increasing household        greatest barrier to the successful conclusion of
January, 8,8% in February and 9,0% in March.               running expenses (electricity and rates) are all         sales. The mortgage bond decline rate is still high,
    Pam Golding Properties’ Western Cape regional          contributing to hesitancy and poor sentiment.            being around 40%.”
director Laurie Weiner explains: “At the end of May        “There is an uptick in activity in under R3 million in      The fact that sectional title unit owners now
we were well ahead of budget but World Cup                 areas where there are a higher proportion of cash        have to pay municipal rates directly has, says
euphoria and the long school holidays drew focus           or financially qualified buyers, namely the Atlantic     Foaden, created an affordability problem even if
entirely away from property and it is proving slow         Seaboard and the City Bowl.”                             the selling price is right.
to recover.” She adds: “There is an increase in stock         In the Boland and Overberg region, sellers are           “On the positive side,” she adds, cash buyers
levels across the board and demand is lagging – a          still reluctant to drop their asking price, reports      are on the increase, both as investors and end
sure formula for pressure on prices. Some areas,           Annien Borg, regional director for the area. “Buyers     users. Our expectations for the remainder of the
where investment properties dominate such as               are taking their time to make offers as they have        year is of steady improvement.”
previous off-plan development sales, have seen             more properties to choose from. When they do,               Carol Reynolds, area principal for the Durban
price decreases as much as 20%.”                           offers come in at much lower than asking price,          North and La Lucia areas, adds some advice to
    The soccer frenzy appears to have had a                sometimes 30% lower.”                                    sellers: “The key to successful transacting is correct
dampening effect nationally. “During the World                Borg says that sales have generally been slow         pricing. The old adage that the first offer is the best
Cup period activity was very low, but it is picking        across the region, in particular the coastal branches    offer certainly rings true in this climate. “Reynolds
up a bit,” says Pretoria regional executive Retha          and small country towns where holiday/second             echoes Retha Schutte’s complaint that the banks
Schutte. “Our market is moving sideways,” adds             homes make up the biggest portion of stock available.    often don’t find value. “Without finance there is no
Bedfordview’s Eric Gibson.                                 “Most sales are between R800 000 and R3 million,         sale, no matter how willing the parties.”

6         intELLECtuAL prOpErtY September 2010

                                                                                                         Cutting Edge
                                                                 The positive effect of cumulative interest rate cuts by the Reserve Bank has worn thin.
                                                                      Lower mortgage bond rates would make a big difference to the housing market

An iMpOrtAnt COntriButing factor                      - 2,5%. “Those days are gone,” says one banker.            inflow (see next page) which the country badly
to the decline in house sales is the fact that             The banks will tell you that their cost of funding    needs to address its widening current account
mortgage bond interest rates are still too high.      has gone up, which squeezes their margins. But             deficit. But try explaining that to a young couple
Potential buyers can’t afford the repayments or,      is this necessarily the case, consumers ask? The           trying to get finance for their first home!
perhaps more common, the banks to whom they           margin between the prime lending rate and repo                There are two further opportunities for the
have applied for a bond decide that, while doing      rate (at which the banks borrow from the SA                Reserve Bank to cut the repo rate – at its monetary
their rigorous credit checks, that the applicant      Reserve Bank) remains constant at 3% and this              policy committee meeting on September 9 or
can’t afford the repayments.                          is applied by all retail banks. This mutually agreed       again in November. However, there is a growing
   Some 40% of bond applications are currently        margin was queried by former SARB governor                 feeling in the market that it may not happen and
being turned down. Loan to value considerations       Tito Mboweni, who called for more competition              that, in fact, we are nearing the bottom of the
are strict, with first-time buyers at the end of      in the banking sector. However, the issue died a           rates cycle. Standard Bank’s economics division,
                                                      quick death. Noticeable is, as far as the man-in-          for example, forecasts rates turning upwards in
                                                      the-street is concerned, the steadily widening gap         the second quarter of next year.
The banks, of course,                                 between the repo rate (7%) and the prime lending              The horrors of recent years when rates went

have been hard hit by                                 rate (10%) and the rate of inflation (4,2%). This
                                                      prime rate hasn’t moved since inflation was up
                                                                                                                 over 20% per annum will still be fresh in the
                                                                                                                 minds of many bondholders. Only a few were
bad debts and are                                     around 8%.                                                 wise enough to switch from a variable rate to a
                                                           It is interesting to compare mortgage costs           fixed one in time to weather the storm.
sitting in a “once bitten,                            in South Africa and, for example the UK. Here                 Perhaps now is the time to look into the issue.
twice shy” mode.                                      the average 60% loan to value bond will carry              Another indication of what could be in store is
                                                      an interest rate of between 10,5% and 11,3%.               that Absa announced recently that it is no longer
                                                      Consumer inflation, as mentioned beforehand, is            offering its 10-year fixed rate on bonds – the
the queue and 100% bonds are rare. Absa did           currently 4,2%. In the UK, where Bank of England           longest term available now is two years (see
announce at the end of May that it had resumed        governor Mervyn King has just announced a rising           table).
granting 100% bonds, “but only to Absa                inflation rate of 3,1%, one can get a mortgage                Mortgage originator ooba says that at present
customers and blue chip ones at that,” says a         bond (see London apartments page 18) at 3,6%               it has no customers enquiring about fixed rates.
spokesman.                                            interest pa. That’s only a margin of 0,6%.                 The banks also report little interest. Bond-seekers
   All the major mortgage lenders insist that they         Of course, South Africa’s relatively high interest    and bondholders alike should keep an eye on
have relaxed their credit requirements since this     rates are important in terms of foreign capital            developments.
time last year, but estate agents are unanimous in
their experience that lack of finance is hindering
any progress in the market. It appears to be a
                                                      fixed rate table - 12 months fixed rates
stand-off.                                             Customer Rate                                                Risk Grade
   The banks, of course, have been hard hit            LTV Band                           1                2                3             4                5
by bad debts and are sitting in a “once bitten,        (A) Less Than 50%               10.30             11.30         10.65            11.5             11.90
twice shy” mode. A striking example is the 16%         (B) 50% to 60%                  10.35             10.45         10.70            11.55            11.95
decline in first half profit announced by Nedbank
                                                       (C) 60% to 70%                  10.40             10.50         10.75            11.6             12.00
in August. The drop, said CE Mike Brown, was due
                                                       (D) 70% to 75%                  10.45             10.55         10.80            11.65            12.05
to losses in its retail business due to the fallout
                                                       (E) 75% to 80%                  10.50             10.60         10.85            11.70            12.10
from mounting bad debts.
                                                       (F) 80% to 85%                  10.60             10.70         10.95            11.80            12.20
   It’s not that the margins in the mortgage
                                                       (G) 85% to 90%                  11.05             11.15         11.40            12.25            12.65
business are unattractive. Only a couple of years
                                                       (H) 90% to 95%                  11.20             11.30         11.55            12.40            12.80
ago the banks were fighting tooth and nail to gain
                                                       (I) 95% to 100%                 11.75             11.85         12.10            12.95            13.35
market share, offering all sorts of inducements
and cutting bond interest rates by as much as 2%       (J) 100% to 120%                11.95             12.05             12.3         13.15            13.55
                                                      Source: ABSA

                                                                                                                 intELLECtuAL prOpErtY September 2010             7
                                                                                                                                           Interest Rates

                                                                 Enter the Turbo Rand
                                                                        For how long will the rand stay on its upward climb? That’s the big question.
                                     It helps importers and frustrates exporters. Organised labour says the currency must be weakened – but how?

tHE StrOng rAnd iS LEAding the                         vociferous in the clamour for interest rate cuts,
country’s economic debate at present or, more          blaming both rand strength and volatility for the
accurately, how to limit it. In July alone, the        country’s growing unemployment. Cosatu has
rand appreciated 4,2% against the dollar. On           been a supporter of more aggressive buying of
the other hand, rand volatility is considered by       foreign currency by the Reserve Bank but says it
some economists to be the priority, as this is more    has become clear that South Africa doesn’t have
harmful to growth.                                     sufficient reserves to buy at a level which will
    One result of the surging rand has been an         make “a real difference.” Cosatu general secretary
unexpected increase in the SA Reserve Bank’s           Zwelinzima Vavi stated recently: “There is a very
gold and foreign exchange reserves which has           clear consensus (with Finance Minister Pravin
been accomplished through the Treasury, which
has been providing some resources from the
government’s foreign deposits. Foreign exchange        One result of the surging rand has
reserves in July stood at US$43,2 billion.
    However, without the Bank’s intervention,
                                                       been an unexpected increase in the SA Reserve
the rand would have been even stronger. This is        Bank’s gold and foreign exchange reserves...
because when the Bank sells rands to buy foreign
currency, this tends to weaken the local currency.
    New in the debate around policy endeavours         Gordhan and the Reserve Bank) that we need a         confidence is surprisingly high, according to the
to limit rand appreciation is the suggestion that      weaker currency and a more stable currency.”         FNB/BER consumer confidence survey. Consumers
we introduce capital controls (some form of tax           The problem is that they don’t always go hand     remain over-indebted and there is a clear
on foreign inflows, such as a small transaction        in hand. Furthermore, critics of Cosatu argue that   indication that they are endeavouring to pay off
fee). However, it is generally accepted that it is     the labour movement is partly responsible for the    debt and even save more. Still, the country’s debt-
difficult to assess the effectiveness of capital       situation because of its excessive wage demands.     service ratio (the cost of servicing the household
controls. The IMF, for example, cautions that          The public sector strike in mid-August, which        debt burden, interest plus capital, as a percentage
capital controls should be part of a tool-kit, but     included many teachers, was in demand for a          of disposable income) is estimated at 12,7% –
adds that such controls are justified only if an       wage increase more than double the current CPI       too high for comfort.
economy is operating near potential, if the level      inflation rate of 4,2%.                                 The global outlook is another matter. Europe,
of reserves is adequate, if the exchange rate is not      The strong capital inflow, supporting equity      the US, China are all potential crisis areas. In
undervalued, and if the capital inflows are likely     and bond markets, has possibly given an              the second week of August the governor of the
to be transitory.                                      impression of a high growth environment. But         Bank of England warned that the UK economy is
    Governor Gill Marcus has been under                this is not the underlying reality, comments Cees    in troubled waters; that inflation was rising and
pressure from trade unions and exporters to cut        Bruggemans, chief economist of First National        the economy slowing. US watchdogs continue to
interest rates and there is a widely held feeling      Bank. “Business confidence has been badly            suggest that a “double dip” remains on the cards;
that the Bank missed this particular boat at its       mauled by crisis and recession. It doesn’t look      and China is in the throes of a banking alarm over
July monetary policy committee meeting. Next           ready to take on demanding labour as earnings        suspect loans, including housing loans. All these,
meeting is on September 9 – but don’t hold your        recovery has barely started.“ Bruggemans adds:       or any one, can impact severely on South Africa.
breath! The rising rand strength is not necessarily    “Indeed, organised labour – and scarce talent           In spite of all this, rand strength may intensify,
going to be curbed by lowering rates given the         – behave as if the prosperity boom of 2004-          towards R7:$1 and even beyond, perhaps to
ongoing flood of foreign short-term capital. And       2007 has never ended, enabling them to keep          R6:$1 unless the authorities find an effective way
the Reserve Bank, wary of inflation, may not want      demanding more.”                                     to intervene. At even current levels, however, the
another credit-based consumer boom. However,              Unfortunately, the net result of unsustainable    currency’s strength is of considerable benefit –
it has happened in the past that the Bank has          wage demands is usually job cuts. And that is        cutting our import bills, particularly oil. Exporters,
surprised us!                                          what is happening.                                   on the other hand, are squealing.
    The trade unions have been particularly               In spite of the restraints on credit, consumer       You can’t please everyone.

8         intELLECtuAL prOpErtY September 2010
                  ANDREW GOLDING                                                                                      PAM GOLDING
                            CHIEF EXECUTIVE                                                                           LIFE PRESIDENT
                     PAM GOLDING PROPERTIES                                                                           PAM GOLDING PROPERTIES

                                                        WEB ACCESS HP513412                                                                    WEB ACCESS HP504772
sandhurst, GautenG                                                             Bryanston, GautenG
This charming family home offers 4 bedrooms (3 en suite), as well as a guest   Set in trendy Eccleston Crescent, this large family home offers generous
suite. 4 Reception rooms flow superbly onto the patio, pool and a park-like    reception rooms, a patio and a pool. It also includes 5 bedrooms en suite, a
garden with rolling lawns.                                                     gourmet kitchen, gym, staff accommodation and excellent security.
R14.5 million                                                                  R7.95 million
victoria russell 074 683 1222, Office 011 380 0000                             Joan Lewis 083 266 9292, Win doody-pestell 083 309 0770,
                                                                               Alison White 082 714 2626

                                                        WEB ACCESS MR533192                                                                    WEB ACCESS BV541125
Kyalami estate, GautenG                                                        Bedfordview, GautenG
With its tranquil surrounds, 4 reception rooms, 4 bedrooms, expansive          This gracious home offers 4 en suite bedrooms, a loft-style study, 5 reception
enclosed entertainment patio, exquisite kitchen, sparkling pool, 4 garages,    rooms, a bar, poker room, patios, pool, Jacuzzi as well as a potential
workshop and staff accommodation, this is the perfect family home.             guest wing.
R4.8 million                                                                   R9.5 million
Leanne Santana 083 273 6881, peta tongs 082 808 0261                           Luz dias 082 444 9763, natalia dias 072 392 8421, Office 011 455 6666

                                                       WEB ACCESS DNF494572                                                                    WEB ACCESS GV462-563
Cedar laKes, GautenG                                                           meyersdal Crest, GautenG
Features of this immaculate family home include a large garden, 4 bedrooms,    This 7-bedroom home offers executive living at its best, and is perfect for
3 bathrooms, a study nook, an open-plan kitchen and a play area. It also       2 families. Boasting a multitude of quality features, the residence offers the
offers a pool, underfloor heating and staff accommodation.                     best of the upmarket estate lifestyle.
R3.95 million                                                                  R4.95 million
natalia Atanassov 084 783 3010, Office 011 469 4691                            debbie Young 083 307 7234, Office 011 432 0303
                                                        WEB ACCESS TU1021487                                                            WEB ACCESS MV452821
tulBaGh, Boland & overBerG                                                      PlatteKloof, western CaPe
This multi-income farm comprises of 2 houses and offers relaxed riverside       This formidable property features a home theatre, snooker room, bar, gourmet
luxury and a variety of fruit and vegetable plantations, including olives and   kitchen, summer house, pool, braai and 3 reception rooms, all opening onto
grapes.                                                                         a wraparound balcony.
R7.5 million                                                                    R10.9 million
gail friedlander 082 699 6146                                                   penny petersen 083 261 7339

                                                       WEB ACCESS ON1023655                                                             WEB ACCESS ST1026596
onrus, Boland & overBerG                                                        stellenBosCh, Boland & overBerG
Set on the banks of the Onrus lagoon, this home’s Scandinavian architecture     This well-designed residence has a wonderful ambience, spacious rooms,
and functionality will appeal to the connoisseur and offers ample privacy and   comforting extras and superior attention to detail – all adding to the
tranquillity.                                                                   functionality of the home.
R7.9 million                                                                    R7.6 million
denis Helfrich 083 285 6474                                                     deanne Kriel 083 531 7827

                                                       WEB ACCESS STA1024735                                                          WEB ACCESS MON1024975
stanford, Boland & overBerG                                                     montaGu, Boland & overBerG
With its inviting, rustic ambience as well as thatched and beamed ceilings,     Renovated to perfection, this smallholding is the ultimate lifestyle property
this lovely home is all about charm. It also offers breathtaking views of the   and offers free-flowing open areas as well as the ultimate gourmet kitchen.
R1.97 million                                                                   R3.25 million
tracy Brady 082 441 8307, Jill Smith 083 700 4103                               Magda pepler 082 816 4364, dimar Marais 084 549 2696
                                                      WEB ACCESS CO1023735                                                              WEB ACCESS PR1017640
Constantia, western CaPe                                                      fresnaye, western CaPe
Set in an unsurpassed position with stunning mountain views and a             Old-world elegance, original features and luxury elements all combine to
north-facing aspect, this property also features a landscaped garden, fine    make this a remarkable 6-bedroom family home. It’s been superbly restored
proportions, meticulous attention to detail and top-quality finishes.         and maintained and is located in a sought-after area.
R39 million                                                                   R13.995 million
Arie Kadé 083 448 0488, Clare Jackson 083 675 3707,                           Janice toay 082 770 1510, Jackie rosenberg 083 414 6600,
Angie Bloom 083 678 7876                                                      Basil Moraitis 082 565 8481

                                                      WEB ACCESS LA1024126                                                              WEB ACCESS TV1025136
lanGeBaan, western CaPe                                                       atlantiC BeaCh, western CaPe
This classic and serene 500m² stone-finished home is set on 3 181m² of        This fully-furnished penthouse-style home is set on a secure estate and
indigenous garden, and offers uninterrupted lagoon views and excellent        features ocean and golf course views, sublime entertainment areas, a pool,
security.                                                                     Jacuzzi, lift and a double-volume entrance with a floating staircase.
R14 million                                                                   R9.95 million
Stephanie Wynne-Cole 082 570 6540                                             ivan Swart 083 653 5620

                                                      WEB ACCESS SIM1023299                                                             WEB ACCESS CB1028216
simon’s town, western CaPe                                                    vredehoeK, western CaPe
Set on the upper slopes of the mountain, this property offers a true rural    Escape the hustle and bustle of the city and relax in the peace and tranquillity
lifestyle retreat and features 5 bedrooms and 4 bathrooms.                    of the popular Fairview complex. The property features 2 bedrooms,
                                                                              1 bathroom, a garage and a parking bay.
R6.5 million                                                                  R1.75 million
Joy Snooke 082 920 0044                                                       Mariel Burger 082 372 2573, peter Spencer 083 264 0971,
                                                                              Scott irving 082 465 8444, Jeanne Hingston 082 888 1630
                                                       WEB ACCESS 1GC1005569                                                           WEB ACCESS 1GC1028241
Grahamstown, eastern CaPe                                                       Grahamstown, eastern CaPe
Set on 1 300 ha of well-watered and fully stocked land, this expansive lodge    This gracious family home is set on 2 erven and its features include a modern,
overlooks a tranquil valley, offering great game viewing from its decks.        revamped kitchen and bathrooms, as well as a main upstairs bedroom with
Located 20 minutes from Grahamstown, the property brims with possibility.       sweeping views over the town.
R11.627 million                                                                 R4.6 million
Angus Sholto-douglas 083 406 0147, Office 046 622 2778                          daphne timm 082 809 4283, Office 046 622 2778

                                                       WEB ACCESS 1GC1029631                                                           WEB ACCESS 1GC1022819
Grahamstown, eastern CaPe                                                       Grahamstown, eastern CaPe
This charming home, circa 1830, is set in a park-like garden and features       This classic home has a huge garden and plenty of potential to become a
wooden floors, pressed ceilings and cellar. This magnificent property would     majestic residence. Set in a sought-after area, the property also includes a
make an exceptional guesthouse or spacious family home.                         2-bedroom, self-contained flat.
R4.5 million                                                                    R3.2 million
Kim Webber 082 523 8277, Office 046 622 2778                                    Brenda Cadle 083 529 5551, Office 046 622 2778

                                                       WEB ACCESS 1EA1029098                                                            WEB ACCESS 1EA1028734
east london, eastern CaPe                                                       east london, eastern CaPe
This sensational property is set in a prime location and boasts breathtaking    This large home with 4 bedrooms and a spacious study also offers gorgeous,
sea views. Features include a gourmet kitchen, spacious living rooms, top-of-   flowing entertainment areas and a gourmet kitchen.
the-range bathrooms and luxury fixtures and fittings throughout.
R3.8 million                                                                    R2.2 million
Hanlie Bassingthwaighte 083 659 8287, Anton Coetzee 082 779 9004                Hanlie Bassingthwaighte 083 659 8287, Anton Coetzee 082 779 9004
                                                     WEB ACCESS 1KC1027629                                                          WEB ACCESS 1KC1024925
noetzie, Garden route                                                         Knysna Quays, Garden route
The perfect opportunity to own your very own well-appointed private           One of the best-positioned units at the Knysna Quays, and with a large deep-
castle, this spectacular home is set on a secluded beach adjacent to the      water mooring, this property provides ample accommodation, good security
internationally acclaimed Pezula Private Estate.                              and top finishes throughout.
R56 million                                                                   R6.3 million
Ling dobson 083 252 2112, Office 044 382 5574                                 Edward Alant 082 979 5309, Office 044 382 5574

                                                     WEB ACCESS 1KC1023196                                                          WEB ACCESS 1KC1027279
Knysna heads, Garden route                                                    Knysna heads, Garden route
Set on the Western Head, a stone’s throw from Knysna, this home offers        This wonderful family/holiday home is located close to the beach and lagoon
countryside living on a 14ha secure estate and boasts a prime position with   and has fabulous views, as well as a protected and sunny garden.
stunning lagoon and ocean views.
R16.125 million                                                               R4.8 million
petrusia deacon 082 734 1373, Office 044 382 5574                             deborah Scott 072 731 8188, Office 044 384 0100

                                                     WEB ACCESS 1KC1023725                                                          WEB ACCESS 1KC1022229
Knysna, Garden route                                                          Knysna, Garden route
Located on Thesen Island, this modern, open-plan property is surrounded       A beautiful and well-designed home with open-plan living, this residence
by water. The home is sunny and bright and features spectacular views of      is set on Thesen Island’s waterways. It has superb finishes and includes
the canal.                                                                    a flatlet and jetty.
R3.9 million                                                                  R6.5 million
Amanda Stocks 083 566 4488, Office 044 382 1775                               Kim Bailey 083 448 2632, Office 044 382 1775
Sales team: Office 011 425 9400,
Celeste ferreira 072 220 8845, fatima rebelo 082 499 4542, Lydia van der Merwe 082 601 0539,
tammy Heatly 082 462 7644, Caroline franks 072 102 0042, Elize Coulter 084 370 6710

                                                                           SARS Bearing Gifts
                                                         Wait awhile before unwinding property in trusts or companies until the new rules are clear.
                                                                                                      Another amnesty for tax and exchange control fiddlers

MOSt Of uS ArE used to visualising                       no longer be restricted to the originating funders          of any tax owing will still have to be paid,
SA Revenue Services as a sort of modern                  (and their spouses). Qualifying distributions               additional tax, penalties and interest relating
highwayman, putting a gun to our heads and               can be made to a broader set of shareholders                to any default will be waived. To improve the
squeezing as much of our earnings as it can,             or beneficiaries. Secondly, the revised relief will         flavour of the carrot, SARS says that it will not
while we wake up in a cold sweat fearing the             accommodate multi-tier structures. Nonetheless,             pursue criminal prosecution in respect of the
outcome of not fully complying with our returns.         the requirement that the distributing company               transgression.
We perceive SARS’ growing efficiency as a threat         or trust (including structures with multiple tiers)            Says Bayne: “Apparently there may be limited
and an imposition and ignore the contribution it         is liquidated, wound up or deregistered in order            circumstances wherein disclosure can be made
makes to the national economy.                           to qualify for the relief on transfer duty remains          after taxpayers have become aware of an audit
   So it is with considerable surprise that we           unchanged.’                                                 or investigation. In such cases, only 50% of the
occasionally see the hand of friendship extended.           “This gets around prior issues where a trust             interest relating to the default will be waived.”
Our natural reaction is to beware the SARS               held a company, which in turn held another                     Incidentally, the programme is expected to
bearing gifts. However, says IP’s tax adviser Grant      company, which held property. These changes                 run simultaneously with one governing exchange
Bayne, that is just what the taxman is offering –        will appear in a Bill shortly and will most likely be       control misdemeanours. Says Bayne: “Clearly
and not just one gesture, but actually two.              promulgated by the end of the year.”                        SARS suspects that there are still a lot of people
   One affects the removal of a residential                 Bayne advises that anyone holding residential            who did not make use of the previous exchange
property out of a corporate or trust structure and       property in a structure – be it simple or complex           control amnesty and that there is still a lot of loot
the second is the waiver of penalties and interest       – may find benefit in waiting until the new                 lying hidden offshore.”
for tax indiscretions – including taxation of assets     legislation is on the table before unwinding.     
linked to exchange control contravention. In             SARS, he says, is keen to unwind such structures
essence, these actions indicate where SARS sees          but is also determined to “get it right”.
tax revenue escaping the net and may intend                 “Considering the proposed changes to the
applying strong punitive action in future.               current Bill there may be opportunities, especially
   This is rather the impression we got last             with trusts. Unwinding a complex tiered structure
year when a concession was granted enabling              now before the legislation is enacted may well
taxpayers to transfer primary residences out             incur transfer duty and trigger other taxes.”
of existing companies or trusts. SARS believed
that these structures were created to avoid the          MEA CuLpA
payment of transfer duty. Yet, oddly enough                 Once again to encourage taxpayers to come
comments Bayne, SARS had never bothered                  clean without the fear of being marched off to
to challenge such measures under the anti-               prison, SARS is proposing a “voluntary disclosure
avoidance measures available to it.                      programme” which will come into force from
   “There were criticisms of the 2009 concession         November 1 this year and run for one year. It will
and in some cases the unwinding of such structures       avoid non-discretionary imposition of interest.
was not possible as this would have triggered               During this period taxpayers may confess
tax. In this year’s Budget Finance Minister Pravin       their tax sins and regularise their tax affairs, but
Gordhan, formerly head of SARS, announced that           it does not absolve them from a SARS audit or
this window would be extended, and this was              investigation. However, although the full amount
generally welcomed. The amendments to the Act
are now in draft form and propose to provide a
more flexible regime. Early in August this year              Of interest to hard-pressed consumers, SARS has announced that the country has 5,5 million
SARS announced:                                              individual taxpayers and 1,8 million companies paying tax. This is a respectable jump from
   ‘It is now proposed that the 2010 regime be               3,7 million individual taxpayers five years ago, but it is still a drop in the ocean in a country with an
further widened to allow a more complete array               estimated population of some 50 million. People in Gauteng pay just over half of tax assessed.
of distributions. Firstly, the distribution rules will

                                                                                                                    intELLECtuAL prOpErtY September 2010                 15
                                                                                                                                             London Focus

                                                                                       Moving Offshore
                                                       Central London property has swept aside the UK value slide and continues to power ahead.
                                                                      Demand is outstripping supply. PGP offers two opportunities to South Africans.

WHiLE uK rESidEntiAL property generally                   Both are being developed by the Berkeley             which floor (there are 3). Average floor coverage
is showing signs of faltering growth, the London       Group’s St James Homes, winner of the Queen’s           for a 1-bedroom unit is between 46 and 50 m2 and
market is powering ahead. Demand is outstripping       Award for Enterprise . The first is Avington House in   75 - 80 m2 for a 2-bedroom apartment. Tenure is
supply, prices are climbing, and sellers are holding   Queen Mary’s Place, a collection of apartments set      a 999 year lease.
on to their properties, to such an extent that the     within the 14-acre grounds of Roehampton House,
ultra-wealthy foreign buyers are turning to other      a stately 18th century Grade 1 listed building. Says
European capitals in which to invest.                  Chris Immelman: “The bulk of the units sold to date
     According to one UK property economist, “With     have been snapped up by UK buyers, so we are
prices rebounding strongly on the back of this         fortunate in bringing to the South African market
demand, the separation in performance between          a limited number of units.” Tenure on Avington
London and the rest of the country has now             House is a 125 year lease.
turned into a chasm… Short term pricing trends            Avington House is ideally located, within
are becoming an irrelevance. Demand for central        walking    distance   of     Richmond    Park    and
London property is so large, and supply so limited,    Wimbledon Common and about four miles from                           the trinity place project
that these price trends no longer matter. The prime    Royal Wimbledon. In close proximity are trendy
London market is becoming ever more difficult to       Barnes and Putney, the River Thames being two               Situated close to Raynes Park station, Trinity is
access, with choice so limited in some areas as to     miles away. Commuting access to central London          also well placed for access to central London as
make suitable purchases a virtual impossibility.”      is easy; train time to London Victoria is 16 minutes    well as Heathrow and Gatwick airports.
     Central London is dominated by discretionary      and to Waterloo 22 minutes.                                 An interesting aspect of this development
owners (59% are un-mortgaged). As a result, they          The 2-bedroom units marketed by PGP are              is that it has been designed with a commitment
can sell when they choose to, meaning that when        priced from GBP 349 950 to GBP 379 950, all with        to sustainable energy. Through careful choice of
prices fall, so too does supply. And even when they    the latest in technology. A typical apartment will      building materials and a central, combined heat
do take a dip the attitude appears to be, “Who         have a net internal space of around 63 m2 – tight       and power system the project can deliver a 25%
cares?” However, falls are not presently on the        by South African standards, but very much the norm      reduction in carbon dioxide emissions below the
cards and prices are expected to rise by 7,5% in       in relatively inexpensive residential developments in   applicable building regulations. There is also an on-
the final quarter of this year.                        London. Says Chris Immelman: “This is one of the        site recycling facility.
     James Talbot, international sales director of     best developments. Heathrow airport is only a 30            Both Avington House and Coombe House
Savills, Pam Golding Properties’ UK associate,         minute drive and the heart of London’s entertainment    are planned to be ready for occupation around
advises: “I have seen the market bounce back.          and cultural centre easily reached.”                    Britain’s Spring next year – March/April. Following
The situation makes for a very astute medium-             Also in South West London but further south,         presentations in Gauteng and Cape Town, Pam
term investment opportunity with potential capital     below Wimbledon Common and about 4 miles                Golding Properties CE Dr Andrew Golding disclosed
growth. “                                              from Kingston on Thames, lies the second                that interest has been phenomenal, but again
     Talbot makes the point that a South African       development – Coombe House, the final phase of          commented that “every astute investor would
buyer can benefit from the weak pound sterling         the Trinity Place project by St James Homes. Trinity    want to add Central London residential property
and the strong rand and thus take advantage of         Place offers unique outside space, uncommon for         to their portfolio”.
the R4 million which can be legally taken offshore.    London developments. 2 Large communal roof
Recognising this opportunity, PGP’s chief executive    top terraces are available to residents and all
Dr Andrew Golding and Chris Immelman, MD of            apartments have their own private balcony or a
the group’s international division, viewed several     terrace area and several include both. The complex
residential developments in central London and         includes a Waitrose store as well as a coffee
selected two which they consider appropriate for       shop, residents’ gymnasium and cycle storage.
the South African market. Both are in South West       There is allocated parking within the purchase
London where, according to Savills, prime rental       price for the 2-bedroom units. Prices range from
values outperform both prime central and prime         GBP 246 000 for a 1-bedroom apartment up to
                                                       around GBP 360 000 depending on volume and                              the Avington House
East of City markets.

16        intELLECtuAL prOpErtY September 2010
BuYing in LOndOn – StEp BY StEp                         complete with all white goods. Furniture packs         deductions, the income will be subject to UK
   If, as a South African resident, you decide to       may be purchased at different levels – from            income tax and your agent, or the tenant, is
invest in overseas property, the first step you need    GBP 2 500 upwards, or you can furnish your home        obliged to deduct basic rate tax at 20% before
to take is to establish an offshore bank account into   yourself (fairly time-consuming).                      paying the rent to you. This can be avoided by
which you can transfer all, or part of your overseas       Pam Golding Properties and Savills have an          registering with HM Revenue Services as a
investment allowance (currently R4 million              association with managing agents Vanet Estates,        non-resident landlord. You should also consider
per person). You will require a tax clearance           which has a Gauteng office specifically to deal        having a separate English will to cover your UK-
certificate from SARS. You then need to inform          with South African customers. Its local agent          based assets. This can help avoid inheritance tax.
your South African attorney of your intentions          Phillip Gittens says: “Some 80% of our clients are     Furthermore, check out your status in terms of
and appoint (through him/her or with the help of        South Africans who own London property, so it          capital gains tax. If you have been a UK resident
PGP’s international division) a UK solicitor.           makes sense to have a presence here.”                  in the past and return to the UK within five years
   If, presumably, you intend to finance part of           Services included in the managing agent’s role      you can be liable.
the purchase, PGP’s London associate Savills            are; securing and vetting suitable tenants, drafting
Private Finance division will assist you in securing    the tenancy or lease agreement, collecting your        finAnCE And gEAring
a suitable mortgage. You must provide suitable          rent (usually monthly) and depositing it into          Buyers at Avington House and Coombe House
financial statements and proof that you can meet        your bank account as well as paying your annual        can gear their purchase through the association
the required mortgage payments – not simply             expenses such as service charges and ground            between PGP and Savills Private Finance. An
from rental income (see cash flow panel).               rent. Service charges are the UK equivalent of         indicative outflow/inflow scenario for a 2-bedroom
   The British system of buying and selling             the levies we pay on properties in SA. Fees range      unit at Avington House would be as follows:
property is different than that of South Africa.        from GBP 1 000 to GBP 3 500 a year and are
In the UK, prior to an “exchange of contracts”          usually paid in two instalments. As the properties     Indicative purchase price            GBP 369 950
– the legal term given to the act of offer and          are leasehold, ground rent is payable to the           Cash (40%)                                 147 980
acceptance – your appointed solicitor in the UK         owner of the underlying land. Incidentally, part       Mortgage (60% @ 3,5% interest only) 221 970
will run a series of searches and checks on the         of the solicitor’s duties will be to check leasehold   Total purchase costs                        18 210
property and the developer or seller. Once the          agreements and ensure that the buyer is not            Rental income @ GBP 365 per week
“exchange of contracts” has taken place both            compromised in any way.                                less outgoings                              13 763
the buyer and the seller are now legally bound to          If you are going the buy-to-let route, it’s worth   Mortgage repayment                           7 769
follow through with the transaction and neither         noting a couple of points in terms of tenants. Your    net income                                  5 994
may withdraw.                                           managing agent will organise a tenant reference        Purchase cash flow
   With transfer completed and applicable fees          check, which is carried out by an independent          Reservation fee                              2 500
and duties paid – at this point the buyer must          company. An option, says Gittens, is an insurance      Deposit: (10% on exchange, 28 days
pay Land Registration fees of approximately             policy (costing GBP 110 a year) which guarantees       from reservation)                           36 995
GBP 330 to enable the property to be legally            rental payment for six months should a tenant          Stage payment: (5% once roof has
transferred into your name. Similar to our Transfer     defect. Also important is an inventory report,         been completed)                             18 498
Duty, you will be required to pay Stamp Duty            also by an independent company, as the tenant          Completion: remaining cash portion          89 988
Land Tax, which varies depending on the value of        moves in. A six weeks deposit is standard and this
the property. At the prices of London apartments        is held against any claims (breakages etc). When       SuMMArY
marketed by Pam Golding Properties SDLT would           the tenant moves out the same report is used for       Cash portion of purchase price       GBP 147 980
typically be 3%.                                        a second inspection. Any disputes will go before       Total purchase costs                        18 210
                                                        the Tenancy Deposit Scheme.                            Total cash required                        166 190
rAndS And SEnSE                                            Most apartments are let furnished. Vanet            rand value                           r1 828 088
   Besides being attractive to South Africans           Estates assures that, for example, it will seek
seeking a compact, secure dwelling in London,           around GBP 380 a week for a 2-bedroom                  According to Tom Bland, a director of Savills
both Avington House and Coombe house offer              apartment at Avington House.” Generally speaking       Private Finance, there are various mortgage
attractive “buy-to-let” investment potential. If        letting demand is for furnished accommodation.         options which can be negotiated. Proof of income,
you intend going this route you should appoint          However, rental income doesn’t vary much               assets and liabilities and income/expenditure
a managing agent. The agent will collect the            between furnished and unfurnished.”                    statements including bank statements, are
keys, gain access and, if you wish, supervise              There is an important legal issue to deal with      required. “We can usually get a decision in
the furnishing of the apartment. The units come         in terms of rental income. Subject to certain          principle within a few days to a week. “

                                                                                                               intELLECtuAL prOpErtY September 2010            17
                                                                                                                                                   Foreign Buyers

                                                                 South Africa Calling…
                                                        Foreign property buyers have been few and far between as the global recession hit the pockets
                                                                    even of the well-heeled. That there are few if any restrictions on foreigners is a plus.

tHE SuCCESSfuL SOCCEr WOrLd                                professional boards overseeing the operations of          pro rata rates and taxes; rates clearance certificate
Cup has presented South Africa with an ideal               both attorneys and estate agents.                         fee; sectional title levies; attorney’s fees.
opportunity to promote the country to foreigners              When a non-resident transfers funds from a                q. On sale of the property can the money
as a prime investment destination, Pam Golding             foreign source into a South African bank account,         be taken out of the country?
Properties’ CE, Dr Andrew Golding told the recent          a record known as a “deal receipt” is kept by the            A. Understandably, this is without doubt the
IPD/SAPOA conference. “If ever there was a time            South African bank. This is an important document         number one concern of non-residents considering
to present our credentials to the international            which will be needed to effect repatriation of the        investing in South Africa. Their answer is, simply,
community of investors, it is in the afterglow of          funds.                                                    yes! Money from a foreign source together with
such a resoundingly successful World Cup.”                    note: Capital gains tax. A non-resident can            any profit, proportionate the non-resident’s
     Dr Golding suggested that the residential             be liable for CGT in certain circumstances. Advice        shareholding in the property, may be repatriated.
property market remains an attractive asset class          should be gained from the buyer’s attorneys.              The non-resident must present the Reserve Bank
                                                                                                                     with all deal receipts, a copy of the agreement
                                                                                                                     of sale together with the conveyancer’s final
The market recession provided ideal timing                                                                           statement of all costs for the duration of ownership.

for foreign buyers, says Dr Andrew Golding.                                                                          This facilitates the repatriation of the funds and
                                                                                                                     the profit on the sale, provided the bankers are
                                                                                                                     satisfied that such profit is reasonable and market
at this time and presents an opportunity to make              q. Can money be borrowed in South                      related.
profits. The market recession provided ideal timing        Africa to purchase property?                                 Obviously, if the purchase was partially financed
for foreign buyers, he added.                                 A. Yes, but non-residents are restricted in their      by funds borrowed in South Africa, that portion of
     A vital component in attracting foreign buyers        borrowing ratio to 50% of the purchase price,             the purchase price cannot be repatriated unless
to South Africa is the basic fact that there are no        while the remaining 50% must be brought into              the mortgage bond has been settled in full. It is
restrictions in respect of property ownership by           the country in cash from a foreign bank. In order         important to note that during the course of the
non-residents – other than illegal aliens. There           to qualify for a South African mortgage bond,             bond repayment history, the instalments towards
are, however, procedures and requirements. If, for         the non-resident will have to comply with the             the bond must have emanated from a foreign
example, a foreign entity (a company, trust etc) buys      bank’s normal credit criteria and comply with the         source or from rental/interest income generated.
property it must be registered in South Africa and         Financial Intelligence Centre Act. This act requires         As stated earlier, funds will be subject to capital
appoint a South African public officer. If the non-        identification of the non-resident for money-             gains tax.
resident intends residing in South Africa for long         laundering purposes, and involves producing                  q. is a non-resident liable for payment of
periods a residence permit must be applied for.            certain documents. Also, the SA Reserve Bank              South African income tax?
     There are a number of frequently asked                adjudges all foreigners not having their domicile in         A. While South Africans are taxed on their
questions from foreigners interested in buying             South Africa as non-residents. However, foreigners        worldwide income, non-residents are liable for
property in South Africa. A number of these follow,        with work permits will be considered residents for        income tax only on income accruing from a South
with the answers provided by attorneys Smith               the duration of their work permit.                        African source. For example, if the property is
Tabata Buchanan Boyes.                                        q. Are there any other costs, other than               rented, the rental income will be subject to South
     q. How can foreign funds be brought into              the purchase price, for which the purchases               African income tax.
South Africa for a property acquisition?                   will be liable?                                              A non-resident who has not permanently
     A. Foreign funds can be paid into any nominated          A. Yes, as follows: Transfer duty is a tax levied on   immigrated to South Africa will be considered
bank account in South Africa. This account will            the acquisition value. It is payable prior to transfer    a resident for income tax purposes if she or he
usually be the trust account of the estate agent           of ownership. For a natural person a purchase up to       spends more than a certain length of time within
or transferring attorneys into which the deposit           R500 000 is exempt; from R500 000 to R1 million           the country. This is known as the “physical presence
for the property and the balance of the purchase           it is 5%, and more than R1 million the duty is 8%.        test” and is calculated in terms of days spent in the
price is paid. These funds will be invested (and           For entities the tax is 8% without exception.             country over a 3-year period.
interest accrued) for the non-resident’s benefit. The         Other costs include transfer fees (not payable            No tax is levied on foreign pensions.
regulation of these accounts is supervised by the          if the seller is VAT registered); Deeds Office levies;

18         intELLECtuAL prOpErtY September 2010

                                                                                              Word of Mouth
                                                                         A cautionary tale - changes to agreements in writing must also be in writing.
                                                                                   Verbal variations may be agreed but they won’t necessarily stand up.

OrAL AgrEEMEntS can be quicksand in
the property market, as a recent court judgment
illustrates. The basic issue in this case was whether
a verbal compromise can override a non-variation
clause. Attorneys Smith Tabata Buchanan Boyes
explain: “Notwithstanding non-variation clauses
in Deeds of Sale and Lease Agreements, property
practitioners will be familiar with allegations by
one or even both parties that they have orally
agreed to something which constitutes an
amendment of their written agreement and are
thus not bound by the original clauses of the           The sureties based their defence on the fact that     •	 It	was	trite	that	where	a	non-variation	clause,	
written agreement.                                      the parties had reached an oral compromise               such as the one in the lease agreement
   “This matter illustrates the perils of relying       after it had been made known to the trust that           under discussion, which was contained in a
on alleged variations. The interesting twist            the company was experiencing serious cash flow           written agreement, any verbal amendment or
here is that the tenant alleged that the original       problems. They alleged the compromise provided           cancellation of the agreement was null and
agreement was not varied but, in terms of a             that:                                                    void and of no force and effect.
compromise reached with the landlord, that the          •	 The	 lease	 would	 be	 cancelled	 as	 from	        •	 On	 the	 other	 hand,	 our	 courts	 have	
latter waived its rights to sue for arrear rental.”        1 September 2009 onwards;                             acknowledged that a non-variation clause
                                                                                                                 did not prevent one party waiving a provision

... the moral of the story is: Should the need                                                                   of an agreement which was entirely for that
                                                                                                                 party’s benefit or waiving the right to pursue
arise to amend a written agreement... such                                                                       his or her remedy for a breach that had already
variation must also be in writing. If not, the                                                                •	 That	 the	 facts	 indicated	 that	 the	 sureties’	
original agreement stands.                                                                                       defence was based on their alleged right
                                                                                                                 to cancel the agreement which arose from
                                                                                                                 their alleged oral agreement with the trust.
The facts are as follows:                               •	 That	 the	 trust	 may	 use	 the	 deposit	 the	        Similarly, the right to vacate (agreed upon in
   The defendants, a company, entered into a               company had paid towards reducing their               the oral arrangement) could not exist if the
written agreement in August 2008 in terms of               damages resulting in the early cancellation in        written lease agreement was still in place.
which it leased premises from a Trust. Occupancy           lieu of outstanding rentals; and                   •	 In	 effect,	 the	 oral	 arrangement/compromise	
was from 1 July 2008 and rental was payable             •	 Neither	party	would	proceed	against	the	other	        constituted an oral cancellation of the
monthly. The lease contained the clause: “No               in terms of the lease agreement.                      agreement, not a waiver of right. As such,
variation, amendment or cancellation of this lease,                                                              it was disallowed and considered invalid by
inclusive of this clause… shall be binding unless          The company vacated the premises on                   virtue of the non-variation clause.
it is in writing and is signed by both landlord and     1 September 2009 and regarded the matter as
tenant.”                                                finalised. With regard to the non-variation clause,      For those in the property industry the moral
   However, from June 2009 the company                  the sureties argued that it was not applicable        of the story is: Should the need arise to amend
defaulted on the rental, electricity charges            because the compromise constituted a waiver           a written agreement which provides that it
and other operating costs and in February the           by the trust of its right to pursue its remedies in   cannot be varied other than in writing, then any
following year the trust issued summons against         terms of the agreement, rather than a variation.      such variation must also be in writing. If not, the
the company and four individuals who had signed                                                               original agreement stands.
sureties. When the sureties entered notice to           The court, however, granted the summary
defend, the trust applied for summary judgment.         judgment and held that;

                                                                                                              intELLECtuAL prOpErtY September 2010             19

                                                                                          Growth Potential
                                                                 Listed property is still attractive as an investment, in spite of a dip in income streams.
                                                                           But commercial property remains under some pressure as the economy lags.

tHE LiStEd prOpErtY SECtiOn in the                      either full year or interim results in the month.      average below that of building cost inflation. This
JSE securities exchange remains a favourite with        These companies account for 60% of the sector in       means that in real terms rentals are lower than
investors. The improved rating over the past few        terms of market capitalisation.                        they were a year ago.
months has resulted in double digit yearly growth in                                                              Commenting on the industrial market, the
prices (March up 15% and April up 13%). This has        Catalyst’s three-year ranking in total return of       Rode Report says: “Although the stilts of the
compensated to some extent for the disappointing        property units trusts is as follows:                   market – namely manufacturing activity and retail
yearly growth in income streams.                         1. Capital property               (69,78%)            sales – can be said to be in recovery mode, the
     Funds are still trading at a premium of about       2. Emira                          (41,33%)            strength and sustainability of the recovery remains
100 points to long bond yields, according to the         3. Fountainhead                   (33,70%)            uncertain. This uncertainty comes mainly against
latest Rode Report, which comments that this             4. SA Corporate                   (25,89%)            the backdrop of a South African economy that is
shows that investors are still willing to pay a          5. Sycom                          (-8,91%)            still shedding jobs, and a wobbly world economy.”
premium for listed property because of the added                                                                  Rode adds that uncertainty regarding market
luxury of potential income growth.                      Property loan stock three-year ranking (cumulative     rental prospects are a negative, adding that in the
     Says the Rode Report: “Considering that            growth over the period) is :                           first quarter of this year market rentals continued
non-residential property fundamentals remain             1. Fortress B                     (76,00%)            to contract. On the Central Witwatersrand (-7%),
under pressure at the moment – read rising               2. Capital Property               (69,78%)            in Durban (-5%), Port Elizabeth (-3%) and the
vacancies and shrinking market rentals – a               3. Panprop                        (52,86%)            Cape Peninsula (-2%) market rentals were lower
further deceleration in the growth of distributions      4. Resilient                      (49,54%)            than a year ago.
from listed property funds is possible. This does        5. Vukile                         (46,53%)               Vacancy rates in smaller shopping centres took
not augur well for listed property prices should         6. Premium                        (38,00%)            a hike as a result of weaker retail sales. However,
sentiment turn against listed property.”                 7. Hyprop                         (37,91%)            the national tenants, especially those in regional
     Catalyst Fund Managers’ August report               8. Acucap                         (34,20%)            centres, continued to do well.
concurs: “Over the last 12-24 months the direct          9. Redefine                       (34,14%)               In terms of office space, capitalization rates
property market has been characterised by                10. Growthpoint                   (27,31%)            remained firm despite the sharp rise in vacancies.
weakening property fundamentals and this has led         11. Hospitality A                 (16,51%)            The reason for this, says Rode, is probably because
to slowing in income distribution growth over the        12. Octodec                       (13,32%)            South African landlords have not been under as
same period. Although the operating environment          13. Fortress A                    (10,00%)            much pressure to sell as those, for instance in the
will remain challenging over the next 12 months,         14. Hospitality B                 (-19,14%)           UK. Cap rates in the decentralised Johannesburg
the signs are that fundamentals are beginning to                                                               office areas moved sideways, similarly in Pretoria
show signs of improvement.”                                The fact that real office, industrial and mall      and Durban. In the major Cape Town decentralised
     August is a busy time for the listed property      rentals are shrinking is impacting on the commercial   office locations such as Claremont, Tyger Valley,
sector in terms of reporting results. A total of nine   property market. In Johannesburg, Pretoria and         Century City and Westlake, cap rates on prime
out of the sector’s 22 listed companies report          Cape Town the growth in market rental was on           office property are in the order of 10%.

20        intELLECtuAL prOpErtY September 2010
                                                               When you’re properly supported,
                                                                you can achieve anything.

New franchising opportunities are now available at Pam Golding Properties.

Supporting your entrepreneurial drive with the experience and expertise of our world-renowned brand is the essence of Pam
Golding Franchise Services. We can provide you with unparalleled dedicated services support teams, award-winning marketing
and global networking capabilities, our company ethos of professionalism, integrity and service excellence – which together
ensure the foundations for your franchising success are in place.

For a discussion or franchise application contact Greta Daniel on +27 (0)12 346 1667 or


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