What’s Trending In SA Property?

The only constant thing about life is that it is never constant … and this is even true of property trends. Here in South Africa, we have experienced the opportunities that come with an economic boom, and stumbled on during a recession, so what now in 2016… and how do current trends affect your chances of securing a residential home loan?

The experts in the property world have varying opinions and expectations of what the market will be doing from here onwards. Their reasons for how the market has behaved in the recent past show as many discrepancies. So who to believe?  The Internet gives you plenty of access to information and opinion from well-informed estate agencies and property guru’s, but in the end you will have to choose to follow advice from those you trust.

A Little History 

It’s all been a bit of an economic roller coaster. The boom period preceding 2008 was wonderful for sellers, buyers and those in the property business. Equally delighted were the banks and financial houses as they were happy to grant residential home loans as South Africa’s interest rates were at an all time low. With the interest low, many people who previously could not afford the repayments of a residential home loan now qualified – although many viewed this easy credit as reckless lending.

A down trend followed with 2012 reflecting the start of a little relief, and an upward movement in the property market.  Fast forward to December 2015 and the economic disaster South Africans experienced overnight – so what to expect for this year?

What to Expect in 2016?

First-time home buyers seem to be driving the property market and the good news is that should this continue, we can hope to see a slow and small growth in the price of properties as the demand for properties remains. There is a twist to the good news, however, as this will be pertinent only to certain areas of the property market. The metro areas throughout South Africa have seen home prices rise – Santon, Umhlanga and Cape Town – and look to continue being popular.

The Atlantic Seaboard has always enjoyed rising property prices and the feeling is that their upward trend will continue – albeit slowly – as prices are still considered to be undervalued in this area. The fall in the value of the rand to the dollar is an attractive incentive for overseas purchasers.

One will not be criticised for being cautious, as the general opinion is that the residential home loan and property situation will have a very slow start in 2016. The shortage of property to sell will warrant that the prices of homes continue on a gentle upward climb.

Residential Home Loans – Why Go it Alone?

Although being careful, banking institutions are still looking to finance potential homeowners. This is evident in the larger value of the bonds being extended and a reduction amount of the deposit required. If you are a buyer and you are looking to purchase a home, being aware of popular trends makes sense. Most estate agents are willing to talk to you and walk you through all the pros and cons of making the decision of where and what to buy. Every potential homeowner has unique requirements and being able to discuss these with an experienced agent is always helpful.

An advantage to deciding on a property to purchase is to pre-qualify for a residential homeloan. Qualified estate agents and home loan originators work closely to ensure you receive exceptional service and advice. At Homeloan Junction, we will assist you with all the paperwork when you apply for home finance and our service comes at no cost to you.

You are under no obligation and we will make sure that you receive the best possible deal from the 9 different banks we approach on your behalf. Our experience and relationship with financial institutes will work to your advantage. This pre-qualification will allow you to gauge your credit rating and realise which price bracket the property you can afford falls into.

The Move is Towards…

Living close to CBD’s, sectional title developments, flats, apartments and complexes is the way things are moving. High density city areas are proving to be the most popular areas for buyers in the market today. Cutting costs on the size of your home, travel expenses and finding advantages in density living is the tendency today.

The tough economic forecast and the rising cost of living that South Africans face, coupled with higher interest rates and a shortage of sought after stock is the test for the 2016 property market.


With compliments of Moneyweb, Today we refer in this bog post to this article ,dated 30 March 2016.

“Brace for Staid Growth” is not the most exciting headline I have read lately. But let’s face it, compared to some of them we have been reading this year, it borders on good news.

When I look at gross yields on property around 7%, they’re not exciting. Levies and rates, never mind maintenance and the odd bad tenant, deserve a better return – especially if your property is bonded and interest rates have risen.

As usual, John Loos of FNB has an interesting take on this issue. Average Price-Rental Ratio, used in the calculation of January’s CPI [inflation], is only 5.2%. this points to the low increase in rentals paid and is positioned relative to house prices which grew last year by 6.5%. So, roughly speaking, rentals are rising slower than the cost of housing and yields are therefore deteriorating. Even rent escalations of 8-10% need to be carefully considered as cash-strapped consumers/tenants battle to afford increases. As a rule of thumb, you can always get a tenant, but you can’t always get a rental – keep the good tenants; the cycle turns.

However, Ian Fyfe of Financial Mail fame, always used to say it’s really nice to be able to touch your assets when it comes to property. Compared with what Robert Kyosaki calls “derivatives” [what we would normally just call “shares”], where you have paper money, property can be seen, felt and admired. Allied to this thought is that your property may not have risen much in value over the past few years, but you never breathed anxiously after Nenegate to until about a month ago when the stock market collapsed from 53000 to around 47000 in huge, unexpected jumps down the Chinese mountain. You were steady, not staid, as she goes.

One of the other problems, in fairness, is that many properties have not grown in resale value over the past 5 to 8 years. A friend was telling me that properties sold in 2010 have grown from R600000 to R630000. That does not sound good and coupled with a 7% gross return on rentals, definitely isn’t exciting. One of the aspects that impacts on rentals is the level of building activity.

According to Jacques du Toit of ABSA, the share of total building as at January 2016 is:

Houses <80m2 is:         37.7%

Flats is:                        35.5%             

Houses > 80m2 is:        26.8%.

This means that 70+% of all properties built were in the “rentable stock”. It could be implied that stock levels may be supressing rentals. I must add though that the Building Confidence Index has only just managed to scrape through the 50% barrier and is nowhere near the heights of 2008. Caution still rules in the minds of developers. This may sway them from further developments.

Lightstone have an interesting take on these matters. House price rises peaked in 2015 at 5.8% and ended Q4 on 5.5%. however, they project house price increases in 2016 between 4.5% and 2.5%. They quote the following reasons for this state of affairs:

·       Looming recession in an economy certainly under strain

·       Less speculation and home improvements

·       Inflation & interest rate present a double whammy on household pockets

·       The luxury property market is leading us through the down turn.

Very interesting and quite gloomy considering some of the early-2016 thoughts from both FNB and ABSA. So, do you invest in residential property? My personal view is, yes. Have some in different areas and different demographics so that your share portfolio is diversified into some physical assets, together with cash and shares.

I see FNB in their Property Barometer of mid-March 2016, sense that the Repo rate will “settle” at about 11% in 2017. Interesting, that is a rise of 1.25% this year. Clearly, this is off my expected 2% and very positive if we can hold steady through the rating agencies’ re-rating in June and August 2016. In fact, it would be a great outcome before hopefully, the rates stabilise or begin to reduce slowly. Also very positive for us all was the speech by Governor Yelland of the Fed yesterday who pointed to the fragile US economy as a reason not to increase rates. This has pushed the Rand back through the R15.00 collar and as I write, it is trading at R14.95. Awesome news!!

So, 2016Q1 is completed. Tomorrow is April Fools’ Day. And all the fools are still here. Remain positive in the strained environment – there is no better way to wake up in the morning than with a positive attitude.

Yours in Property

Go Big or Go Home

A bond repayment calculator makes light work of trying to work out what monthly repayments will be required when taking out a bond. It certainly beats frantically scribbling down numbers and firmly thumping your calculator while your blood pressure rises!

Everyone’s dream is to own their own home, but you need to make sure that you can afford the monthly repayments before you take on such a big financial commitment. Mortgage repayments can change from time to time if the interest rate is linked to the prime rate. A financial provider is sometimes agreeable to a fixed interest rate, if this is what you favour. Terms of a home loan are flexible and range from between 20 to 30 years. As this is an extensive time period, one should carefully calculate the affordability of the loan amount you settle for.

To help home owners get the feel of the responsibility attached to taking out a loan we have a bond repayment calculator on our website. This is a tool which bond originators supply to assist a prospective homeowner like you to calculate various mortgage repayments.

Bond Affordability Calculator

A bond repayment calculator will work out the size of the bond you qualify to apply for. By visiting our website you will be able to get an idea of what bond repayments you can afford each month. There are many factors that come into play and which can affect the bond you are offered. The general idea is that the higher your salary, the larger the bond you would qualify for.

However, a person earning a large-numbered salary but having many obligations (debts) could find that they qualify for a smaller mortgage than another applicant earning considerably less but with no serious commitments. This is called the DTI ratio (Debt-To-Income) and is used to calculate how much ‘extra money’ one has after monthly expenses are accounted for. Every person has unique circumstances and requirements and we will treat each application with these distinctive factors in mind.

Bond Repayment Calculator 

What portion of your salary should you spend on a bond each month? This is another situation which will rely purely on individual circumstances.

  • The traditional rule of thumb consideration is mortgage repayments should be no more than 30% of your pre-tax salary. Another conservative view is that it should be not be in excess of 25% of your take home salary.
  • Most banks prefer a deposit before granting a home loan as 100% loans are hard to qualify for.
  • The calculator will give you an idea of what your monthly repayments could be. A different interest rate will alter your monthly payment as will the time period in which you chose to pay it.
  • By paying back more than the stipulated amount, an exceptional difference in the eventual time and amount your home will cost you.
  • We suggest you to play around with numbers on our bond repayment calculator and have your questions ready for us to help you answer.

The Big Picture

Sound advice is to take into account the whole of your housing obligation and not only the mortgage. Your housing budget should include your bond repayment, municipal rates and taxes and home insurance. Do not be drawn into over-extending yourself as what seems affordable today could be very uncomfortable down the line. Children grow up, educational costs increase and perhaps supporting a parent will come into the equation, not to mention maintenance and repairs.

This is a long-term commitment and it is wise to consider all factors. Research residential areas before deciding on a home that is affordable.  Where is there expected growth? Will the location work for the family’s needs?

Place the purchase price, years you are planning to repay the bond in, current interest rate and your expected deposit amount into the bond repayment calculator to get the big picture on what the real monthly mortgage costs will be. Homeloan Junction has a separate calculator to help you ascertain your bond and transfer costs.

Loan – To – Value Ratio (LTV)

Giving financial assistance to home buyers is a risk for the lenders. They want to be sure that their money is repaid, with interest of course, and in the event of any unfortunate circumstances that they are not the ones to lose financially. Therefore the bond you are granted will also be linked to the property you wish to purchase: what it is valued at and what the asking price is. Being able to recover their money is an important consideration.

Smart Thinking

Being cautious does not mean doom and gloom and your dreams flying out the window. Perhaps a little trade-off is all that is needed: buy a smaller home that can accommodate renovations or alterations at a later stage. The cheapest house in the best neighbourhood is an alternative view as you cannot over capitalise and all improvements will add value to your home. Do you have to buy a small home in the newest trendy area? Think about the well-established areas with older homes that have huge rooms, established gardens but need just a little tweaking to make them your dream home.

Use our online bond repayment calculator to see where you stand, and contact us for expert consultation on applying for your homeloan. You can go big on your dreams and go home with the help of Homeloan Junction.

Your in Property



It’s that time of the year – National Budget 2016/17.

Let’s have a look at highlights and think about how that may affect the property market.

In providing the following overview, I wish to thank Moneyweb for excellent coverage of the Budget and its ensuing Press conference.

For sake of brevity, the highlights are:

  1. Budget deficit is reduced to 3.2% of GDP, down from 3.9% achieved in 2015/16 tax year.
  2. Government debt to rise by 11% to R2 trillion or 45.7% of GDP. Total debt will stabilise at 46% over the next two tax years.
  3. Increased Treasury oversight of State-owned enterprises (SOE’s) and the investigation of the sale of minority equity stakes to private investors.
  4. No increase in personal income tax (of 13.7 million registered taxpayers, fewer than 1 million individuals pay 64% of personal income tax revenue) or VAT.
  5. Tax relief of R5.5 billion to limit the impact of fiscal drag with the majority of the relief aimed at lower- and medium-income earners.
  6. Increase in the effective Capital Gains Tax rates for individuals (from 13.7% to 16.4%) and for companies (from 18.6% to 22.4%).
  7. The fuel levy will increase by 30c/litre.
  8. Government to implement a new sugar tax from March next year.
  9. Increase of transfer duties on property sales above R10 million.
  10. Sin taxes will rise. Duties on malt beer, fortified wine, sparkling wine, spirits, cigarettes, and cigars rise between 6.7% and 8.2%.

Government has committed to the following expenditure cuts:

  • Costs of travel, accommodation and conferences for public officials. The target is to save R1.6 billion over the next three years.
  • Vehicles for politicians (Cost of new vehicles limited R750 000).
  • Government to renegotiate leases of properties.
  • Procurement reforms to achieve savings of R25bn per year by 2018/19.

As regards the economy, Finance Minister Gordhan fell short of implying a recession would occur. From 2014/15 onwards the following were his GDP growth and CPI projections:

GDP growth:                            1.6%      0.9%      1.2%      1.9%      2.5%

Consumer price inflation (CPI):  5.6%      5.4%      6.6%      6.2%      5.9%.

These targets are crucial for another aspect of government finance, namely the Budget Deficit [how much government needs to borrow], % of Debt to GDP [self-explanatory] and the cost of repaying debt [very self-explanatory]. From 2015/6, the numbers are:

Budget deficit:                           -3,9%                   -3,2%                 -2,8%                 -2,4%

Debt as percentage of GDP:        44.3%                  45.7%                 46.2%                 46.2%

Debt service costs:                     R129.1bn             R147.7bn             R161.9bn             R178.6bn.

The final numbers are the quantity and cost of the Public Service this year and next year:

Total public wage bill for national and provincial departments:        R479bn                 R509bn

Number of employees for national and provincial departments:      1,316m                 1,321m.

Finance Minister Pravin Gordhan professionally presented a budget that was geared to improve South Africa’s financial position. On the positive side he achieved this by not raising personal income taxes or those of companies. In addition, he avoided raising VAT which was no doubt well received. His willingness to reduce the budget deficit, which fell from 3.9% to 3.2% this year and is expected to decline further to 2.4% over the next two years, is positive. The fact that he did this by decreasing the cost of government goes beyond the token savings of the last few years.

His difficulty was explaining how GDP growth will be enhanced [by the way, this is not only his job] and he certainly did not cut actual government expense. In addition, the recent decline of the Rand has caused our Foreign Currency debt [only some 10% of Total Debt, thank Goodness], to rise by R45bn. A strengthening of the Rand will decrease that so we need that enhancement badly at least to get us back to our pre-December position. GDP growth also needs to accelerate to positively impact on the above numbers.

Continuing to quote Moneyweb’s articles, Gordhan said: “We need to be frank about South Africa’s economic constraints. We have low growth which leads to reduced tax revenue, lower scope to increase expenditure and lower confidence levels,” he said during a media briefing.

He added that government cannot solely be responsible for growing the economy and that the private sector must come to the party. “Both government and business must do what they can to increase growth and to avoid a downgrade.”

Gordhan was critical of the dismal financial performance and low levels of efficiency of many State-owned enterprises (SOE’s), such as SAA and Eskom. Government has already provided support in the form of guarantees, which now total R467 billion or 11.5% of GDP. The technically insolvent SAA is at the top of the agenda and has received bailouts of R14.4 billion.

To analyse the above highlights, we firstly need to ask whether FM Gordhan has the political support to see this budget through. If not, we are in serious trouble and only the government has the ability to ensure this vital ingredient.

On a positive note:

–          He presented professionally and was in command

–          We have no increases in income tax that could affect affordability

–          R5.5bn has been pumped into the Affordable and lower Middle market sectors through income tax cuts

–          The cost of buying houses has not changed but for those from R10m upwards

–          The fuel levy is not a major issue for affordability

–          CGT’s rise should not really impact anyone but the rich

–          If he is right, we are not facing recession which many of our well-informed global advisors seem to expect

–          The Rand has generally strengthened in recent days, despite the drop because of Brazil’s downgrading two below junk bond status

–          And, on the lighter side we will drink less, smoke less and consume less sugar!

It was interesting to note his Inflation forecast. It was way below the number of 6.8% average I quoted for 2016. Should he prove correct, this will alleviate the need to raise interest rates much further. We could probably expect then only another 0.5% being a total of 1% for this year. This reduced increase could be offset by the R5.5bn tax relief provided in the lower income market.

There is much to be grateful for in this Budget when considering the property market.

However, South Africa remains in dire straits and those who poo-poo a Rating downgrade have no idea how much value it will destroy. Every person in this country will feel the pain economically. Minister Gordhan has probably done his best within the constraints of political will, to present the rating Agencies with a reason to not downgrade us. Time will tell.

Yours in Property.