AFFORDABILITY

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We’re in that time again in the business cycle, when affordability begins to come into question. So, let’s question it.

I want to put the negative on the table first so we can get it off the table quickly. Depending on your measure of doom and gloom,affordability is affected by many factors that work together. For us today, let’s make them Inflation, Interest Rates, and Employment. If you have a job, are assured that it is stable, have low interest rates and live in a low inflationary environment, then you haveaffordability. In our environment, inflation is out the range at 6.3% average this year, rates may be about to rise and jobs are not secure. Therefore, on the negative side, Affordability is in question and therefore fewer houses will be sold as less bonds are financed by ever-risk mitigating banks.

NOW I’VE GOT THAT ON AND OFF THE TABLE, LET’S SEE SOMETHING THAT IS INTERESTING. IN FACT, EVEN IF THE RATES GO UP SOON, THEN MUCH OF WHAT I SAY WILL STILL STAND.

On the positive side, a September 2016 ABSA Property Market Overview, led me to thinking. It said:

– Average nominal house price growth in August 2016 was at its lowest in 4 years, year-on-year.

– Nominal house price growth is to remain under downward pressure in the rest of the year and into 2017.

Against this backdrop, those of us who have been in the property industry for a long time will recognize some interesting signs. The banks are strict lenders of credit but frankly, at this stage are still lending and at significant loans-to-value ratios. The interest rate rise has been managed superbly by the SARB – you can debate if raising rates has been necessary but you can’t debate the intelligence, independence and stability of the SARB. It has really managed a difficult process in the whitewater of the global economy with due diligence and clear communication. So that said, if the rate rises this week, it will continue along similar lines – my premise is that it will not rise and if it does, will not have a negative effect. On the other side of the ocean, strong consensus is that the FED will not raise interest rates given the soggy USA economy. So let’s assume rates stay the same there and here. As regards inflation, we do have it and it must be dealt but if the Rand remains stable below R14.50 and Oil remains <US$50, it will help curb further Rand declines. So let’s assume the Rand trades in this current range with a blip, make that “serious blip”, around a possible downgrade. Then Employment is about as bad as it can get in the formal [read: mortgage borrowing] sector. Certain industries, Steel especially, are under the cosh but generally, Mining, Manufacturing and a few other sectors, like Property, are doing fairly well. [Please believe me, given the stuff of our politics, EU/British politics, Japan’s economy etc, we are doing fairly well.]

So we have Interest rates stable or well managed, Inflation hopefully will peak and decline a little and Employment will remain soft but stable. If that is true, then Affordability comes into play. You see, cost prices of houses are declining. Therefore loans-to-values will increase. Therefore there will be a few happier credit managers around the place prepared to take a better view of your customers’ mortgage application. Affordability will kick into play – all of the positive, easy-to-feel effects of a Consumer more capable of paying for houses whose prices have decreased. Now that’s good news.

As always, I like to stick my neck out on these issues and if you asked me what the biggest risk is, well, it’s the downgrade of our country. Sad but true. However, many experts believe it is factored in and shouldn’t present a major change in the medium-term. In the short-term, it will feel like a blow to the financial Solar Plexis but we will survive and come through it.

There is another fact that is a driving force of much that is our economy – the Middle Class. Here is an article from Business Tech copied which makes good reading:This is what it means to be middle class in South Africa

There is cause for hope! Watch what you read and distinguish the Noise from the Truth. Watch the new municipalities perform as best they can in the next 5 years remembering they account for 60% plus of our GDP. Watch politics play out but don’t let mind-games play you. Focus like your business life depends on it.

I was reading about a Morningside development this morning. Darn good value. I read some innovative Cape Town property deals last week. Very clever and financially effective. At Homeloan Junction we are determined to understand and then remain positive – who knows but that my scenario above, buoyed by the growth of the Middle Class, does not become our experience and we benefit from improved Affordability at this time in our Mortgage cycle?

Yours in Property.

LOOKING FOR A BOND SOLUTION?

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After months of searching and visiting show houses, you have found the home you want to make your own.  Now what?  If this is the first time you are buying a home, the process may seem overwhelming.  How do you make sure that you are successful in your application for a bond?  How do you make sure that you get the best deal possible on an investment decision as important as your homeloan?  How do you even go about the process of applying for a bond?

Should you go it alone?

The information age has brought in an era of being able to do many things by yourself; things you would previously asked an expert to do.  Within minutes you can have detailed instructions on how to do virtually anything, often with a video to accompany the instructions.  Whilst this can be empowering, sometimes using expert advice and getting professional input is a better decision.  Applying for residential homeloans is one of those areas.

Why use the experts?

When you use a bond originator company that specialises in providing bond solutions, you can be assured that you will have the most favourable outcome possible with regard to your residential homeloans application.  There are a number of reasons for this:

1. They know what each bank requires

A Bond Originator knows what each bank requires.  By examining your application, they will know which banks it would be best to approach for your circumstances.  This will help ensure that you are successful.  Once you have set your heart on a property, you want to know that your bond application will go smoothly.

2. You don’t need to deal with the bank bureaucracy 

When you use a Bond Originator they will deal with the banks directly and will make sure that all requirements are met.  They have experience and expertise and know exactly what is required and who to speak to in order achieve a speedy result.

3. You get the best deal possible

A company providing residential homeloans can take advantage of bank corporate scheme arrangements.  This means that they are able to get you preferential rates and terms, better than those you would be able to arrange by yourself.  Getting the best interest rate possible is very important when you are taking out a loan with a repayment period of between 20 and 30 years.

4. You can access other financial products you may need for the purchase of your new home

The situation often arises when you are purchasing a home that you do not have access to the funds you need when you need them.  For example you may be waiting for the proceeds of the sale of your current house. This can take up to 90 days, and in the meantime you may need to pay transfer fees, deposits, or fees for rates and clearance certificates.

When you use a bond originator they can assist you to access a loan product like bridging finance.

5. You can get expert advice upfront

With a Bond Originator you can get expert advice upfront.  They have a number of calculators that can help you in your decisions.  You can assess what you can afford, what your monthly repayments would be, and how long it will take you to pay off your loan.

You can have a single point of contact, a professional that will assist you in the process and answer all of your questions.

6. It will not cost you anything

There is everything to gain when you use a bond originator.  There is no fee involved, and you have access to excellent advice.  The consultant will be your one point of contact for the process and will guide you throughout.  They will apply at all the institutions for which you qualify.  With their experience, they will also know where you are most likely to be successful.

When you are ready to take the next step and buy your own home, you will need a bond solution.  Rather than going through the process of approaching every financial institution yourself, why not use a bond originator?  With their experience and a good track record in securing affordable finance, the process will be quick and painless.  You will be guided on each step of the way.  It will result in the best possible financial deal available.

Wouldn’t it be nice if the hardest thing about buying a new home is deciding where to put your furniture?  With a bond originator like Homeloan Junction, finding a bond solution is easy.

OVERTRADING

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Just to break from the usual property information as I did one blog ago, let’s talk about business and life.

Overtrading is not a well-known word for most people although, like Gearing, we often use it. It’s roots are in financial management so as bankers, we use it a lot. It applies to the tendency of a successful business to ramp up its turnover because it can and then fall over on cashflow. The reason is that increased turnover looks really good but increased debtors, stock and human resources bring about funding requirements that deplete facilities, and employees that require more cost and management focus. As a business partner of mine has explained often: “Businesses fail for two reasons, failure itself and success”.

The trick with business is to stage turnover increases according to available funds. In that way, you can bank an increase and then begin the process again once the stock and debtors have caught up. This staging enables the business to suss out the efficacy of the growth – is it fast enough, are our new debtors paying on time, are our stock suppliers happy and ready to support us with improved credit terms? There is so much to be said for staging increases in turnover. Perhaps the most important is facilities. Banks do not enjoy overtrading,  but they love cashflow [sometimes even more than profits]. You can arrange facilities in advance of, and more than, what is required. Having financial capacity from your own bank can avoid bad mistakes like having to pay investors in your business high interest rates because they know you need the money, and even worse, investors who demand shareholdings in the name of helping you grow. Such shareholding is very expensive in the long-run when a business is well-sold off the back of your hard work. It’s good to grow; it’s better to grow in proportion to your own funding requirements and resources.

But then, there is the Overtrading that is less described as such. In fact, I use some license with the term when I apply it to your personal circumstances. How does this work and what do we normally call it? Perhaps the most important question is what is its long-term impact on you and those you care about?

I attended a Mens’ Retreat and came upon the term: “Always On” guy. Know one…….. or two or three? In the front of the class with the perpetual response: “Pick me!” Always ready to say Yes and not willing to say No. Otherwise, always thinking up the “next big thing” and going for it. Not just going for it but fundamentally believing that he or she really can do it together with all the other things. We call it “personal bandwidth” and we think it is infinite as long as we’re “going for it”. Distraction and lack of focus are not terms in our vocabulary. We are excited by the hunt and determined to win for reasons we best understand – because we can, gotta stop the competition, need to leave something for the kids, have to make people happy, grow while the opportunity is there, more money is better than less money and retire young. So many reasons and sometimes, just our own innate drive and desire to achieve.

If you recognise yourself somewhere in the description, here is some advice for you:

1. FOCUS: In his book, Essentialism, Greg McKeown quotes the poet, Mary Olivier when she asks: 

“What is it you plan to do
With your one wild and precious life?”

In a hard read, he continues to force the issue of being an Essentialist. In becoming so, you do that one thing. It’s big and it’s challenging but it is the thing you have decided to do often, to the exclusion of many other things. The result is clean, uncluttered, directed, relatively calm Focus and Execution. At the heart of his treatise is that “you choose to do” one thing, and are not driven by “you have to do” many things for many reasons.

It is unarguably sensible.

2. PRIORITISE:

If you are a mere mortal like I am, the notion of “only one thing” may escape you.  There is so much to do and so many opportunities to grasp that you become busy. Really busy! “Rat Race” often slips off the tongue for those trapped in “doing”. If you identify, then do yourself at least half a favour and begin to prioritise your activities. Simple questions like: What must I do? What would I like to do? What can I do whilst I delegate to another who I manage? What makes sense to prioritise given limited resources [including, my time]? All valid questions that redirect thinking and therefore actions. I sometimes speak of de-complicating my life – taking all the things I must do, comparing them with what I want to do, finding the overlaps and then settling down to do as many as possible over time. Simplifying life and time.

3. PURPOSE:

Allied to the above, is purpose. In defining it, a sense of purpose becomes the mirror against which every opportunity is reflected. I often think of it as the white barriers on either side of a horse racecourse. When I’m within my Purpose [read: personal life goal; the objective of my life; why I’m here…if you wish], I’m running on the track from the start line to the finish line. But if something comes along that demands my attention, I find myself, metaphorically speaking, over the barrier – you know, that area where the cars park and the catering tents are pitched. Definitely no distinct course of direction, lots of obstacles and distractions; bad going at best. Found yourself there? Out of purpose doing stuff you were not made for? I suggest to you, that the time you take to discover your purpose will save you years of your life “over the white barrier”.

4. TIME MANAGEMENT:

No good blog on personal overtrading would be replete without mentioning time management. Think of this: we have diaries that ding when we have an appointment, Suri and My Google which tell you when to leave and which way to go, anniversary/birthday/special day reminders, instant internet access to global sites, all in the palm of our hands. But, but, we can’t manage our time. Bottom line, you can’t blame the tool, you can’t blame others so you must be to blame; soree for you. Jack Welsh said: “Take control of our life or someone else will”. No truer word has been spoken. I listened to Cape Talk the other day and they were talking about Money vs Time. It was very interesting to hear the heart-warming stories about Time and how people had changed their lifestyle and income to have more of it. I heard no one call in to say, “Get a life, money is more than important!” However, truth is the majority of those I know de facto, choose Money. Manage your time, or your time will manage you.

Serious stuff, you may say. But really, just consider the consequences. Focus on everything is focussed on nothing. Something gives – your relationships, your health, your finances, your sense of wellbeing – something gives. In his book, First Things First, the late Stephen Covey talks about what’s Urgent vs what’s Important. When everything is urgent – dropping the kids at school, being up to date on your emails, social media – beware that you are not missing or missing out on what’s important. Often what’s important is long-term. Building character in your children is important and a mission-to-adulthood application. But nothing takes its place in the finished product. Is that email seriously more important than eyeballing your child when they come home from school!?

Failure comes in many forms. Sometimes you just fail and maybe it wasn’t you but the thing or project just wasn’t due to succeed. Other times, stretched on the “too much” rack, failure just drifts in and out as your focus reflects that of a happy bumble bee; flitting from one flower to the next in the hope that some pollen transfers. Success is Focus X Determination nine times out of ten. Be careful that you don’t really believe that if you do everything something will succeed – you may just be the reason why that is not the case. I’ll never forget that in my mind-map when I left the bank for entrepreneurship, I had 33 things to do. Of all of them, only 1 worked successfully for our benefit and we tried them all – do you have any idea how much work that took? Just think about it, are you the same?

Enough said. If you’re Overtrading in your business or personal space, think about it. If you continue, as most seem to do, realise the consequences. If you think you should reconsider, think about that and use one of the ways discussed above to re-focus on what you can do properly, what will give you maximum bang for your buck, and what demands your energy because you want to give it your all.

Homeloan Junction says to each of you: Strength to your Arm and much Success!

Yours in Property

CREDIT VOLUMES

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You know, I have been looking at the volumes of credit extension and am suitably impressed. Oh, you might say, that’s “glass half full” stuff. But you know the old story, if you “gave” me something a year ago or just after Nenegate, would I have taken it? A resounding, Yes!

So let’s dig a little deeper using ABSA’s Credit and Mortgage Advances Report as at end-August 2016 and the microcosm of ooba’s Origination Overview as at end-July 2016. Not entirely comparable, but good enough for us to make some points on growth in our industry.

Is the market declining? Yes it is. But if you took that feeling in your gut in December 2015 and as you watched the Rand/UKP exchange rate sail off into the sunset and turn just before R25, you will know what I’m referring to when I say, “I would take what we have now”.

According to ooba, their volume of applications is down 5.67% comparing the cumulative year-on-year [ie, Jan-July 2015 totals to the 2016 period] figures. In fairness, the rate of decrease has increased so that June 2016 compared with June 2015’s applications volume decrease is 17.87%. In round figures, the month of June 2016 is 18% less than the same time last year.

Now let’s look at ABSA’s analysis. You cannot compare the percentages as they are talking to Total Advances of lending but a few points relate to trends:

  • Growth in outstanding Secured credit balances for households showed a 3.1% growth up to end-July 2016. This number includes Instalment sales [read: car finance] which has negative growth. To that point, we know car sales and finance are declining rapidly.
  • Mortgage balance growth is rising 5.7% in July off 6% in June2016. This growth is after taking into account any capital injections into bonds and any increased payments. But it would also include any non-payment of mortgages but frankly, I don’t think the banks are  bleeding in this area at this stage compared with normal default ratios.
  • The great eye-opener is Unsecured lending. Growth per annum between 2010 and 2013 peaked as high as 30% but since then, it has plummeted through 0% to about -8% to date. The unsecured lenders are also experiencing dramatic bad debt levels as the consumers try to repay their personal loans.

Given the figures of ooba and the advances growth of Mortgage balances, if you had said to me that’s it for July in January 2016, I’m still telling you, I would have taken it. Not sure if you agree?

So where are we at? South Africa is not accustomed to long periods of 0% growth in the economy.  There is really no excuse. Of course it’s better than negative growth and hugely better than the gut-wrenching collapse of 2008-2010, the infamous Sub-Prime Crisis [for which, to the best of my knowledge, no one has been prosecuted – given that the rip-off took place inside the law!]. But no-growth is akin to oxygen deprivation – you don’t feel it initially but it slowly takes hold and weakens you. We have just had a 3.2% growth reported and what an injection of fresh clean air! Don’t hold your breath though, we’re told, as it was just a statistical aberration. And some good news is coming out of China recently. Just for it’s size and perception of good news, that is good news. Another good news element is the fact that the National Credit Regulator’s enhanced credit criteria are curbing reckless lending to the point that only responsible lending to sustainably employed people can occur. Very good news for the consumers but then you just need to watch for rogue lenders cropping up again.

It is true that only Politics now bedevils the economy. Affecting Confidence we know is a hammer blow to growth. It saddens me that the sale of Tekkietown to Steinhoff, as one example, now has its expansion plans in Poland. This is great for the shareholders, but what a tragedy for South Africa and Southern Africa. What a powerhouse we fly over to do business in a business-friendly, fast-growing economy!

All that said, growth is growth and we’ll take it at any level. And it seems USA will not be raising its interest rates too soon. We’ll take that as well.

A closing point really close to home. Homeloan Junction’s performance has been beating the trends. If you look at August-on-August, applications have dropped by 3. You read right, just 3 applications. And then, if you look at July 2016 to August 2016, applications, coming out of Winter, increased by 75. That is really good and a testimony to the whole team who are putting heart and soul into their work effort. Very well done!!

We include this information only to say: It can be done! If you internalise, or the popular word, “mentalise”, everything you hear or read, you may be convinced you don’t have a chance. The day you are, you don’t. Henry Ford again to remind us: “If you think you can or you think you can’t, you’re right.” Always remain positive and determined to succeed. Things could have been catastrophic and they have not been. Let’s trust the market can take any other shocks that may be thrown at us this year.

Yours in Property

How can you pay off your home loan faster?

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The process of buying a home, especially a first home, is exciting and scary at the same time. South Africans can get caught up in the hype of affordable residential home loans based solely on the monthly payment. When you only factor in the monthly outlay and mentally dismiss the total cost of a home, you do yourself a disservice.

The good news is that disclosure laws are in place to protect you and you have your estate agent available for guidance. Best of all, when you secure a home loan through Homeloan Junction, you get the best possible deal.

  • Our experts guide clients through the application process, explaining everything as you go along.
  • Homeloan Junction submits applications to 9 different banks. You just have to choose which deal suits you best.
  • We are experienced in negotiating with the banks on your behalf to get the best rates.
  • You are relieved of replicating all the paperwork.
  • You will know the monthly payment and you will also know the total cost over 20 or 30 years at various interest rates, so you can choose wisely.

By the time you actually sign the final paperwork your mind may be in a whirl. You just want to get through the signing, get the key and go home. You need time to let the meaning of it all settle in.

It’s time to take another look

When all is said and done, your residential home loan is an investment.  Life gets busy and paperwork gets buried. Still, you need to periodically review your loan terms. You need to track what kind of return you are getting on this investment and improve that return if possible. You also need to know if your investment has turned into a liability. Listed are a few markers to check:

  1. Do the maths and find out how much you have paid to date toward interest and how much to principal? You may be surprised. If you need one, your lender will provide an amortisation schedule so you can track these amounts by month.
  2. Get a list of all similar properties that have sold in the last 90 days. Your estate agent can help with that. This will give you an idea of what the market value of your home is today.

    – Hopefully it is worth more than your total home loan balance so you are making money.  If you sold now, you would realise some profit.
    – A drop in value is cause for concern because your investment has turned into a liability. You would lose money if you sold now.
    – If there is no movement up or down, you are safe for now. You are not making money but you are not losing either. If you had to sell you could expect to break even.

  3. Subtract your home loan principal balance from the total loan balance. That number could be another surprise but that is what it is costing you to borrow the money to buy the house.
  4. If property values do not increase over the term of your loan, your profit will be absorbed by loan fees. Shorten the loan term to save your profits.
  5. Since interest is figured on a daily loan balance, the faster you lower the balance the shorter the loan term. Shorten the term by paying more toward principal each month.

Shorten the term of residential home loans

There are several ways to shorten the term of your home loan so you pay less for your home. Any amount you pay above your monthly payment goes directly onto your principal.

  • If you pay off another loan, like credit cards, student loans or vehicle financing, divert that money toward your home loan every month. You will cut your loan term by years. That is a lot of interest you will not be paying!
  • Make home loan repayment a top priority. Know exactly how much you are paying for your house if you do not make extra payments. Then, commit an additional, firm amount each month. Do the maths to find out how much you will be saving on the purchase price of your house.  The numbers could be big.

The simple truth is any extra money South Africans put toward the principal payment shortens the loan term and saves money on interest. People are always tempted to use extra money for nonessentials. That is why you have to make a loan payoff plan and stick to it. Rather than wasting the money, plan what you can do with the significant savings. You’ll be amazed by how much you can save if you pay your residential home loan five or ten years sooner than scheduled.

RELATIONAL AFFINITY

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The news of Pravin, made me think that it’s time to write about something different.

The other day, we walked past our neighbour who had just pulled into her driveway. She had a passenger [Sue, for sake of this blog] with her who climbed out the car and proceeded to greet us, “Hello, I know your Aunt Joan [for sake of this blog] who lived in Barberton.” We chatted, got friendly, proceeded to go out on the Friday night Art Walk – we do this on the first Friday of every month in Hermanus J – , enjoyed a super supper afterwards and then visited twice in the remaining long weekend. And now, we’re well acquainted and my wife stays in touch with Sue.

What happened? A casual encounter with a stranger turns into multiple visits and maybe a good friendship. Why would a stranger become such a quick, close acquaintance?

Sue happens to have a great personality so that could explain something. Joan happens to be a favourite Aunt of mine. My father spent a lot of time in Barberton in his youth so I’ve heard lots of stories and been there often. So could it be that a relationship triangle was forged and forged immediately. Given that it was weekend, we had the time to further the link and from that came a pleasant interaction and friendship.

Interesting that you could probably think of many similar examples in your own experience. So let’s have a look at the subject of this blog: Relational Affinity. Affinity simply means “a natural liking for someone or something”. Relational means “the way in which two or more people or things are connected”. So Relational Affinity means “a natural liking for someone with whom you are connected”. Sounds so simple that it begs a, “So what”!

But let’s dig a little deeper………

When last did you do a deal with someone and the deal just seemed to flow? Was this perhaps a combination of obvious things like Cash, Intent etc or, could it also have been that you liked the person and they liked you. Every day we meet with people but don’t actually sense Relational Affinity so what is different or, how do we bring it about? Here are some pointers:

BE YOURSELF: There is nothing more false than a false person. Glamour, chic, and accentuation, whatever – if it’s false, it’s recognised almost immediately. You have been born and, like the rest of us, you have become a product of Nature and Nurture. Nature, the DNA of your parents. Sorry for you, you gain weight like your Mom and have your Dad’s eyes. If not, you have your Aunt Agatha’s hair. You simply can’t ignore your genes in who you are. Nurture is different. It is the foundation of what you have been shown, taught and have experienced over the years. Even to the point, that the way you have thought about yourself has moulded you into what you are. Some would say you are the sum total of the all the thoughts you have had and all the choices you have made. So being “Yourself” is quite a complex thing to be. But without it, falsehood can creep into the way you relate. Think about it, reflect and then, almost on a daily basis, decide to be self-aware (and include the impact you have on others), as you step out into the day.

SEEK COMMONALITY: Did you know that finger prints are copied exactly but compared using spot checks? When finger prints are taken, your digit is pressed into ink and then pressed carefully onto paper from which a digital record is taken, a foto or a scan. However, when someone is trying to identify you, they don’t scan every crevasse and ridge of your finger print, but rather seek about 60 points from the fingerprint you have and the one they seek. The same happens in your brain when you recognise someone’s face. You do not memorise every feature and, in any case, features change over time so remembering all of them would be futile. All your memory does is remember key points (dots in the “fingerprint”) and then join the dots. That’s why you will say, “She looks like so and so”. Some of the dots align but it’s not the same person.

So what are the dots you can join for Relational Affinity to occur? Dots of age, profession, family, sports, friendships – all of these to find the affinity between you and another person which is common and which could spark a relationship to mutual benefit. We talk about the “common touch” when we refer to someone who relates well to people. For instance, Teddy Roosevelt, the US President during WW2, knew the names and family details of every 168 staffers in the White House. Indeed, like common sense, “common touch” may not be so common. But it can be acquired.

ASK QUESTIONS, THEN LISTEN: If you read the famous book by Dale Carnegie, How to Win Friends and Influence People, he writes about the power of questions. In all the types of Coaching, powerful questions come to the fore. The effort is not to know it all and tell the client your best advice, but rather to allow them to think through the issues under discussion. Open and closed questions, probing and clarifying questions and the great one, reflective questions, are all powerful means to unlock possibility thinking, problem-solving creativity and solution-orientated action in and for a client. Carnegie’s aspersion is that questions show interest and spark conversation. Ever sat and listened to someone tell you about themselves the whole night? Have you “done it” to someone? – I have, unfortunately! The antidote for self-absorption is questions. “How are you?”, “Where did you go to school?”, “What are you looking for in a house?” and FNB”s “How may we help you?” are all probing questions that can unlock the client’s meaning and needs and create Relational Affinity. Answered as “That’s a good idea”, “I like that as well”, “Oh, I also went to school in the Eastern Cape” are the kinds of responses that create Commonality.

Ah, then the power of LISTENING! Your Mom tell you that God gave you two ears and one mouth for a reason? If you want to create Relational Affinity as opposed to a Sounding Board (which we all need at times), then listen. Not just with your ears but with your whole body and especially your head, your eyes, your torso, and your hands. Your head nods in affirmation, your eyes are the windows to your soul, your torso (read: “upper body”) moves forward when interested and sits back when you’re reflecting and, finally, your hands embrace, agree, and even reject. Together with your ears, the rest of your body language, as we like to call it, listens more than any attention you can ever pay. Make them all come together to mirror powerful Relational Affinity with your client.

INTERPERSONAL SKILL: How often do you reflect on your impact on other people? I’m selling a flat at the moment and I deal with a number of estate agents. Two come to mind. The one is a person I have known since 2002 and he is really a great guy – mannerly, knowledgeable, professional, and polite. I would love him to sell the unit. The other, I don’t know from a bar of soap. She works for a major group, she has the OTP but she’s direct, abrasive, officious and abrupt. She annoys me when I speak to her. She has never asked me one Relational Affinity question. Her conversation is about my flat and the OTP I have to sign. She’s in it for the money and from her own mouth “Will you sign this today. You know I’m relying on this sale this month.” What is my stance? – With an attitude like that, I’m hopeful the cash sale will go through quickly so that only the conveyancers need exchange communications as soon as possible. So, you say,”Who cares, she’s got the sale hasn’t she?”. “Sure”, is my answer, “But what happens when I want to invest again; would call her or the other guy?” And what about what we all know about, the cost of acquiring new business versus repeat business from existing clients? It’s really hard to be in the property business no matter what your discipline – selling, bonds, renting, maintenance – and always have to prospect new clients because your sales are transactional and not relational. And, finally, what would my lasting impression be of the major brand? Has she been an ambassador or a destroyer of value?

As sales people, our interpersonal skills are vital to our long-term success. Many of you reading this blog have built relationships over decades and they are flippin’ hard to break if I’m a new entrant. Think of this, the value of your personal brand, You Inc, is probably the sum total of your revenue generating capacity over the next 5 years. That’s right! – it’s measurable; all you need to decide on is what period you can still be economically active. And more importantly, you leave a mark on people. Your integrity, your smile, touch and gestures all add to your value of personal goodwill – not as a bank account, but as a person. I meet old Nedbankers in the Hermanus market that have added value to my life over many years and when I see them, I recognise that immediately. Another example, I’ve just had a dear friend stay with us for a break, and he reminded me of all the good times we have spent together in the trenches of Sales. That’s Relational Affinity of a very high order.

Reflect upon your impact on others. Practice your inter-personal skills.

There is so much more to say and I know the bookshelves are full of appropriate self-help books on similar topics. But think about it, recognise the way you build relationships that last and grow.

In closing, Relational Affinity means “a natural liking for someone with whom you are connected”. Just to say this, Homeloan Junctionappreciates you and holds your business close to its heart. That’s why we keep coming back with a smile and a desire to make your property experiences enjoyable.

 

Yours in Property

RENOVATE OR MOVE?

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Are you faced with the difficult choice of whether to renovate your existing home or to move into a new one? Here are some pointers to help you come to the best decision.

Not enough space?

There comes a time in a home when you start to notice you are running out of space.  You could be falling over clutter.  Your cupboards may be full to overflowing.  Maybe there is another child on the way, or a parent is moving in.  The teenagers could need a living room of their own; or more accurately you need a space to contain the mess the teenagers make!

Not the right space?

Perhaps the opposite is true.  Your children are moving out of the house and you no longer need as many bedrooms.  It would be lovely to make some of the rooms bigger or create a guest suite.  Perhaps now is the time to start an B&B venture and generate some income.

There are many reasons why you could be faced with this choice.  Whatever the reasons, there is much to take into consideration to arrive at a decision.

But I love my home!

For many the decision to move or renovate becomes an emotional decision. Despite it being one of the most important financial decisions one needs to make, the heart can rule the head.  The home you are in may have deep sentimental value for you.  You may want to avoid moving at all costs.

It can be helpful to place your emotions aside for a moment, and to consider all aspects before taking a leap of faith.

Determine the costs

A good place to start is to determine the current value of your property.   Take into consideration your bond amount, the area you are living in, the current trends.  You can compare your property to others in the area, or get an opinion from an estate agent.  There are many free calculators available online to assist the South African homeowner to determine the value of their property.

Now consider the costs of renovation.  This should include the materials and labour that will be needed as well as the fee for the building contractor.  Consider if you will use a designer or an architect, and make provision for the cost of drawing up plans and the approval of plans.  Once you have arrived at a figure, add on a further 10% as a contingency, standard practice for building projects.  A further loan may be the best way of financing this initiative.

The next step is to compare this cost with the cost of buying a new house.  Search the Internet, visit properties in areas you like, meet a few agents; establish how much you will need to pay for a new home. Take into account the costs involved such as transfer fees, deposit amounts, municipal rates and taxes, and the cost of moving.

Is the decision clearer?

Now that you have all the costs involved, you should be in a better position to make a decision.  Will the cost of your renovation mean that you over-capitalise on your current property?  If your home is already one of the nicest in the area, your future loan money may never be recouped.  If your home is in the lower bracket of properties in your area, renovation could make financial sense, and a further loan would be money well spent.

Still can’t decide?

It is not only finances that will determine whether you should move or renovate.  Now is the time to take other things into consideration.  You can do this by weighing up the pros of each option.  Something like this:

Pros of renovating:

  •       You love the neighbourhood
  • You are close to good schools
  • You would love to put your personal stamp on your property
  • You have a trustworthy contractor

Pros of moving:

  • You want to change location
  • You want to move to a different school catchment area
  • Renovation will overcapitalise on your house
  • Moving is less disruptive than living in a building site

On balance, for you, which of the two lists is more convincing?  You should now be in a good position to make a decision.

Can a further loan finance your renovation?

If you have decided that renovation is the way you want to go, you can finance your renovation through a further loan.  This will provide you with the capital you need to implement your changes.

Do what is right for you!

Choose the right option for you and your family.  It does not matter which choice you make; it must be the right choice for you.  And once you have made a choice, implement it.

Your home is your sanctuary.  Take a leap!

MUNEXIT?

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Never heard the word?

Well, BREXIT stands for: Will Britain exit the European Union? MUNEXIT stands for: Will the ANC exit the municipalities of Tshwane, Joburg and Port Elizabeth? One, or two, or all three and/or in any significant proportions?

The lovely thing about democracy is that you don’t know. Many polls have seen the DA and the ANC neck-and-neck but, like the polls that had the world on a high 48 hours before BREXIT, they could be wrong. Then, of course, even before the result, we have the political commentators talking about who would be good bedfellows – the ANC and the EFF, the EFF and the DA or the DA and other smaller parties etc, etc. Finally, there is the talk of the smaller parties falling away from the South African political landscape as the larger parties warn voters that a vote for “small party” means they could not have enough to get into Council but the ANC could have one more proportional vote for their candidates.

Politics is not boring and one thing we know, this is the most important election since 1994 and probably the forerunner of a few “most important elections” to come. The reason? The ANC is fractured and caught between reason and the President – it’s centre, so critical to political power in any party, is cracking. No attempt to heal the rift has been successful and they are now dependent on a massive show of support in Gauteng even as I write.

On 31 December last year, Clem Sunter gave us 10 Flags to watch this year. A number have been playing out in global economics and politics. Very interesting that BREXIT wasn’t mentioned but SA Elections 2016 was. Here are the Flags and I’m sure, in no particular order of importance:

  1. The oil price [into the $30’s, back to $50 and now early $40’s [and I read to day the mega-oil companies are making mega-losses whilst the over-supply continues]
  2. Global temperatures, floods and droughts [we have not been left unscathed]
  3. The US Federal Reserve Bank [read: “US interest rates”]
  4. The Chinese economy [who could ever forget those January collapses in the Chinese stock market where falls were faster that the “close the market” stop-losses could trigger in?
  5. The war in Syria [Europe has changed for many, for ever]
  6. Vladimir Putin [“Mr Putin is a strong leader who wants to restore the superpower status”]
  7. The American presidential election [Donald is chosen but Ted Cruz won’t even endorse him and Hilary may be sanctioned before she even has a chance to run – amazing]
  8. A global pandemic [the Vika virus hasn’t just concerned the Pro golfers and antibiotics failed to heal a person in the USA this year – all’s gone very quiet]
  9. The municipal elections in South Africa [THE FULL STORY IS RETAINED, FYI]

“The results of these elections will indicate to what extent all the controversies of 2015 have affected the popularity of the ruling party and its leadership. The flag is not just about the percentage of the votes that each party receives, but the total turn-out too in terms of judging the outcome of the next general election. Meanwhile, the Rand/Dollar exchange rate remains the best indicator of the world’s take on developments in South Africa: whether we are consolidating our position in the Premier League of nations or meandering downhill into the Second Division.”

So there you have it, little ol’ SA gets into the List of 10 once again. We certainly do always box above our weight!

The one thing we cannot do is debate the stats when it comes to well-run municipalities. The DA runs the greater majority of them in the Top 10. More importantly for this blog, is what happens in well-run municipalities is that property prices rise. In fact, I would stick my neck out and say they rise at a level greater than the national rate over the long-term – that’s a dead cert in Cape Town. Probably the reason is simply that people want to live there and are prepared to “pay up” to do that.

That said, the most recent [June 2016] House Price Indices of the banks have been an interesting read:

  • According to ABSA, the Middle segment has shown the most resilient growth dropping from 6% in February to 4.9% in June 2016. Overall house price growth so far this year has been 5.7% and points to a negative growth of between 2 and 2.5% in Real house price growth for the year.
  • FNB remains quite positive. “…….little cause for concern at levels of financial stress” is the way John Loos expresses his introductory remarks in his Mortgage Barometer of 19 July 2016. However, he goes on to say that their Household Debt Service Ratio is “under pressure”.
  • Standard Bank is somewhat of an outlier but one needs to bear in mind the different ways banks measure house prices. They record house price increases at 7.3% due to the fact that credit extension by the banks remained robust for longer than expected.

A recent report from Homeloan Junction shows that volumes of Applications for bonds have remained resilient and even better than last year. That’s an excellent statistic and well done to the Team! 

 

So, why the interlude around the house market and its prices? People like to live in safe, clean environments. They like their kids to go to school in well-run establishments and when sick, to be cared for in sanitized, proficient hospitals. Doesn’t that sound like you and I? It’s true as well that the only way we can influence the current status of these facilities, is by using our vote. Never mind the conjecture about the ANC, the DA, the EFF and the Small parties, all we can do is put our “X” where our conscience leads us. What an act of utter individualism, what personal power with responsibility. Once every 4-5 years, we get to change the world; well, at least the one in which we live. How fascinating the process and how knife-edge it has become for some leaders!

May 3 August 2016 ushers in the local government we deserve as citizens of this beautiful, tortured country. May White and Black, Coloured and Indian, every valid citizen, go to the Polls en masse and vote with reason and conviction. No greater truth exists than that property is more valuable in well-managed municipalities. And the choice of who manages our towns and our Provinces is solelydriven by our vote.

As for the process and the outcome, we will know by next weekend how things have gone. What then follows is anybody’s guess. But, to return to Clem’s 10 Flags blog, a closing thought for you, our friends in property:

“If you are a pocket of excellence, you will thrive irrespective of how 2016 pans out and which scenario is in play. Foxes adapt and win!”

Yours in Property.

Jack

BREXIT OR BREAKIT?

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Today’s blog is not scientific and will refer to little of the volumes that have been written on the subject of BREXIT. It’s just from the heart and a view of many things.

This much we do know – little of major significance in the world does not affect us on the Southern tip of Africa sooner or later and BREXIT is of major significance.

When last did you see the British Pound in the R18’s?

When last did a UKP asset like INTU [the Earls Court redevelopment] drop R17?

When last did the Pound not behave as a Rand hedge?

Well, the answer is when Britain decided to regain its independence.

I guess David Cameron will be known as the Referendum Prime Minister. Scotland decides to stay in the UK convinced that England would remain. Then the UK vote with a massive Scottish “remain” vote and the “leaves” outgun the “remains” by 1 million votes. Democracy has her day and the Scottish now want to re-vote for their independence and ties with the Europeans. What a see-saw!

Richard Branson admits his wealth collapsed by one third. Every property bought by South Africans over the past few years drops in value. Threats of recession, succession, and procession abound. Party leaders resign, and the world markets collapse. Big “remain” activists like Boris Johnson retract from the Conservative’s leadership race and, wait for it, the leader to be announced on 9 September 2016 will probably be a woman – watch out the Falklands, here comes Maggie Thatcher the Second. I think it’s going to take a woman to give effect to the succession from the EU – firm, fair, determined, iron fist in a velvet glove and most of all, charming, disarming and intelligent – great trade deals without the encumbrances of the European Parliament which has been costing billions of UK Pounds per annum.

So why does this entire hullabaloo affect us here?

First, it creates uncertainty which rattles the markets and stalls investments. Nobody likes uncertainty and the sense of being out of control. That’s the reason the markets collapse so dramatically in the face of a seismic [heard the word recently?] event. If the future is not seen as what it was, the market isn’t going to be what it was. Only those shorting currencies and stocks like volatility; the rest of us mere mortals want to know our pensions are safe. One reason why SA is so affected, or, affected like the others, is because we are so damn good – our communications, share trading, competencies and connections – both people and systems – are world class. In addition, we have limited foreign exchange controls so money moves freely and without cost, only controlled by exchange rate fluctuations. In many respects we remain a free market and that wins us many accolades. So certainty isn’t certain when you box with the world money flows.

Secondly, attention moves from Emerging to Developed markets. Developed markets, like your real, big brother, are the authors of knowledge, stability, reason and rational democracy. The biggest joke for me are those people who confess to voting “leave” just so that their leaders understood that there were some real issues with Britain and EU. Goodness me, how can you toy with the rest of the nation and think that your resistance vote would be lost to history – what a shock when you find the next morning that 16m other people actually wanted to succeed from Europe and didn’t care what the world thought of it! So, another Developed market causes eruptions to the common Man across the world. As if sub-Prime was not enough, we now have England threatening recession, according to some. And on the other side of the Atlantic, Donald Trump is taking on more and more meaning to the common Man of America. Love him or hate him, he has read a sense of nationalism and dis-integration in her people that he has harvested for the right to lead the Republicans into this year’s elections. One more Developed country is looking shaky to its core as her people grapple with “in” or “out” – this time, of the world. Then there are the Emergents – a big, little group of nations that are highly influential together in World affairs. Some of them, like Brazil, fast becoming a mess where there’s enough money and glamour to host an Olympics but not enough to kill the Vika virus. Then there’s Russia that seems to be flexing its muscles in many ways and directions. Great little nations economically, some of which are busting a gut to be good exporters to the Developed nations and many still succeeding to do so. To state the obvious for our beautiful Land, you really don’t want to be an Emergent country at this time and have a leadership that doesn’t have character and direction for the nation.

Thirdly, this too will pass. Let’s say that again: This too will pass. The markets have rebounded and taken stock of their over-reaction. To be specific, INTU has come back 10% in a week. This too will pass for South Africa and whilst we enjoy a little respite in the Rand/UKP exchange rate, it too will rise. Will Britain plunge the world economy into recession – no, I don’t think so. If the process of extricating itself from the EU takes two years, it could take 5 years. Five years to open up new opportunities, renegotiate new terms, save billions, have new countries come direct and avoid trade barriers. Can you really see London filled only with red-cheeked Londoners without the cosmopolitan hue of every other country’s populace walking in the streets? Can you really see London’s financial district being allowed to become a ghost town? I don’t want to sound trite, but England, with or without Scotland, will survive and prosper and recover her ability economically if she has lost anything anyway. What is important in all of this is that people understand the global village and our inter-connectedness as nations. Boundaries are the institution of countries and treaties, the right of people to move is nearly inviolate. South Africa has learned this lesson and will continue to learn it as long as Africa sees we have more to offer – good or bad, I prefer not to comment –  but will it continue to happen? Absolutely! Such is the British and European reality.

There is so much more to say. We will experience some discomfort but hopefully in our presently well-managed economy, the bad will be offset by some strengthening of the Rand and a lid put on the fuel price, for instance. But nothing can take our focus of the national imperative to create growth and jobs for our young people through good education and unrestricted opportunities.

Remember to control what you can and stop worrying about the rest – all the worry in the world could not reverse the BREXIT decision so put your head down, keep your eyes on the road to property sales and be all you can be; a role-model to those who know and respect you.

Yours in Property.

DOWN TO GRADES

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So what do we say, South Africa?

Against the backdrop of S&P’s “steady as she goes” decision, we have won a reprieve. That is until December 2016. Remember, we still have Fitch to come and if I was a rumour-monger, I would say they exited SA early this year in order to deliver bad news from afar.  But, that would be churlish as Rating agencies are particularly circumspect before they deliver judgements upon economies, especially those that result in sub-investment grade. As I recall we will have their decision within a month.

Who’ve we got to thank? Not Boland Bank but two institutions. The one is Pravin Gordhan and his Treasury team who must have done an amazing job in the past 6 months to avert a certain downgrade. Recovering from Nenegate, straight into Budget 2016/7, navigating Guptagate and all the speculation around it and then walking through the fire with the Hawks and their implication. What a feat for Treasury to whom we owe a debt of gratitude.

The other is Business. Thank goodness that in December 2015, they rallied around the change of mind about David van Rooyen and began what may prove to be the best Public Private Partnership [PPP] in our modern economic history. The teams that volunteered to work with government must have laid the ground for solid feedback on growth, labour and jobs to be positioned with S&P. Who knows but that in these early stages, we are not laying the foundation for progressive growth targets with the necessary compromise between Labour and Business so as to achieve meaningful employment in the balance of the year and beyond?

Of course, there were those of us [even me if I’m honest] that wondered if we could avoid the downgrade. On the back of Friday the 3rd’s news, many have said, “Well, we still have to get through December”. Let me tell you, if you had given me “stay as you are but prove yourself” as an outcome on Thursday, I would have taken it with both hands. We can face Fitch with new confidence and assuredness that we have the presentation, the evidence and the support to remain as is and work forward.

The great thing now is that we have a fighting chance. And we can come out on top. Many have referred to the Social Compact and this era could be the very galvanization that we need to find Government, Labour and Business around the table.

One thing we know is that we trade in Hope and its cousin, Confidence. With a market happily over 54000 and a Rand smilingly below R15, we have early stage Confidence. For you and I in the property industry, Confidence = Sales.

It’s a short, sweet note, this blog. Let’s hope Fitch is convinced we have the teams and mettle to improve and the wisdom to focus while we vote. Then they leave us “as is” to get on with being better by yearend. And with that decision made, that our market enjoys a fillip going into the 3rd quarter as we shrug off the negativity with a sense that all will be well.

Wishful thinking or Reality? Like Ford said: “If you think you can or you think you can’t, you’re right.” Let’s trust we’re going to surprise ourselves. And in any case, surprize yourself in the second half of 2016.

 

Yours in Property,

Jack Trevena