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THE LAST BIG THING

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I have a friend who uses the term: The Next Big Thing,  quite often. It intrigues me as a concept.

However, the Last Big Thing is what I’d like to discuss quite briefly today.

In our previous blog I surmised the possibility that rates, both here and in the USA would remain the same. They did. I wrote:

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.

I was correct on the rates so the question now remains whether affordability will improve over the medium-term. That we shall see.

But this matter of stable interest rates is certainly “the last big thing”. In the USA, it means that the Federal Reserve is concerned that should they raise the rates they may snuff out the growth they are enjoying. This is double-edged – on the one hand the cost of debt remains stable and historically low. But, on the other hand, it implies that the FED is concerned that growth is not vibrant and could be nipped in the bud.

As a result, the stock markets react quite negatively to the news. In fact, they rise when the oil price rises as historically, this has meant higher demand from industrialized nations. In the old economies, prior to Sub-Prime 2008-10, a rise in oil prices predicated a rise in interest rates as economies were growing and inflation needed to be tempered. These days, the oil price is driven more by Saudi Arabia deciding on production levels – at the moment these are creating an oversupply.

As regards rates, Quantitative Easing [QE] [read: printing money] is driving the interest rate discussion. In a recent article I read, in the USA $3trillion of QE has occurred and still the economy is sluggish. This is a quandary for the FED and hence the reticence to raise rates. Bear in mind that whilst we talk about America, there is hardly a leading nation that has not QE’d their way out of Sub-Prime. Some described Sub-Prime as a seismic shift at the time [as they have recently also described Brexit]. Fact is, it was, and the hangover still remains. One good thing for us is that the US$ is a little weak and so that helps us in our imported inflation, especially the cost of Oil.

So what does The Last Big Thing mean to us in South Africa?

  1. We can enjoy the respite of, at least, stable interest rates.
  2. We continue to enjoy relatively inexpensive fuel.
  3. Our inflation rate is under control.
  4. We allow ourselves a little headroom to accommodate our poor politics.
  5. We gain from commodity prices wherever these occur and enjoy coming off very low bases.
  6. It helps with further unemployment.

Downgrade risk aside, our real problem is the long-term effect of Zero growth. In my memory, I cannot remember when we have endured such a long period of <1% growth whether the higher rate of growth was organic to our economy or induced by the intervention of Financial Authorities. But in the meantime, volumes of homeloan sales are performing relatively well compared to last year whilst house price increases are slowing. My Affordability theory is therefore still possible. Not a bad place to be under the circumstances.

I guess, all said and done, it’s going to come down to our attitude, commitment and hard work. Homeloan Junction may understand the economic situation but refuses to comply with its rules. It reminds me, many years ago in Nedfin Bank we had a saying in recessionary times: “We have heard there’s a recession. We refuse to take part.” There isn’t a recession in South Africa but even if there was a sniff of it, Homeloan Junction refuses to take part.

Yours in Property

NEARLY TIME TO REVIEW THE HALF-YEAR

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Can you believe it, the year is far advanced. And what a year it has been with probably the only gorilla in the national room being the arrest of our Minister of Finance. So far, everybody has confirmed it is not going to happen so let’s rest with that knowledge.

One of the reasons he would be hectic on government business is the soon-to-be rating by Standard & Poor which is due to make its decision on 3 June whether to downgrade SAInc to non-investment grade. The jury is out on what this could mean for us. For instance, PSG is buying Bonds because it believes the bond yield has discounted the likelihood of a down grade whilst RMB has surveyed it’s leading clients and decided the re-rating would not have a deleterious effect on the market. Moneyweb Today is reporting that the re-rating will have a dramatic effect on shares, quoting Standard Bank, and up to a 60% decline in value with a dragged bounce back over 12 months. Chris Hart, ex-Standard bank economist, is stating that under a particular set of circumstances, the Rand could collapse to R60:1US$. What a see-saw of opinions!

On the positive side, the SARB decision to hold rates was interesting. The view is that Inflation won’t stay out of the target band ie above 6%, for as long as expected. So they held the rate. Surprising to me as my sense is that that Rand will drop after the S&P re-rating and would have needed an interest rate hike to protect it. I still expect 2% this year and we are some 0.5% away from that point. You may recall that I called 2% against the general consensus of 1-1.5% for the year. Certainly I see the next 0.5% being inevitable. However, let me make it clear that I don’t believe the rate hikes are good for anything other than the protection and stability of the Rand. We simply cannot afford high interest and low growth but, if I was to choose between a devalued Rand and high inflation or raising interest rates, I would raise rates. Another point to remember is that S&P look for sound monetary policy and the independence of the SARB especially at these times – all of this is being demonstrated.

Assuming all the information above, where is property at?

 

  1. Prices continue to rise slowly but, surprisingly, real price rises around 0% are occurring. Why “surprisingly”? Well, we expected negative real growth in house prices and the figure is better than expected. Good News! What is interesting according to ABSA at end-April was that the affordable segment is performing well and pushing up the average. Their think is that down-buying [the tendency to buy a smaller house that you know you can afford] could be creating price resilience in the lower market. My sense is that government employees can afford these houses and are wanting to enter the property market.

  2. The rand is under strain whichever way you cut it. If that is so, building prices will rise and new houses will become more expensive that existing properties. That will push the price of houses in all sectors. By how much, I do not know but it is good news for ad valorem money earners like estate agents.
  3. The issue is affordability and this is driven by two things: Employment and Interest rates. Employment, whether it exists/remains and the stability around “my job” lends confidence. If rates are rising [and this must be a dead cert], I question my ability to afford a bond. The move earlier in May by the FED to hold back again on a rate increase in the USA coupled with our decision last week to hold fire is cause for positivity but we must accept rates will tend to rise – we’re in such a cycle. Rates rising has a mathematical impact on affordability but if I’m unsure about my job, I lack confidence to buy in any case. As a knock-on, that affects even my willingness to sell. The nutshell of this is that sales will be slow.

  4. The downgrade is possible and imminent. We really don’t have long to wait. I want to be with those who believe it will not occur; my heart is there. My head says it is inevitable. Unless PSG is spot-on, it will raise the cost of borrowing for government, decrease the value of shares and dent the Rand. None of this we need at a time of slow growth and drought. It will make us feel poorer before the markets rally back over a year. Let’s raise our genes of faith and trust for the best outcome for all our Peoples.

My best advice – Know what you can control and work hard at it. Rest with what you can’t control and allow things to take their course. If you really do have money to buy offshore hard currency then do so.

 

Yours in Property

Jack Trevena

What’s Trending In SA Property?

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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.

STEADY AS SHE GOES

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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

INTEREST RATE REVIEWS AND THEIR IMPACT ON OUR HOMES

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A very interesting week last week. Two interest rate reviews, one up and the other, sideways.

But before we think about the effect of this on our home and homeloan businesses, here’s a quote from Ayn Rand to encourage you:

“In the name of the best within you, do not sacrifice this world to those who are its worst. In the name of the values that keep you alive, do not let your vision of man be distorted by the ugly, the cowardly, the mindless in those who have never achieved his title. Do not lose your knowledge that man’s proper estate is an upright posture, an intransigent mind and a step that travels unlimited roads. Do not let your fire go out, spark by irreplaceable spark, in the hopeless swamps of the approximate, the not-quite, the not-yet, the not-at-all. Do not let the hero in your soul perish, in lonely frustration for the life you deserved, but have never been able to reach. Check your road and the nature of your battle. The world you desired can be won, it exists, it is real, it is possible, it’s yours.”
– Ayn Rand

On 28 January, the Monetary Policy Committee of The South African Reserve Bank [SARB] announced an increase of 0.50% in the Repo rate, which will result in the Banks’ Prime lending rate increasing to 10.25% with effect from 29 January 2016. This was the first interest rate review mentioned above.

A few comments:

  • I heard a leading economist interviewed this week and he would not be drawn into quantum of the interest rate hike in 2016, whether 1 or 2%, but he did make the point that it would be well considered and managed.

  • I did stick my neck out in the last blog and say 2 % this year as I feel the Rand and inflation will have the final say on how much.
  • As regards the Rand, it was wonderful to see it pull back; from the mid-R16 range, to about R16.26 to close around R16.18 on Friday. So the market was factoring in a significant rate hike on Thursday and got it.
  • We are between a rock and a hard place with the interest rate. From a growth perspective, we cannot afford rising rates. Both indebted business [Employment] and consumers [Affordability] will find the going tough. Harming either constituency will harm the country. Sadly, though, with the Rand slide by about R3 from R14 to R16 (and as high as R17) to the US$, Inflation will rise. The 6 tons of Maize being imported does nothing to improve the situation. Last year, Inflation averaged 4.6% and in 2016, is expected to average 6.8%. The SARB target range is 3-6%.
  • Remember, absolute versus relative maths. “Only 2.2%” does not seem like much Inflation, but it is 48% [2.2/4.6*100] more Inflation than in 2015. In turn, the 0.5% rise in rates is not “just half a percent”, but forms part of a 1.75% rate rise off the lowest base, 8.5% on 20 July 2012,  since 15 November 1973 [See the Chart attached] when it was 8%. Therefore in relative terms, the cost of interest has risen since July 2012 by 21% in three and a half years. That’s a lot more interest being paid.
  • The process is being well managed and is simply unavoidable. The SARB has done the responsible thing and protected the Rand exchange rate which has been in a mess even before El Nene given Emerging Markets battling a very strong US$. By the way, a stable exchange rate to all major currencies is one of the core functions that a Reserve/Central Bank executes. In addition, if our Finance Minister has any chance of staving off a Non-investment grade rating by the Rating Agencies, he is going to need a strong, independent SARB doing what is right for Inflation. Also, by the way, his fight with SARS is also very important as they need to collect the revenues in order to keep Government stable. In the absence of efficiency in SARS, taxes will go up much more in February.

So, to sum it up, the rate rise was good for SA Inc, Inflation and the Rand/$ exchange but bad for Debt users. Overall, probably unavoidable after December 2015. I sincerely hope my 2% rise (1.5% remaining) proves very wrong for us. Watch the Rand, Inflation, the Drought and Oil.

With less detail, the US FED decision to retain the US interest rate where it is was is also them saying they do not want to dampen the US economy. That is really good news as:

  • The stock markets accepted that as meaning the US economy remains strong enough for about 2% growth in GDP. Hence the global markets rallied somewhat.
  • That fact makes up for China and provides them some headroom to work through their issues.

So, overall, a good week for rates in a fragile environment.

So what about us, you ask?

FNB put the house price rise for 2015 at an average of approximately 6.4%. that would give a real price rise of almost 2% after Inflation. ABSA, in their January 2016 synopsis expects an approximate 5% rise in 2016 and this will result, as we can expect from the rise in Inflation, in approximately -1.8% decline in real house prices this year. They quote a number of factors but the one that would concern me the most is weak Consumer Confidence. But please remember, the reversal in the real house price growth rate is because of the large increase in inflation and not necessarily because less homes are being sold.

That means that house prices will continue to rise so the question then is:

–        What volume will be sold?

–        How much of that will I, as the estate agent/principal, sell?

My sense is that less houses will be sold this year and the affordable homes will continue to dominate sales. My reasoning is simply that affordability will be affected by higher interest rates and Inflation will eat away little by little at our disposable income. I expect some tax increases but I’m not sure if the Finance Minister will target the rich or make them across the board. I don’t think VAT will rise as it is just too sensitive – we’ll see.

The last question remains yours to answer. When all the pundits have had their say and I have written mine, you must decide if you are going to list less, show less and sell less. That answer remains with you and your energy and enthusiasm. Believe all you read and internalise it, and anyone could predict your outcome – sales will slide.

Read it, think it through and find the way around obstacles with optimism and determination, not letting  the hero in your soul perish, and you will enjoy success. Check your road and the nature of your battle. The world you desire can be won.

Homeloan Junction has made that decision and will be there to support you in yours.

Yours in Property.

Jack

What will my monthly bond repayment be?

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Budgeting in general can present major headaches for people but a bond repayment calculator, if used correctly, could help to ease the pain. Coming up with a realistic budget — whether for the purchase of a new home, or for the necessary control of household and monthly expenses or the entire expenditure plan for a whole country — can bring its fair share of headaches, even when you know it will be implemented in the most skilful and savvy way. So, don’t feel disheartened: you’re not alone if you’re facing the tiresome task of working out your budget.

If you’re planning on buying a house, you’ll need to know how much you can budget to spend on the loan each month. And you’ll need to know this before you go house hunting if you want to avoid disappointment. Imagine spending valuable time finding a dream home, only to discover that it is out of your price range! Luckily, Homeloan Junction offers you a simple, online tool to make this easier for you. Try their free bond repayment calculator to see if you can afford the house you love

How a Bond Repayment Calculator Works

When you are shopping for a new home, the last thing you want to discover is that the amount you thought you could afford is actually quite a bit different to the amount you can realistically afford each month. It’s best to find these things out before you go charging headlong into the process – and certainly well before you sign any Offers to Purchase.

Nowadays you can explore your options in the privacy of your own home, with the help of a bond repayment calculator. Having the benefit and independent use of an accurate bond repayment calculator in front of you, can help you create a more realistic assessment for the way forward. Remember, when you make your calculations, it is important to take into consideration that financial circumstances can change, so be sure not to stretch your budget too far.

Go ahead and test the bond repayment calculator tool on Homeloan Junction’s website. You’ll see that in less than one minute you will be able to quantify the amount of the bond you are eligible for … and the amount you can realistically afford.

Easy-To-Use Bond Repayment Calculator

You also have other calculation options over and above the bond repayment calculator available at your fingertips. With the useful calculators on the Homeloan Junction website, you can work out how much you will be able to afford to pay, you can project bond and transfer costs, and also work out how much you could save on interest with a bigger deposit. The website is well-optimized which means you’ll experience no problems with speed, and you’ll have the answers to your questions in a few minutes. Also, the calculators are simple to use.

Whether you are working out a budget that includes a new bond or re-evaluating the way forward with existing bond repayments, after spending a few minutes with these versatile tools you will soon see that they are quite easy to navigate and apply to your own, individual needs.

Save More and Pay Less

The most successful and accurate assessment of how much you can afford on a homeloan will come from thoroughly doing your homework. Don’t stop once you’ve assessed how much you can afford to pay as a monthly instalment, research as much as possible about the methodologies that can be applied to see you save more and pay off your bond in the shortest period possible. Banks in general are happy to see you stay with them for longer; after all you are generating streams of income for them. But will this really work for you?

A successful trick is to pay off your homeloan over a shorter period, but this entails a disciplined approach. Prioritize this expenditure and also seek new ways to add a bit extra to your repayment schedule. This is another reason to keep your budget realistic – give yourself the option to pay more into your mortgage each month, allowing you to save more and pay less.

Do you need assistance in determining your ideal homeloan amount? Even if you have used the useful bond repayment calculator to find out how much you can afford, you can also talk to one of the qualified and experienced consultants at Homeloan Junction to help you make accurate assessments.

South Africa can be very proud of its property industry

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I was having a look at the ‘net and came across this headline: SA property sector worth R4.9-trillion

I know, I felt like that as well: So much property and so little in my name. It happens to all of us!

But, that got me thinking about our country and the industry…………

The South African property industry is significant in many respects:

  • Property rights are secured in our Constitution and we trust that it will stay that way.
  • The Deeds Office nationally is functional and does relatively well in securing our property rights as well as the rights of our financiers.
  • Our property law is well established and we produce outstanding conveyancers and property experts in many fields of the property market.
  • It is very well managed with a number of globally competitive property funds that own significant amounts of property on behalf of shareholders.
  • Our estate agents are highly skilled and requiring of continuous training and development in order to stay at the top of their game. Estate Agencies, are widespread and whilst the large franchises dominate, there is still room for the smaller business owners to ply their trade off the back of excellent exposure and/or relationships in their community.
  • We are building property across the spectrum of requirements, from the poor to the aged and up to the rich. Whilst the process could be much better, developers are getting access to land, and we hope ever-improving, to electricity which was a real issue a few years ago.
  • In our cities we have leafy suburbs and our own “Hollywoods” and, by and large, we live safely though behind some very high, secured walls.

 

Not a bad situation to be in as a country. Yes it could be better, our cities could be better managed in key areas of delivery, our poor ramshackle areas could be revitalised and our informal settlements are a blight on us, but it is probably fair to say that we have a good property industry overall. In fact, I would be prepared to call it a significant and contributing national asset.

The CEO of the Property Sector Charter Council, Portia Tau-Sekati, presented excellent research to the industry in September. The sector contributes significantly to the country’s economy and in 2009 comprised 8.3% of gross domestic product (GDP), according to a South African Property Owners Association research report entitled “The economic impact of the property sector in South Africa”.

According to the Charter Council’s study, only 1% of the country’s land is urban and residential, about 73% is natural pasture, approximately 12% is agricultural and the remaining land is comprised of conservations and reserves. Two-thirds of the property owned in South Africa is residential and worth R3-trillion, while commercial property is worth R780-billion. Undeveloped land that is zoned for development is valued at R520-billion and publicly owned property, including national, provincial and local government and state-owned enterprises, is worth R570-billion.

“Retail property has the highest value of the commercial property sectors in South Africa at R340-billion, followed by office properties at R228-billion and industrial properties at R187-billion,” the Charter Council reported. “Representing a small comparative value of R25-billion is hospitality, leisure and ‘other’ property.”

According to SAinfo reporter, the study will be an annual one and the Charter Council aims for it to become the benchmark against which progress in the industry is measured. “The study is a useful tool for understanding the South African property market and its dynamics,” Tau- Sekati said.

To read more go here.

I make my point again against the backdrop of this recent and defining research that South Africa can be very proud of its property industry.

Against this backdrop, the SARB’s decision to hold off on an interest rate hike late last month augers well for the industry. Inflation figures will be announced today [19 October 2015] but are expected to remain within the 3-6% range so no serious danger there. Of course, the whole world seems to be waiting for the USA rates decision and we have the unfortunate matter of the weak Rand, ostensibly because of the US$ strength. There is no doubt that the SARB decision, as much as it would like to raise interest to protect the Rand and still inflationary fears, is set against the context of South Africa’s dismal economic growth. That will probably be revised to a 1.5% forecast but it is, at best, hovering unacceptably low.

John Loos, FNB’s Property Economist, speaks to the interest rate and makes valid points as usual. Firstly, a gradual rise in interest rates prevents any need to over-react later and keeps lenders and borrowers cautious. Secondly, he makes the point that lending does not grow the economy but only productive lending does that with any sustainable effect. Finally, he states the obvious that we all need to hear: Indebtedness is not good for our economy [and back pockets] and we should use the low interest rates as an opportunity to reduce our household debts as quickly as possible.

According to Private Property, Cape Town has the most exclusive properties and precincts of incredible value. Private Property, quoting Lightstone research, reports, “Cape Town may not be the financial epicentre of South Africa but it continues to dominate the list of most exclusive addresses and data has revealed that the Mother City lays claim to three of the five most elite addresses in the country. According to the Lightstone research, the most expensive street in South Africa currently is Nettleton Road in Clifton, where the median price for houses is R27.1 million, followed by Glen Beach Road in Camps Bay with an average house price of just under R24m. Head Road in Fresnaye takes fourth place with an average selling price of R21.44m. Sandhurst in Johannesburg scoops third and fifth places with a median sale price of just under R25m in Coronation Road and R20.76m in Rivonia Road. In the list of most expensive addresses in the Western Cape, not surprisingly, four of the five most pricey are situated on the sought-after Atlantic Seaboard, with fourth place taken by Eastcliff in Hermanus.

Lew Geffen says: “The upswing on the Atlantic Seaboard started in 2002 when a property in Chilworth Road in Camps Bay sold for R23m, but the demand for luxury homes really began to peak 2008 when 13 properties in the R20m plus price band changed hands to the combined value of R414.193m.”  “In spite of the credit crunch which hit in 2008, property values on the Atlantic Seaboard have continued to grow exponentially and now it is not only home to the most trophy properties in South Africa; it also fetches the highest price per square metre.”

Closing on this article, Cape Town may be home to the most luxury properties in South Africa, although data from New World Wealth shows that Johannesburg still has the most Dollar millionaires in the country.

So there you have it, Cape Town has the properties and Johannesburg has the money. Like Homeloan Junction’s excellent service, some things never change.

Yours in Property

Inside Tips on getting your homeloan approved first time

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Let’s face it, particularly in the South African context; securing a homeloan in order to purchase your first home can be quite scary. Do you even qualify? Most men and women dream of settling down and starting their own family and to have their very own home in which to do this. The bad news is that the challenges of meeting the criteria as a first-time and successful applicant have increased. Does this mean you won’t qualify?

Here are 5 insider tips to help you to secure the homeloan that will help you buy your dream home:

Tip #1 Create a Record of Good Standing
Many first-time applicants have had their home loan application rejected. Why? The problem lies in the fact that young applicants have no credit record and history of their ability to pay promptly and consistently. So, in spite of having saved for a deposit with the bank, you may not be able to secure that homeloan simply because you have no other loans. Before making an application, spend some months creating a good credit history by paying smaller loans on time, like your cell phone or clothing accounts.

Tip #2 Generate Financial Discipline
While the country’s leading lending institutions and major estate agents warned against this, the government under Thabo Mbeki was determined to and ultimately succeeded in relaxing credit access rules and lending criteria. There are two ironies in this. One; Mbeki’s Minister of Finance (who did not have jurisdiction over these rulings) was openly opposed to the relaxing of previously prudent credit rules. Two; while the banks were initially sceptical when the laws were quickly passed, they obligingly processed new applications and granted them. This proved to be a disaster waiting to happen. The trick is to have financial discipline – don’t accept just any offer of credit. Make sure that you can afford the repayments first. This way you won’t be in any danger of being blacklisted.

Tip #3 Make Formal Inquiries with Home Loan Junction
Today, the homeloan application process is relatively simple and straightforward, and most South Africans with access to computers, laptops, mobile devices and the internet, can self-test while completing a pre-application. Correctly, banking criteria still prefer the first-time applicant (or any applicant for that matter) to make a formal application and ideally with one of our officials in person (although the application can, in certain instances, be made online). Invariably applicants are reminded of, or advised on what records and documentation are required to make inroads towards a successful application.

Tip #4 Ask About Options and Opportunities
In reaction to the disastrous effects of the relaxation of credit lending criteria, the government initiated new legislation which saw the founding of the National Credit Regulator which essentially acts as a watchdog for both clients and lenders. This has also made the homeloan application process more difficult for many applicants. But, today there are still companies, particularly new entrants to the personal and home lending markets, arguing in favour of more flexible, merit-based and opportunistic rules. Their argument is sound because if more people have access to credit within the parameters of properly regulated checks and balances, of course, the country benefits economically as a whole.

Tip #5 See What You Can Afford
Let it be known that all is not lost for new applicants. Homeloan Junction leaves them with some clues on how to go about securing their homeloan successfully. As a bond originator and not a traditional lender, We promises a speedy delivery of services ideal for helping you plan ahead of time. The emphasis is also on savings and tools which are available online to help you assess affordability and whether you qualify for a first-time loan. We also offer innovative alternatives to traditional bonds which could see you paying far less in the long term and also paying off your loan over a shorter period of time.

Tip #6 And Learn How Much You Can Save
For more information on whether you meet all criteria and what you can do next, you can contact Homeloan Junction directly online. Our service and advice is free.  Blog posts on our website have important information on what influences first-time home buyers.

In view of all the challenges, expectant applicants should have realistic objectives. With enough information on the home buying process, and with online calculators at their fingertips, there is no reason why South Africans cannot plan and succeed in buying their home at their first attempt.

Part of our service entails good advice based on experience and qualifications. Talk to Homeloan Junction today about how you can successfully secure your loan. We have contact with banks and conveyancers and knowledge of the products, and various credit terms available to advise you of all the options which will best serve your requirements.

How better to serve your needs than to approach a company who will, on your behalf, motivate and negotiate one of the most important deals of your life? Homeloan Junction is a one-stop service complete with efficiency and convenience at the tips of your fingers.

Yours in Property

TO ACCOMPLISH GREAT THINGS, WE MUST DREAM AS WELL AS ACT

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individual or firm; they are not more important or less important. A friend of mine consults to a coffee company. They have the opportunity of cracking the Retailer market [high turnover, low margin] or of rolling out a franchise of brilliantly branded coffee cafes. The first strategy looks powerful on paper, but the second, by far less in turnover, makes more money. Interesting for the entrepreneur because he physically can’t do both. He is faced with goal prioritisation and then goal optimisation as he executes. Poor goal clarification can lead to a “straddled” strategy –  attempt to do everything and, whilst I may not fail at everything, I don’t optimise outcomes as I could have if I was focussed. In the book by Ashbury and Ball, The Winning Ways, they quoted Meyer Kahn, then-CEO of SAB, as saying he just did one thing every year. Sound seriously simplistic, almost childish. But you see his goal in those days was to internationalise SAB and become the biggest brewery in the world. His business managed 2nd and anyone who has SAB shares knows what’s happening right now as Anhauser Busch moves to acquire SAB, gain and African footprint, and be by far, the #1 brewer in the world. So your goal needs to be owned and communicated as the most important thing you need to achieve. If not, beware the new year resolution quandary.

  1. Bringing the resources to bear

In the course of establishing milestones or, in other words, laying out the journey of the Plan, you would have given thought to what it takes to achieve the goals. Apart from the caveat that entrepreneurs often take big risks, knowing what it requires to take on your goals is fundamental to Execution. Early January, you will begin committing resource to your Vision and its Plan. In the coffee example above, the owner needs to employ a Financial Manager without whom his tax, debtors and quick expansion could vaporise his business. A friend of mine taught me that businesses fail for two reasons: Success and Failure itself. Whatever the latter is you will understand, but the former is harder to comprehend. Success, and what the bankers call Overtrading, goes hand in hand. You may need new staff, more staff, new offices, more offices, more cash resources, more marketing, more stock – whatever is “more” could lead to unsuccessful Execution. From observation, Success fails even more conspicuously than Failure or, put another way, it’s just a bigger mess. So dedicate the resources that you have to the top priority goals and don’t overstretch them. Getting “one thing” done properly is more important as you build success than attempting everything. The only antidote to inadequate resources is clear prioritisation.

And, by the way, for many estate agencies, the most vulnerable resource is the Principal – You. Stretched too thin, you cannot execute optimally. You may put in the effort but something is bound to fail – your health or relationships, for example. You’re human so pace your ability to Execute as if it is a scarce  resource. By doing so, you may avoid much disappointment.

  1. Management control

I often think that this management discipline is the most neglected of all. In 1916, Henri Fayol laid down 5 functions of Management which were condensed over the years to four: Planning Organising, Leading and Controlling. Let’s face it, by the time you’ve done the first three successfully, the fourth seems redundant. Nothing could be further from the truth and, I would go so far as to say, what you don’t Control will control you. The five pillars of Management Control are: Set the Goal, Measure Performance, Evaluate Performance, Correct or Reward and Feedback [into Goal Setting]. A process is required to control an outcome. Space allows for just a few points: (a) Ensure that you can measure your goals. Some say you only get what you measure. (b) Evaluation takes time and effort. Look at what went wrong and what went right, assess future performance and what needs to change and compare current to desired outcomes. (c) We all correct well but few of us stop to reward well. From a pat on the back, to a restaurant voucher, to a monetary incentive to a large bonus – all Reward is good to ensure continued performance to goals. (d) Feedback is the process that informs direction. Think of it this way, you get to a destination by steering the car away from deviation and putting it back on course over and over again. Management Control is just like that and is mission critical to Execution.

  1. Hard work

The founder of Twitter was interviewed the other day. Asked about their success he retorted: Isn’t it funny how 10 years of hard work looks like an instant success? To the same point, many years ago our Bank came up with a slogan: Work smarter not harder, as part of a values campaign. I’ve got to be honest, I have never understood that and have always resorted to hard work, the right kind of focussed work, as a prerequisite for success. Continual attention to detail, looking for new things, personal application to the task, risk management and expenditure of effort has a way of winning through. I know successful people and all of them look like an instant success after years of hard work and sacrifice. Why should you and I be any different? In the process, don’t ignore three things: Exercise, Eating and Sleep.

Execution makes the difference between success and failure. In between is mediocrity. Only Success is desirable. 2016 can only be successful against a Plan that is well Executed. Otherwise hope for a geluksskoot [“a lucky shot”]. On the other hand, it is highly probable that a well-considered Plan and a great Execution will pay you rich dividends and serve others in the process. Why would you choose anything less for yourself and those you value?

There is one more ingredient, I believe. People.

Yours in Property

If you knew you had December to make your business highly successful in 2016, what would you do?

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“‘Tis the Season to be jolly tralalalalalalalah”.

So the carol goes. But just reading the pre-reporting on the Fitch rating which may see SA Inc achieve junk bond status on 4 December 2015, the “jolly” turns to “golly” in one foul swoop.

So for that reason, at the entree to this beautiful Christmas Season [I really struggle with “the Holidays” so please forgive me], I deem it a good idea to write a trilogy of uplifting articles. Trilogy, because I also need a break between Christmas, that very special Holiday, and New Year, that time when all the resolutions kick in.

If you knew you had December to make your business [read Life, if you will] highly successful in 2016, what would you do? Run for the hills, Dream big, Plan, Act, Take advice, Retrench your dead wood, Drink champagne, Motivate your people, Have a workshop, Write your thoughts down, [Eat, Love and] Pray; really, what would you do? This is the month of determination; in it you set the course for all that achieves success in 2016 – so what would you do?

We don’t know your circumstances, but if you’re reading this blog, you probably are a person who seeks to learn by being informed and challenged. You probably take the smallest scraps of thinking and learning and coagulate them into something you can work with to develop yourself and your relationships and your business. If you’re that kind of person, read on. Below are four major highlights that will define your year commercially and which deserve attention this month before you take a break. Four is not magical and I’m sure there may be more for you. However, dedicated focus on these four things are proven to be key ingredients of success.

First, an anecdote from my days at Nedbank.  At one Homeloan conference, a thoughtful organiser put a small card on my pillow that said: To accomplish great things, we must dream as well as act. The quote was by the famous French poet, journalist and novelist, Anatole France, who was awarded the Nobel peace prize for Literature in 1921. Another anecdote, which quote by Zig Ziglar I sent to my Son a few days ago, is: When you catch a glimpse of your potential, that’s when passion is born.

1.Set a Vision bigger than you

You see, Anatole was right to call the dream into being. Nothing in the conditionality he places on action detracts from our God-given right and responsibility to dream. There is  a thought that if your dream doesn’t scare you, it isn’t big enough. I would say that is extreme but something in there does raise the bar. My school motto is Per Ardua ad Astra which means “By hard work to the Stars”. I like that and wouldn’t if I believed in get-rich-quick schemes. It’s the “to the Stars” part that lifts your chin, drives out your fears and burns in your heart. It is the Vision in you that keeps you constantly thinking, wondering, searching and striving until you find the Confidence that this dream, this Vision, is for you. If you can’t buy the “hyper” in what I’m saying, then think about this – What would you like to change so that you double what you have now in one year? Sales, originations, the depth of a relationship, turnover or money? What would it take to do that versus what price you are prepared to pay? If the formula is acceptable to you, then what stops you from achieving that dream? In the stating of it comes the angst of how I would do it; in the envisioning lies the challenge and the risk. But without the genesis of this thought “any ol’ place” would be good enough. If there ever was a distinction between our soul and our spirit, it would be the deep desire for more that lies in the spirit. You can be content with what you have and where you are or you can begin to thirst for more. Set a Vision that is bigger than you. 

2.Determine the time-frame and set the milestones that need to be achieved

Bring your Vision down to earth. Unless you’re a dreamer, dreaming is a beginning but not the desired outcome. Our minds love pictures and can bathe themselves in daydreams and images all day long. Sweet dreams we say to our loved ones, but then they’re going to sleep! Given our December challenge above, there’s no time for sleeping just yet. We can rest later. You need to begin to think out what milestones will direct your achievement and when you would expect to see them on the journey to success. To keep it simple, milestones are quantitative indicators of your achievement. Think of it like this: any salesman loves the “hockey stick” approach to his annual goal. For years I’ve seen that, off target up to September, the super-salesman thinks he can achieve the rest in the last quarter. True maybe, if you’re GM of a holiday resort, but for the rest of us mere mortals, you probably can’t “shoot the lights out” in the final sprint any more than you could in the previous 3 quarters. Salespeople, yes you and me my Originator and Estate Agent friends, love the hockey stick and it’s expected air-punch but, alas, it seldom works. If you’re travelling Joburg to Cape Town in 14 hours, doing 90km/hour for the first 900kms will leave you with much catch-up from Worcester. The problem then is you hit law enforcement, sharp bends through the Hex and more traffic. Life and its achievement is no different and by the time you realise your mistake, it’s too late. From a brain point of view, as you click from the Vision in the right brain, you enter the Reality of the left brain. There you need milestones and a good sense of timing to keep focused on the destination.Determine the time frame and set the milestones that need to be achieved.

  1. Set the goals for the milestones

In point 2 I said the milestones are indicators. Give or take an hour or 30 kilometres, not achieving a particular milestone is not a major issue when you’re on the road. But in business, indications are not enough. Goals are required. If you look at the five pillars of Management Control: Set the Goal, Measure Performance, Evaluate Performance, Correct or Reward and Feedback [into Goal Setting], then you can see that a process is required to control an outcome. “Ag, it’s only 30 minutes” is fine for normal day-to-day driving, but winning rally drivers have their navigators assess their progress by the second, literally. Goals enable the fine tuning necessary for specific achievement. Goals are the hard rock of success. Over is good but Under is simply not acceptable to a Winner. Setting goals is hard work. You need to think and challenge yourself and re-think. You need to drill down into the milestones, decide on the price you’re prepared to pay and then drive out the appropriate, non-negotiable goals you want to achieve. Anything less in a plan is simply wishful thinking and the next time to get to think about it, you’ll be facing the indeterminable “hockey stick” reality. Set the goals for the milestones. Now!

  1. Write down the plan of action

In the Good Book, Habakkuk was told to write the vision down. Hey but it such a cool Vision, why not just announce it and turn it into reality. The reason was simple: We Forget. The plan is the document where you write down the Vision, its milestones and the goals. Then you write down the actions required and mentally rank their level of difficulty so as to understand the obstacles to their achievement. What you need to overcome is as important as prerequisites. You can reach for the stars as long as you like but you better get a ladder or “go virtual”. Not seeing these obstacles to a Plan and dealing them upfront is a figment of the imagination. One word of caution though, as I revert to this almost mathematical process.  Entrepreneurs see the vision, the milestones, the goals and the action plan but often choose to ignore the requirements. Sheer passion says I will [read: want to] do this “whatever it takes”. Fundamental to this approach and attitude is that I am a firm believer that Risk and its concomitant action, Risk Management, is fundamental to success. Entering a business, creating a BIHAG [Big Hairy Audacious Gaol], deciding to marry, all require you to take risks and then manage them. Why? Well, on the one hand, little goals are “more of the same”, they’re incremental and risk mitigating whilst big goals need you to jump at some stage. Once you jump, you’re committed; no turning back. On the other hand, you just cannot see all the pitfalls in the beginning. We often read about the overcoming of a Hilary Tensing team, Ford and Edison. The question is would they have started in the first place if they knew what they would face along the journey? You can’t see it all and the bigger the goal, the longer the timeframe, so the less you can see. But what Reward awaits Success! Write down the plan of action.

So there you have it plain and simple. You now have a choice, get ready to go on leave and just enjoy the silly season, or, do the hard yard to revolutionise your circumstances. It’s always a choice and the choice confronts us many time about many things in life.

In our next part of the trilogy, we’ll have a look at Execution. It truly is the sine qua non of Success. It is the as well as act of Anatole’s quote.

Homeloan Junction epitomises what we’re speaking about. It was built out of the ashes of Sub-Prime to be a top Performer in Evo, Ooba’s Aggregation business, in a few years. Why not approach us to see how we could help you turn your dreams for starting an origination business, or multiplying your existing success, into reality?

Yours in Property.