Western Cape IOL Index

Looks like that rate hike increase (and the upcoming ones) spooked a few landlords into putting extra effort into renting their 'investments'.

Interest Rates Still Going Up

After Tito Mboweni hiked interest rates it came as a big shock to most economists who were not expecting it. Now suddenly they see rates increasing again before the end of the year:

HE main inflation gauges may have accelerated last month, reflecting a sharp fall in the rand and raising prospects of further interest rate increases this year, according to a Reuters poll.

Buying Off Plan Is Too Risky

Buying off-plan? Dissect the contract

Rising numbers of people who buy townhouses and apartments off-plan are being faced with the nasty prospect of having the date of delivery of their units postponed.

And while many developers give buyers adequate notice of the delay in delivery, some inform buyers less than a month before occupation that they are no longer able to take ownership of the unit on the specified day.

The consequences can be grim, especially for those who were renting and decided that they are no longer going to service someone else’s bond, as they may have given the required month’s notice already – leaving them highly inconvenienced and technically homeless.

Western Cape IOL Index

What Goes Up

SA house prices outstrip all others

HOUSE prices in South Africa have grown quicker than those in any other country monitored by The Economist.

Using the ABSA house price index as a measure, The Economist reports that the average SA house price has rocketed nearly 300% in the last nine years.

300% in nine years? How much has your salary increased in nine years? What about the rental income of residential housing?

But don't worry there's absolutely nothing wrong with this picture...

Century City: Lots Of Choice

Century City is turning out to be rife with 'inverstors'. Today on property listing site Gumtree four different units in various Centurty City complexes were put online just today.

Brand New 2 Bed Apartment in Villa Italia (R4,250 pcm)
Century Place (R4,700 pcm)
secure village living (R7,000 pcm)
Century City Bougain Villas - Flat to rent (R4,500 pcm)

Me thinks that one going for R7000 might need to reevaluate.

Western Cape IOL Index

St Martini Garden: Rent Vs. Buy

St Martini Garden is an old block of flats in the Cape Town CBD right next to the Company Garden. Again prices are completely out of whack with rents. A one bedroom flat rents for R2600 a month, and they're for sale from R699 000 (I assume that's for the bachelor, but we'll assume it's the price of a one bedrom). Here's the cashflow and yield assuming 11% interest over 20 years:

Down Payment	Monthly Cash Flow	ROI
100000	-3593	-43
200000	-2561	-15
300000	-1529	-6
400000	-497	-1
500000	536	1
600000	1568	3
700000	2600	4

Not pretty at all. That's almost 2% less than a fixed deposit. Remember rates, maintenance, insurance and vacancy are not included so the returns are probably a bit less.

ABSA: More Rate Hikes By End Of Year

ABSA says:

If the current inflationary pressures and other negative factors persist into the second half of the year, it is quite possible that interest rates may increase further before the end of the year, Absa said in a statement on Friday.

And here's another tidbit:

As a result, we expect nominal growth in house prices to come in at about 11% for the full year, taking into account that average house price growth of 13,8% was recorded in the first five months of the year. For growth in house prices to drop to a level of below 10% in 2006, prices must decline sharply over a wide front before the end of the year

Rates up 0.5%!!!

Tito Mboweni has raised interest rates 0.5% way above what people were expecting:

The prime rate will rise by 0.5 percentage points to 11 percent after the South African Reserve Bank opted on Thursday to raise the repo rate - at which it lends money to commercial banks - from 7 to 7.5 percent.

Reserve Bank governor Tito Mboweni's announcement came as a surprise to economists and analysts, many of whom had expected interest rates to remain unchanged.

Only one of 16 economists surveyed by Bloomberg forecast a quarter-point increase, while the rest expected the rate to stay unchanged.

Well that's economists for you, driving while only looking in the rear view.

Perspectives: Rent Vs Buy

Perspectives is a new apartment complex in Roeland Street in the Cape Town CBD. You can either rent for R4500/mo or buy at R10000/mo (with 20% down over 20 years).

Ouch!

That's some SERIOUS negative cashflow if you're thinking of buying now for an 'investment'. I don't even want to run the numbers of this... Ahhh what the hell:

Down Payment	Monthly Cash Flow	ROI
100000	-8329	-100
200000	-7331	-44
300000	-6332	-25
400000	-5334	-16
500000	-4336	-10
600000	-3337	-7
700000	-2339	-4
800000	-1341	-2
900000	-342	0
1000000	656	1
1100000	1655	2
1200000	2653	3
1300000	3651	3

EINA!

Interest Rates Going Up

The Reserve Bank’s next get-together to decide on interest rate policy is scheduled for this week. Although most economists expect rates to stay steady, a surprising number of them are warning that it may no longer be realistic to expect interest rates to stay unchanged for another year.

Interest rates in the balance

Western Cape IOL Index

Today is the first installment of the IOL Index. This is a highly unscientific graph showing the inventories of different housing categories based on the number of advertisements in the IOL property classifieds for the Western Cape.