Mandela Rhodes Place Is Under Water

And no I don't mean that the residents of Mandela Rhodes Place property values are less than their mortgages, I mean that the place is literally under water:

A flood emergency was declared yesterday by staff at one of Cape Town's newest and swankiest city centre developments just three months after the billion-rand complex opened its doors.

About 10pm on Friday, residents of apartments on the fourth floor of Mandela Rhodes Place were shocked to find water flooding into their homes.

Witnesses said that within minutes the water was "cascading" down into the lobby and lower floors, soaking residents and patrons at restaurants.

We've talked before on this blog about the fact that because there's so much development going on coupled with the fact that skilled artisans are becoming rarer and rarer and that developers will cut as many corners as possible to extract most profit as possible we wouldn't be surprised if building quality, even in supposed luxury developments like Mandela Rhodes Place, is less than what one would normally expect. Others are a bit more suprised

It's incredible. This is one of the most expensive property developments in the city and just shortly after opening, this happens. It's unbelievable.

It has just been the most incredible mess and for it to have happened in a place that is supposed to provide the very best in luxury and service is just beyond belief.

Now you know why I stay away from new developments like the plague. If you think this is a freak accident think again. I've heard horror stories about build quality from people who've bought in new developments and from people who worked on them as well bitching about some of the work quality (with other contractors of course).

Western Cape IOL Index

Rates Shock On The Way?

A colleague of mine who lives in the far Northern Suburbs told me he got a letter from his council telling him that his house has been appraised at a new higher value and as such his rates are about to increase dramatically. And by dramatically I mean at least double. Can anyone else confirm this?

Investment Properties That Aren't: Sea Point

Here's a three bedroomed flat in Sea Point currently renting for R6000 a month or you can buy it for R1 100 000.

Down Payment	Monthly Payment	Cash flow	ROI
R110000	R11247.79	R-5247.79	-57.25%
R220000	R9998.04	R-3998.04	-21.81%
R330000	R8748.28	R-2748.28	-9.99%
R440000	R7498.53	R-1498.53	-4.09%
R550000	R6248.77	R-248.77	-0.54%
R660000	R4999.02	R1000.98	1.82%
R770000	R3749.26	R2250.74	3.51%
R880000	R2499.51	R3500.49	4.77%
R990000	R1249.75	R4750.25	5.76%
R1100000	R0.00	R6000.00	6.55%

6.5% ROI when you pay full price in cash. And that's before rates, maintenance and vacancy.

Bo Kaap: Asking Prices Drop

Same house, same agency, R200 000 difference. R1 800 000 Vs. R1 600 000

Western Cape IOL Index

Century City Investors Getting "Desperate" To Rent

Here's an anecdote sent in from a reader

i was shown a 2b, 2b apartment in knightsbridge in century city.
it came down from 7 grand to 6 500 per month. the agent told me that the
owner could actually consider less because she is desperate. the "value"
is estimated at 1.8 mil.

Well Ms Specuvestor should be because unless she put down a 70% downpayment she's losing money:

Down Payment	Monthly Payment	Cash flow	ROI
R180000	R17837.60	R-11337.60	-75.58%
R360000	R15855.64	R-9355.64	-31.19%
R540000	R13873.69	R-7373.69	-16.39%
R720000	R11891.73	R-5391.73	-8.99%
R900000	R9909.78	R-3409.78	-4.55%
R1080000	R7927.82	R-1427.82	-1.59%
R1260000	R5945.87	R554.13	0.53%
R1440000	R3963.91	R2536.09	2.11%
R1620000	R1981.96	R4518.04	3.35%
R1800000	R0.00	R6500.00	4.33%

And unless she's put down more than 30% as downpayment not even capital appreciation (estimated 6%-9%) is going to help.

Our reader was also kind enough to give us some info on what the average rentals are in Century City.

Villa Italia

1 bed, 1 bath R3,500.00 Unfurnished
1 bed, 1 bath R5,500.00 furnished
2 bed, 2 bath R4,500.00
2 bed, 2 bath double volume loft R5,500.00
3 bed, 2 bath R5,500.00
3 bed, double volume loft R6,000.00 - R7,000.00

Bougain Villas

1 bed, full bathroom R3,500.00
2 bed, 1 bath R4,300.00
2 bed, 2 bath R4,500.00
3 bed house, 2 bath, double garage R6,000.00 - R7,000.00

The Island Club

1 bed, 1 bath R3,800.00
2 bed, 2 bath, 77 sqm R4,800.00
2 bed, 100 sqm, garden R5,500.00
3 bed R6,000.00 - R7,000.00


Century View

3 bed free standing houses R6,000.00 - R7,000.00

Knightsbridge

1 bed 51 sqm R4,000.00
2 bed 76 sqm R5,000.00
2 bed 100 sqm R6,000.00 - R7,000.00
3 bed R7,000.00 - R7,500.00

Economy Growing More Dependent On Property Growth

One of the big concerns in the current US property implosion is that it's going to affect a lot more than just the property market. With increasing property prices comes what's known as the 'wealth effect', people feel richer because they own rapidly appreciating asset and they spend more knowing the asset (in this case their houses) will be there as security. More spending of course leads to a growing economy and job creation.

However in the reverse scenario, with property prices stagnant or dropping (as is the current case in the US), the opposite happens - consumers stop spending. In California (the worlds 6th largest economy) it's been estimated that real estate is responsible for 60% of job creation in the past few years. With real estate hitting a brick wall what's going to happen to those jobs?

And in a new report from ABSA it seems that real estate in South Africa is playing a greater role in our economy than ever before.

THE country’s residential property market has become much more important as a contributor to economic growth and development over the past few years, says the latest quarterly report on the residential property market by Absa.

Absa senior economist Jacques du Toit said the real value of fixed property investment excluding inflation increased to R23,8bn in the third quarter of last year on a seasonally adjusted annual rate from R10,9bn in 1999.

Western Cape IOL Index

Can you afford the average house?

Can you afford the average house?

If you’re not earning at least R30 000 a month, the “average” house is out of your reach, at least according to a back-of-a-matchbox calculation.

On Wednesday Absa released its quarterly residential property market report, which found that the average house price is about R811 000. This is for the so-called middle segment of the residential property market (houses of 80m²-400m² and priced at up to R2,7m).

Don't Sabotage Your Property Listing

When listing your property and one of the keywords you're using to describe the block is 'secure', you might want to take a picture of the place that doesn't include a wall covered in grafitti.

Update: Same flat, R50 000 less (Thanks to reader AC).

House Price Growth Discrepancy

House price balloon still deflating

The current declining trend house price growth is expected to continue in 2007, with a lower growth rate of 9.1 percent projected for the year, Absa Group Economic Research said in a research note on Wednesday.

Buy-to-let trouble looming?

Elna Moolman, Standard Bank senior economist says in a media release: "House price growth moderated to just 6,9% y/y in January from 18,5% y/y a year earlier, continuing a sliding trend in growth rates from the 35% y/y peak in October 2004.

Why is there a 2.2% difference in house price growth amongst different bank economists? Surely house price sales are easily monitored that there should be no doubt as to how much the housing price grew.

Western Cape IOL Index

The IOL property listings pages are a bit wonky (only listing 7 flats for rent and 1 for sale in the whole of Cape Town) so this weeks posting of the index won't be much use.

News Round Up

Buy-to-let trouble looming?

Buy-to-let investors hoping to eke out returns from residential property should brace themselves for a market slow down. Standard Bank, a compiler of house price data, warned Thursday that a slow down in house prices is “inevitable”.

Standard Bank attributes this malaise to waning investor appetite combined with constrained demand and finances from owner-occupants. Rising interest rates are one of the key factors in reducing demand, says the Bank.

House price fall may keep interest rate down

The sharp slowdown of house price growth should provide the South African Reserve Bank with ammunition to limit interest rate rises.

According to Standard Bank's latest residential property gauge, released on Thursday, the rising interest rates are one reason the housing market has gone from 18,5 percent year-on-year growth up to January 2006 to 6,9 percent year-on-year growth in January this year.