28 April 2007
27 April 2007
Rent Vs Buy: Durbanville
With property slowing down we're being told that investing on the low end of the market (sub R500 000) is the place to be. So here's an investment for you, a two bedroom duplex flat in Bellville for R480 000 and they already have a tenant renting at R2600 a month. What's your return?
You would have to put down more than a 50% downpayment to just break even. If you gear up fully you would have lost R31 836 a year, meaning you need 7% appreciation in capital appreciation just to break even. And these rental numbers are before deductions for rates, maintenance and vacancy.
| Down Payment | Monthly Payment | Cash flow | ROI |
|---|---|---|---|
| R0 | R5453.47 | R-2653.47 | |
| R48000 | R4908.13 | R-2108.13 | -52.70% |
| R96000 | R4362.78 | R-1562.78 | -19.53% |
| R144000 | R3817.43 | R-1017.43 | -8.48% |
| R192000 | R3272.08 | R-472.08 | -2.95% |
| R240000 | R2726.74 | R73.26 | 0.37% |
| R288000 | R2181.39 | R618.61 | 2.58% |
| R336000 | R1636.04 | R1163.96 | 4.16% |
| R384000 | R1090.69 | R1709.31 | 5.34% |
| R432000 | R545.35 | R2254.65 | 6.26% |
| R480000 | R0.00 | R2800.00 | 7.00% |
You would have to put down more than a 50% downpayment to just break even. If you gear up fully you would have lost R31 836 a year, meaning you need 7% appreciation in capital appreciation just to break even. And these rental numbers are before deductions for rates, maintenance and vacancy.
26 April 2007
Guest Post: Stop feeding the sharks while you still can
Here's a guest post from "BubbleWarrior"
Stop feeding the sharks while you still can
We, the over-taxed and under-policed South African public, have been targeted by a cynical campaign of deception, that if left unchallenged, could ruin millions of us, and plunge our economy into a depression. The lie? That your home, my home, all our homes, are safe investments.
The truth is that if you own a home, or are thinking about buying one, you are in terrible danger right now.
First, three important facts:
1) There are no independent voices providing real information in the media about the impending catastrophe. Check your newspapers, the internet, the radio, or the television, and all you’re hear are the opinions of three or four “property economists”, endlessly repeated the mantra that property is safe, that its increasing in value, and that there are no shocks coming. And who do these commentators work for? ABSA, Standard Bank, and First National Bank. The same people who give you your home loan and whose massive profits are bulked by your loan repayments. Asking “property economists” for the truth is like asking a McDonalds executive about healthy eating. We don’t believe the police and politicians when they tell us crime is under control, so why do we so eagerly believe the banks when they say property is going up?
2) House prices can, and often do, drop. In parts of Japan prices have dropped 40% since the 1990s.
3) You get better returns by putting your money in your savings account. If you own a flat worth R750,000, the chances are good that half of that value is what you owe the bank: let’s say you’re paying R4,500 per month on your home loan. If you’ve got a tenant, they’re probably paying about
R4,500 per month in rent. So you’re back to zero outlay, zero income. For the moment, your property is increasing in value at about 5% per year. So every month it’s worth about R3,200 more than it was the month before. Thus your total ‘income’ from property is R3,200 per month – 5% on an investment of R750,000! Even the rip-off artists at the major banks offer better interest than this! (Of course if your bond is bigger, your return is even less.)
Maybe, like the vast majority of us who have been suckered by the banks’ propaganda, you’re thinking: okay, but I’m happy to wait. It might only be 5% now, but they keep talking about an upturn, and in 2008 or 2009 my property will increase by 20% or 25%, and I’ll sell it for a big profit.
Wrong.
The chances are that by 2009, your property will be worth 25% LESS than it is now.
House prices have begun to fall in the US, for the first time in 40 years. This is a massive event, and has been totally covered up by the international media, who are so heavily funded by advertising from the banking sector. If you heard about it, it was probably just another item
in the news, along with the day’s currency trends or another loss on the sports field. But this drop is a MAJOR FINANCIAL AND POLITICAL EVENT. The bubble in America – widely regarded to be the biggest economic bubble since the one that caused the 1929 Crash and the Great Depression – is
bursting. In three months that slowdown will reach the UK, and in another month after that it will reach SA. Your ridiculously over-priced home will lose 5% of its value, then, as more people realize that they’re being ripped off and start selling, prices will drop faster. Sellers unable to offload their properties will drop their prices even faster, until panic sets in and people are dumping property, selling to the first offer.
Within months, your R2 million house will be worth R1,5 million, then R1 million, then R750,000. But your bond repayments won’t drop. Suddenly you’ll be forking out thousands for a property worth not much more. In the US, the nightmare of Negative Equity has already begun to hit in some
area: people paying bond installments for a house worth tens of thousands more than the one they now own – for example, paying R7,000 per month on a flat worth just R600,000.
Are SA prices inflated? Absolutely. Think about it. Would you rather pay $200,000 for a modern, renovated one-bedroom apartment in downtown Chicago, with negligible crime, excellent public transport, a huge cultural center, shopping to die for, and a huge choice of work- and education opportunities, or would you rather pay $200,000 for an identical apartment in Cape Town, which has no functioning public transport, South African crime levels, massive pollution in winter, and crumbling infrastructure?
Or how about a three-bed apartment with high ceilings and wooden floors, built in the 1920; five minutes from superb public transport, in one of the most vibrant cities in the world? In Johannesburg or Cape Town you’re looking at a minimum of R1 million. In Berlin – the center of Europe, two hours from everywhere! – you’re looking at 80,000 Euros, or R750,000. Still think that SA property is ‘in line with the rest of the world’?
Stop feeding the sharks! Stop paying prices that are 40% higher than they should be! The bubble is bursting, and the bust is coming. Don’t be caught napping.
Sell today, and rent – and watch the fatcat bankers, the estate agents, and your neighbors panic!
Yours in the interests of fair trade and a boot up the fat arses of the capitalists who run our lives for us.
Stop feeding the sharks while you still can
We, the over-taxed and under-policed South African public, have been targeted by a cynical campaign of deception, that if left unchallenged, could ruin millions of us, and plunge our economy into a depression. The lie? That your home, my home, all our homes, are safe investments.
The truth is that if you own a home, or are thinking about buying one, you are in terrible danger right now.
First, three important facts:
1) There are no independent voices providing real information in the media about the impending catastrophe. Check your newspapers, the internet, the radio, or the television, and all you’re hear are the opinions of three or four “property economists”, endlessly repeated the mantra that property is safe, that its increasing in value, and that there are no shocks coming. And who do these commentators work for? ABSA, Standard Bank, and First National Bank. The same people who give you your home loan and whose massive profits are bulked by your loan repayments. Asking “property economists” for the truth is like asking a McDonalds executive about healthy eating. We don’t believe the police and politicians when they tell us crime is under control, so why do we so eagerly believe the banks when they say property is going up?
2) House prices can, and often do, drop. In parts of Japan prices have dropped 40% since the 1990s.
3) You get better returns by putting your money in your savings account. If you own a flat worth R750,000, the chances are good that half of that value is what you owe the bank: let’s say you’re paying R4,500 per month on your home loan. If you’ve got a tenant, they’re probably paying about
R4,500 per month in rent. So you’re back to zero outlay, zero income. For the moment, your property is increasing in value at about 5% per year. So every month it’s worth about R3,200 more than it was the month before. Thus your total ‘income’ from property is R3,200 per month – 5% on an investment of R750,000! Even the rip-off artists at the major banks offer better interest than this! (Of course if your bond is bigger, your return is even less.)
Maybe, like the vast majority of us who have been suckered by the banks’ propaganda, you’re thinking: okay, but I’m happy to wait. It might only be 5% now, but they keep talking about an upturn, and in 2008 or 2009 my property will increase by 20% or 25%, and I’ll sell it for a big profit.
Wrong.
The chances are that by 2009, your property will be worth 25% LESS than it is now.
House prices have begun to fall in the US, for the first time in 40 years. This is a massive event, and has been totally covered up by the international media, who are so heavily funded by advertising from the banking sector. If you heard about it, it was probably just another item
in the news, along with the day’s currency trends or another loss on the sports field. But this drop is a MAJOR FINANCIAL AND POLITICAL EVENT. The bubble in America – widely regarded to be the biggest economic bubble since the one that caused the 1929 Crash and the Great Depression – is
bursting. In three months that slowdown will reach the UK, and in another month after that it will reach SA. Your ridiculously over-priced home will lose 5% of its value, then, as more people realize that they’re being ripped off and start selling, prices will drop faster. Sellers unable to offload their properties will drop their prices even faster, until panic sets in and people are dumping property, selling to the first offer.
Within months, your R2 million house will be worth R1,5 million, then R1 million, then R750,000. But your bond repayments won’t drop. Suddenly you’ll be forking out thousands for a property worth not much more. In the US, the nightmare of Negative Equity has already begun to hit in some
area: people paying bond installments for a house worth tens of thousands more than the one they now own – for example, paying R7,000 per month on a flat worth just R600,000.
Are SA prices inflated? Absolutely. Think about it. Would you rather pay $200,000 for a modern, renovated one-bedroom apartment in downtown Chicago, with negligible crime, excellent public transport, a huge cultural center, shopping to die for, and a huge choice of work- and education opportunities, or would you rather pay $200,000 for an identical apartment in Cape Town, which has no functioning public transport, South African crime levels, massive pollution in winter, and crumbling infrastructure?
Or how about a three-bed apartment with high ceilings and wooden floors, built in the 1920; five minutes from superb public transport, in one of the most vibrant cities in the world? In Johannesburg or Cape Town you’re looking at a minimum of R1 million. In Berlin – the center of Europe, two hours from everywhere! – you’re looking at 80,000 Euros, or R750,000. Still think that SA property is ‘in line with the rest of the world’?
Stop feeding the sharks! Stop paying prices that are 40% higher than they should be! The bubble is bursting, and the bust is coming. Don’t be caught napping.
Sell today, and rent – and watch the fatcat bankers, the estate agents, and your neighbors panic!
Yours in the interests of fair trade and a boot up the fat arses of the capitalists who run our lives for us.
21 April 2007
US Housing Market A Danger To SA?
US housing market poses new dangers for the world
Extra vigilance is required - especially since inflationary pressures could lead the Fed to hike interest rates further.
Moreover, the emergence of the subprime mortgage lending market has taken the housing market into uncharted territory. The warning remains: Danger Ahead!
18 April 2007
Rent Vs Buy: Cape Town CBD
Here's a newly build two bedroom apartment in the Cape Town CBD. Asking price is R1 465 000 and they've already got a tenant in for one year at R5500 a year. How nice of them. What's your return you ask? Let's find out:| Down Payment | Monthly Payment | Cash flow | ROI |
|---|---|---|---|
| R146500 | R14980.01 | R-9480.01 | -77.65% |
| R293000 | R13315.57 | R-7815.57 | -32.01% |
| R439500 | R11651.12 | R-6151.12 | -16.79% |
| R586000 | R9986.68 | R-4486.68 | -9.19% |
| R732500 | R8322.23 | R-2822.23 | -4.62% |
| R879000 | R6657.78 | R-1157.78 | -1.58% |
| R1025500 | R4993.34 | R506.66 | 0.59% |
| R1172000 | R3328.89 | R2171.11 | 2.22% |
| R1318500 | R1664.45 | R3835.55 | 3.49% |
| R1465000 | R0.00 | R5500.00 | 4.51% |
You need to put a cool million as a down payment to just cover the bond repayments and if you buy it for cash you'll make a paltry 4.5% ROI. With capital appreciation hovering at 3.3% if you bought it at this price without putting at least R700 000 down even that is not going to help.
17 April 2007
Rent Vs. Buy: Sun Valley
Four bedroomed house in Sun Valley, tenanted with a rent of R3500. On sale for R735 000. If you bought it as an investment your return would be:| Down Payment | Monthly Payment | Cash flow | ROI |
|---|---|---|---|
| R73500 | R7515.57 | R-4015.57 | -65.56% |
| R147000 | R6680.51 | R-3180.51 | -25.96% |
| R220500 | R5845.44 | R-2345.44 | -12.76% |
| R294000 | R5010.38 | R-1510.38 | -6.16% |
| R367500 | R4175.32 | R-675.32 | -2.21% |
| R441000 | R3340.25 | R159.75 | 0.43% |
| R514500 | R2505.19 | R994.81 | 2.32% |
| R588000 | R1670.13 | R1829.87 | 3.73% |
| R661500 | R835.06 | R2664.94 | 4.83% |
| R735000 | R0.00 | R3500.00 | 5.71% |
Paying upfront in cash that's not even as much as a fixed deposit and don't forget to take off for rates, maintenance and vacancy. Unless you put down R400 000 you're not even making any money. If you gear up totally not even capital apprecation will help you (6-8% at this price level).
15 April 2007
Rent Vs. Buy: Canterbury Square
Take a look at this ad:
Right so you can buy it for R1 250 000 and then rent it out for R5000 a month. What's your return?
R800 000 just to break even and if you pay the full price you're making a paltry 4.8% yearly ROI. What's that? 3% below a fixed deposit? And then of course in actual fact your return is a lot less once you factor in for rates, maintenance and vacancy. And considering that the property growth rate is 3.3% for property over R900 000 if you don't put at least R500 000 down even property appreciation is not going to save you.
Newly built 1 bedroom flat available on the 5th floor overlooking the City Bowl
BIC
Granite Tops
Pool
Secured Parking Bay
Mountain and City Bowl views
Opposite Wembley Square and the Virgin Active gym
Rental is R5000 per month or buy the flat for R1.25 million
Right so you can buy it for R1 250 000 and then rent it out for R5000 a month. What's your return?
| Down Payment | Monthly Payment | Cash flow | ROI |
|---|---|---|---|
| R125000 | R12387.22 | R-7387.22 | -70.92% |
| R250000 | R11010.86 | R-6010.86 | -28.85% |
| R375000 | R9634.50 | R-4634.50 | -14.83% |
| R500000 | R8258.15 | R-3258.15 | -7.82% |
| R625000 | R6881.79 | R-1881.79 | -3.61% |
| R750000 | R5505.43 | R-505.43 | -0.81% |
| R875000 | R4129.07 | R870.93 | 1.19% |
| R1000000 | R2752.72 | R2247.28 | 2.70% |
| R1125000 | R1376.36 | R3623.64 | 3.87% |
| R1250000 | R0.00 | R5000.00 | 4.80% |
R800 000 just to break even and if you pay the full price you're making a paltry 4.8% yearly ROI. What's that? 3% below a fixed deposit? And then of course in actual fact your return is a lot less once you factor in for rates, maintenance and vacancy. And considering that the property growth rate is 3.3% for property over R900 000 if you don't put at least R500 000 down even property appreciation is not going to save you.
Table View: Rental Incentives
Is the rental market in Table View so flat that landlords need to throw in incetives? Check out this Gumtree ad:
2 bedroom flat in secure complex
...
* Furnished
1 Double bed, furniture, fridge and microwave (only 3 months old)
For keeps the 1st person taking the flat
14 April 2007
12 April 2007
US Bubble: POP!
Home prices set for first drop in 40 years
And thus endeth the US property bubble. With it now careening down a hill nervous investors will start shifting money out of property as quickly as possible worldwide.
The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began keeping track nearly 40 years ago.
In its latest monthly forecast, the real estate group said it expects a 0.7 percent decline in the median price of an existing home sold in 2007. A month ago it had been projecting a 1.2 percent increase. Half of all homes sell for more than the median and half for less.
And thus endeth the US property bubble. With it now careening down a hill nervous investors will start shifting money out of property as quickly as possible worldwide.
10 April 2007
Consumer Confidence Up... Business Confidence Down?
Anyone else a bit uneasy that consumer confidence is rising, while business confidence is dropping?
09 April 2007
Cancellations At The Rockwell?
Long time followers of this blog know that we have been following the development of The Rockwell, a new development in Green Point. When we last checked in November 2006 sales looked to be stagnating with 1 unit sold in two months.I checked in today and I can say that sales are no longer stagnating. In November last year they had sold 84 units out of 150. According to their availability page as of today they have only sold 72. That's 12 units cancelled in the five months since November. Ouch.
07 April 2007
04 April 2007
US Meltdown Getting To Local Experts
The property meltdown in the US currently underway has obviously got some people at the banks spooked as they're coming out thick and fast with statements that we have nothing to fear and to keep buyng!
How the US mortgage market might affect the SA property prices
Keep buying! Ignore that smoking crater that is the US property market.
How the US mortgage market might affect the SA property prices
The local housing market seems to be reasonably strong, despite the moderation in global housing markets and in particular, the concerns surrounding the American housing market.
This is according to Standard Bank’s latest residential property gauge, which stated several reasons why the current dynamics in the US residential property market aren’t expected to materially affect local house prices.
Keep buying! Ignore that smoking crater that is the US property market.
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