Saturday Open Thread

It's the final open thread of 2008!

An Old Friend Returns In Century City

It's always heartwarming when an old friend returns for the holidays. For instance this flat in Century City has been on sale since at least September 2007, and we last wrote about it in March 2008. It's price has gone from R799 000, down to R780 000, up to R800 000, back down to R780 000, up to R790 000 and back to R780 000 where it's been for the last 9 months, all while pulling in R3 500/month rent which doesn't cover half the bond costs on a 100% bond.

Saturday Open Thread

It's Saturday and our weekly open thread.

Blouberg Reader Report

Reader GP sent in the following report from Blouberg:

I have the keys to a friends "holiday" apartment in Blouberg. He bought it last year (off plan) in Sandy Bay, Athens Road, Blouberg (300m from the beach).
Stats are as follows:

- 35m2
- Bed in lounge (folds into cupboard)
- 1 open parking bay

He bought it for... wait for it... R650k! (I bought my apartment, 2 bed, 65m2 Royal Ascot, around the same time, and paid R630k).
The apartment is costing him R8,500 every month, and has been empty for the past 9 months! He has advertised it online for short term, long term and holiday homes, and no-one is interested in it (too small, and they prefer a seperate bedroom).

Up until September 2008, the agents were still selling the already-built apartments "off plan" AND were giving a FREE car with each purchase! Some of those apartments are still empty and the building has been standing for just over a year.

Another story:

A friend bought a place last year August in Blouberg. Its called The Sands, just around the corner from the Cheri car dealership at the beach. Stats are as follows:

- 55m2
- 2 bedroom (second room can barely fit a double bed)
- 1 open and 1 undercover parking
- 5m2 store room in basement

She bought it for... wait for it... R780k. After buying it, she had some structural issues. (Whenever it rains, the slabs from the balconies above, literally starts falling down in chunks (of concrete)). She took this up with the body corporate, etc only to find out that the building structure was never approved by the municipality. Her repayments are R9,000 per month. Spoke with her the other day and she and her husband are saving up a lumpsum, so that they can sell it at a lower prices, make a loss, and use the lumpsum to fill in the balance of what they would owe the bank!

And this folks is why Blouberg/Table View is the divorce capital of South Africa.

Saturday Open Thread

We never got much time this week to post stories. So if you've got something you want to discuss, this is the thread for you.

ABSA Rapid Auction Programme Report Back - 40% Off Asking Price Accepted

Reader TA went to an Auction Alliance/ABSA Rapid Auction Programme auction and sent in this report:

I must admit that I was quite impressed at the style in which these auctions were being held in that the auctioneers and the bank made it known what was the outstanding bond owing on the property. The way I understood it, these were properties that the distressed owners were 'voluntarily' putting up for auction. Needless to say, not a single property on auction, out of 60, recieved bids even close to their outstanding bond value.

I bid on eight properties and was the succesful highest bidder on three. I left the auction thinking that there was no way in hell that such low bids would be accepted.

I was very pleasantly surprised when I recieved confirmation emails from the auctioneers that all my bids were accepted by the sellers. The one property I bid on was a three bedroom/ two bathroom free standing house in the Table View area. It was and still is for sale through agents for R895 000. My bid of R450 000 was accepted. The other was on a two bedroom 67 square meter flat in the CBD which had a outstanding bond of over R1 million. My bid of R475 000 was also successful. On the third property, a two bedroom flat in the South Peninsula, my succesful bid was R390 000 and the oustanding bond was R650 000 (granted just over a year ago).

Even with the auctioneers commission of 11.4% on top of these prices, they are still bargains of note.

I think that ABSA, along with the other big banks, are seeing ever increasing amount of homeowners defaulting on their repayments and panic is starting to move in. Homeowners are being forced to accept these low bids on their property or else the property will be repossessed leading to a drawn out process which the banks are trying to avoid at all costs.

What gets to me is that the majority of these distressed property owners were granted these bonds less than three years ago by the very same lending institution. Now they are being forced to sell at unheard of prices. The banks actions border on criminal to say the least.

Here's a summary of TA's purchases and the discount he got off asking prices:

	Owed on Bond	Successful Bid	Discount off Asking Price
Three bedroom/ two bathroom free standing house in the Table View area	R895 000	R450 000	49.7%
Two bedroom 67 square meter flat in the CBD	Over R1 million (let's say R1 000 000 even)	R475 000	52.4%
Two bedroom flat in the South Peninsula	R650 000	R390 000	40%

Saturday Open Thread

It's time for the Saturday open thread. Got something to discuss we haven't covered? Some observations from your neck of the Peninsula? This thread is for you.

Is Gazundering Legal In SA?

Reader James in London mentioned the term "Gazundering" in a comment and wondered if it was allowed in SA:

Don't know if "gazundering" has started in CT yet? (or whether it's legally possible?)

Gazundering is defined as follows:

Gazundering is the practice of demanding a reduction in price to secure the sale of a property. This is usually done during contract negotiation. The timing of this demand is usually intended to prevent the seller from rejecting the lower price, as the sale could collapse if they did, although it may also reflect a genuine downturn in property prices in an area.

It's legal in England:

Under English law, the price you agree on is not definite until the `exchange of contracts'. Up until that time (usually 6 - 8 weeks after the seller accepts your offer for the property), the seller can choose to cancel the sale and accept a higher price from another buyer (if the market is moving upwards). Likewise, you have the right to cancel the agreement and buy a cheaper property (if you feel the price you originally offered was too high, or that prices may be falling.)

Any legal eagles out there know if it's allowed in SA? I have a feeling it isn't but confirmation would be nice.

ABSA: Nominal Property Prices Are Dropping

RealestateWeb reports:

Absa, which has been monitoring house prices since the 60s, says the average house is now worth less than it was a month ago.

Its latest figures, released on Friday, indicates that the average house in South Africa cost about R963 500 in November, about 0,1% less than in October.

Real house prices, which take into account the effect inflation has on purchasing power, have dropped by more than 10% year-on-year.

This year houses are expected to have increased in value by about 4% overall, but the forecast for next year is for houses to drop on average by at least 3%.

And there you have it folks. Nominal price drops. If you're a specuvestor and you bought in the past two years and you are not cash flow positive you're about to lose a truckload of money.

So if you bought a house for R1 000 000 today in a year it would be worth R970 000. You would have also paid over R160 000 to basically rent your house from the bank.

Sea Point Anecdote

Reader KS writes:

A duplex round the corner from me was on the market for four months. Last week a SOLD sign was on the wall. This week... it's back on sale.

The Big Cuts Start Rolling In

Last month this apartment in Strand was on the market for R2 080 000. This month it's asking price has dropped to R1 500 000. That's a 28% drop in asking price.

Remember folks: Don't panic. But if you do, be the first.

Thanks to Reader Bean Counter for the link.

Landlords: Think Again Before Putting The Rent Up

With the softening of the housing market landlords have been loudly proclaiming that they're going to be able to put up rentals as the demand for rental accommodation is set to increase. Well... not so fast. RealEstateWeb reports:

Landlords hammered as tenants struggle to pay
TPN also a registered credit bureau said 54% of tenants are able to meet their rental commitments compared to 70% in the previous quarter.

The rental market has seen a recent average rental price drop of two percent said the report.

Michelle Dickens, managing director of TPN said the 16% of rentals paid on time and in full clearly reflects the tight economic conditions which have negatively impacted on tenants' ability to meet their rental obligations.

Only 16% of renters pay on time and in full. I repeat 16%. That means if you have a tenant who pays you on the first of every month you're in a better position than 84% of landlords out there. Are you going to risk a good thing by raising rent and having a reliable tenant decide to leave and go to the vacant flat in the nicer block across the road?

Auctions Continue To Increase

Sources reveal to me that for the first time Auction Alliance did more than 300 property auctions last month. Many as part of the Rapid Auction Programme, the main customer of that scheme being ABSA.

Saturday Open Thread

Got something on your mind we haven't covered? Chat about it in our Saturday Open Thread...

Overheard At The Deli: "I mean you'd have to be absolutely f$%^&$%g mad to buy now."

The following report was sent in by reader Bean Counter:

Was just having my afternoon cuppa and catching up on some work at the deli near my house when I realised two estate agents were having a fat chat at the next table. Unfortunately I didn't catch the names of either of their companies, but I gathered that both are pushing property in the northern suburbs and on various wine/golf estates out Somerset West way.

At first neither of them wanted to talk about the deathly state of the market, a bit of professional rivalry I suppose. But soon they cracked and the tales of woe started. And did they start. I had to write down one part verbatim, it was too priceless not to pass on as it came from the horses' mouths (always knew that shorthand course would come in handy!):

Estate Agent A: "What people are asking, they're just clueless, still."
Estate Agent B: "They should show the selling price. Completely different."
EAA: "Completely different, the asking and the selling. I mean what they're selling for now was what they paid three years ago."
EAB: "Four years."
EAA: "Absolutely. They've lost all the money they made in the last three years."
EAB: "Totally."
EAA: "I mean you'd have to be absolutely f$%^&%#g mad to buy now."
EAB: "But people can't sell, hey, because they're not dropping their price, like, 40 percent!"
EAA: "You'd have to be mad. I know okes who are buying, they're fucked."
EAB: "Nice for us, hey?"
[A short embarassed laugh.]

Request For Information: The Majestic - Kalk Bay

Any readers out there have any information on what's going on at The Majestic development in Kalk Bay? I checked it out when it was initially built and the prices were horrendous. Looking at the site I linked to it seems there's still plenty stock left to be sold .

Saturday Open Thread

It's Saturday, which means it's time for our weekly open thread...

Rent Vs Buy: Rondebosch

Purchase price: R680 000. 100% bond: R9 206/month.
Rental: R3 200/month before rates, maintenance and vacancy.

62.24% (R443 642) deposit required to break even on cash flow. 5.65% ROI when paying in cash. 2.48% capital appreciation required with 50% deposit.

Rent Vs Buy: Milnerton - Royal Ascot

Purchase price: R1 180 000. 100% bond: R15 975/month
Rental: R5 500/month before rates, maintenance and vacancy.

65.57% (R773 760) deposit required to break even on cash flow. 5.59% ROI when paying in cash. 2.53% capital appreciation required with 50% deposit.

Our Favourite Simon's Town McMansion Drops The Price (Again)

Our favourite Simon's Town McMansion has had another asking price drop. Back in August it went from R3 600 000 to R3 500 000 (a massive 2.7% price drop!) and has now been dropped to R3 200 000. That's about a 8% asking price drop. I guess these folks have never heard of chasing the market down.

Considering this house looks like it has been sitting empty since February at least someone is taking a bath on this thing.

Thanks to reader GT for sending us the link!

Rent Vs Buy: Malmesbury

We usually don't go this far out of Cape Town but here's a house for sale in Malmesbury, or rather as it says in the ad 22km behind Malmesbury and 6km inland, with an asking price of R990 000. With a 100% bond you'd be paying just over R13 400/month. Or you could rent it for R3 300 a month, just over 3 times the monthly difference (R10 103) between the rental and bond price. Here's the yield and payment graph.

That's pretty bad. A 75% downpayment to break even on cash flow and a just over 4% ROI if you buy in cash. But ignore that because the price of property 100km from Cape Town and 6km from the coast are just set to skyrocket right?

Saturday Open Thread

It's that time of week again, the Saturday open thread.

Simon's Town: Buy The House, Get The Car

Desperation is starting to set in it seems. Here's a 3 bed house in Simon's Town for sale for R1 985 000 and if you buy it you get a free 2000 Land Rover Freelander. Now the car may be free but the insurance and maintenance (and petrol) aren't...




Thanks to reader HJ for the link!

Update: This house is in Glencairn Heights, not Simon's Town. Sorry if I offended any Simon's Towners.

SA Savings Rate Goes Negative

SA saving habits 'unsustainable'

South Africa's saving rate has dropped from 2.7 percent in 2001 to a negative rating of -0.5 percent in the second quarter of this year, the SA Saving Institute said on Tuesday.

Rent Vs Buy: Sea Point Quickie

1 bed flat, R750 000 asking price, R3500 monthly rent.

Saturday Open Thread

It's that time of the week again, the Saturday Open Thread.

ABSA: Forget About 2009

From RealEstateWeb;
Bleak property outlook for 2009 - Absa

Big bank Absa (JSE:ASA) has warned that the property pain is set to continue into next year and said the housing market has cooled off "to levels not seen in many years".

Its October House Price Index, released on Thursday, still shows nominal year-on-year house growth (1,2%), but at its lowest level since January 1993.

With inflation at just over 13%, a little lower than 13,7% year-on-year in September, in real terms house prices in South Africa are falling. The figure for September is -10,1%, said Absa.

Looking at the price trends, said senior property analyst Jacques du Toit, "nominal year-on-year house price growth is at risk of moving into negative territory in the near future".

So if house price growth is still nominally positive, and the trend is for it to move into nominal negative territory and you bought a house, you would in fact be doing nothing more than "renting from the bank" for three to four times the cost of actually renting an equivalent property.

It's Birthday Time In Parklands

Reader Bean Counter writes:

As you know I've been monitoring Remax's inventory for some time now, and the following Parklands McMansions are celebrating their first birthday on the site - for sale since 5 November 2007 (at least - some of them may have been on the market from before I started monitoring).

The lucky 1st birthday losers are as follows (ref number):

300129425 - reduced price from R2.2 million to R1.97 million in July, but it hasn't helped
300124769 - reduced from R1.99 million to R1.59 million in July.
300053213 - no reduction, no action.
300145659 - no reduction, no action.
300126745 - no reduction, no action.
300057755 - this beaut actually raised his price from R1.78 million to R1.85 million in February - yeah, that's really going to help it sell.
300132504 - no reduction, no action.
300147733 - no reduction, no action.
300134038 - no reduction, no action.
And finally, this one - 300114217 - who raised from R749,000 to R760,000 in May - roughly what you'd have to pay me to live in this deeply depressing little piece of sandblown hell.

Thanks for the info BC!

Atlantic Seaboard Hits The Wall

Atlantic Seaboard struggling

The swanky Atlantic Seaboard, which until recently appeared to be reasonably immune to the overall housing slump, is now also being hit by negative sentiment.

New data from Seeff Properties' Atlantic Seaboard office show that sales of sectional title apartments in Fresnaye, Sea Point and Bantry Bay have halved from January to October 2008 (y-o-y).

Seeff sales specialist Adrian Mauerberger says in 2007 around six apartments were sold every month in this area in the price range R2m plus. Atlantic Seaboard apartment sales are now down to an average three per month.

More worrying is the large number of units coming on to the market. According to Mauerberger's statistics, some 117 sectional title apartments are currently for sale on the Atlantic Seaboard. He says given that only three units are selling every month it would take 40 months (or more than three years) to sell all of this stock. "That's assuming that not one further listing comes on to the market.'

Thanks to reader TA for the link!

Saturday Open Thread

It's our weekly Saturday open thread.

Rent Vs Buy: Tyger Valley - Great Expectations

Here's an ad for a 2 bed apartment in Tyger Valley on the market for R1 300 000, or alternately you can rent it out for R10 000/month. But why rent it out for R10 000/month when you can rent an apartment in the same building for 68% less at R4 200/month?

So if you bought the place at R1 300 000 only to find your rental income isn't quite what the owner promised what can you expect? Well if you consider that with a 100% bond the difference between the bond payment and the rent is 3.2 times the monthly rental (R13 400/month) then you know it's going to be pretty bad.

Plonking down R1.3 million gets you a ROI of 3.88% which is about 8% below inflation. To be cash flow positive you have to put down just under R990 000 (a 76.14% downpayment).

More Plunging Prices From Repo Auctions

Reader TA has been at another bank repo auction and sends in the following:

Parklands

Parklands - 3 bedroom/2.5 bathroom townhouse(only 12 months old) - sheriff auction price R583000 - Sold in 2007 for R879 000 by developer
Parklands - 3 bedroom / 2.5 bathroom townhouse - sheriff auction price: R379 000 - exact same sized property in same complex selling through Remax for R749 000
Parklands - 3 bedroom/ 2 bathroom townhouse - sheriff auction price : R480 000 - Open market value: about R650 000 (currently being rented out for R4600)
Parklands - 3 bedrooms/2 bathroom townhouse Sheriff auction price: R515 000 - Open market value: about R699 000 (currently being rented out for R4800 hence its high price)
Parklands - 3 bedroom / 2 bathroom freestanding house (no garage): R490 000 - Open market value: about R650-699 000 (currently being rented out for R5000 per month)
Parklands - Plot - sheriff auction price: R350 000 - outstanding bond: R590 000 odd

Table View

Heron Cove complex - 2 bedroom / 1 bathroom - sheriff auction price: R252000 - Open market value: about R399 - 429 000
Heron Cove complex - 3 bedroom / 1 bathroom - sheriff auction price: R355000 - open market value: about R449 - R499 000 - Oustanding bond value -R550 000 (achieving a monthly rental of R3500 per month)

Bloubergstrand

2 bedroom/ 1 bathroom apartment - sheriff auction price: R424 000 - open market value: R650 000
2 bedoom/ 2 .5 bathroom 127 square meter luxury apartment on Blouberg beachfront - Outstanding bond: R1.9 million (registered in 2005)- sold by sheriff for R1.450 million

Parow / Loevenstein

2 bedroom/ 1 bathroom duplex apartment with great view - Highest bid: R381 000 - Nedbank wanted much more as bond was over R550 000 so no sale.
3 bedoom/ 2 bathroom/double garage/pool - recently renovated house in pristine condition with seperate 1 bedroom granny flat on 900 sq/m plot - Sheriif auction price R866 000 - Outstanding bond: R1.5 million - open market value- R1.3 million

Goodwood

2 bedroom / 1 bathroom apartment (1 years old) - sheriif auction price: R330 000 - open market value: R499-550 000

Sybrand Park

4 bedroom/3 bathroom 250 sq meter house on 850 square meter plot with pool, garage for 4 cars, offstreet parking for 6 cars / had a granny flat that was easily 80 square meters in size- sheriff auction price: R790 000 - outstanding bond value: R1.6 million (registered in 2004) - Open market price: R1.5 million odd

Cape town CBD

Batchelor apartment (40 square meters) - sheriff auction price: R371 000 - similar sized apartments in building selling for R599 - R620 000 - Bond with FNB registered in 2005 was R600 000.

Zonnebloem

3 bedroom/2 bathroom corner unit duplex in Cantebury Square with garage and big garden - sheriff auction top bid: R895000 - no sale as Standard Bank wanted more - Bond value: R1.9 million - exactly same sized property selling for R1.499 million.

South Peninsula

Coniston Park / Retreat- 3 bedroom/ 2 .5 bathroom freestanding brick face home with double garage - Sheriff auction price: R315 000 - Open market value: R550-599 000 - achieving a monthly rental of R4500

Costa Da Gama (opposite Marina Da Gama) - 3 bedroom/2 bathroom freestanding home with garage (about 2 years old) - Sheriff auction price: R270 000 Open market value: R499 000 - R529 000

St James - 2 bedroom/2 bathroom 80 odd square meter sea facing apartment in the St James Terraces - Sheriff auction price: R 1 million - unit directly underneath selling for R1.499 million but has a small garden

Maitland - the exception!

3 bedroom/2 bathroom freestanding trashed house with a garage that was occupied by 30 or so Congolese or Nigerians - somehow this property was sold for R450 000 when the oustanding bond was R280 000. There were two shady characters bidding hell for leather so they probably knew something everybody else didnt.

What I mean by open market value is the current value at this point in time and taking the current depressed market conditions into account.

Its quite apparent that the market has tanked judging by the prices being achieved at the sheriff's auction. It must be said that there are numerous bidders at these auctions and the bank's representative does get involved if the bids are too low.

Another interesting observation is that the banks, with the exception of Nedbank, are willing to accept the fact that the final bid is only 50-60% of the oustanding bond value. It seems the banks know that prices are going down and they are selling cheap to cut their losses. That and banks dont want to be landlords of distressed properties.

Bond Defaults Up 21.5% From 6 Months Ago

Unpaid home loans soar

In the third quarter of this year 70 000 homeowners were more than two months behind with their bond instalments - 21.5% more than in the first quarter.

At the same time, 25 000 homeowners were more than four months behind and in danger of losing their houses. This figure shot up from 18 000 in the first quarter.

These shocking figures have become evident from the Alliance Group's latest research for the third quarter.

CE Rael Levitt says that indications are that the numbers will climb. "The residential market is slipping backwards and, if the macroeconomic climate weakens further, more and more homeowners will experience serious mortgage stress."

He says that stressed sales being handled by the group are growing 20% month by month.

Rent Vs Buy: Blouberg - A Loser All The Way

Here's possibly the worst 'investment' I've ever seen advertised in Blouberg. A 2 bed/2 bath apartment on sale for R1 250 000,a 'winner all the way' and 'IDEAL FOR INVESTORS', but which rents for... wait for it... R3 500/month. To put that in perspective the payments on a 100% bond is R16 923/month which means it would be 4.8 times cheaper to rent the place than buy it. The difference between the bond and the rental is R13 423/month alone, and if you were diligent and saved that money you'd be sitting with over R160 000 in your bank account at the end of the year.

The yield graph is as to be expected, horrendous:


So just to break even on cash flow you need a 79% downpayment, over R990 000. Paying for the place in cash get you a 3.36% return on investment. I think there are transactional accounts that earn more interest than that.

Saturday Open Thread

It's really Friday when I'm posting this but I don't plan on switching my laptop on during Saturday. Got a burning issue you want to discuss? Post it here, I'll be up Lion's Head.

Bank Repos Kick Into High Gear

Since the 20th bank repossessed properties have been dumped en masse onto Gumtree. Not sure if it's ABSA, who are also trying to get rid of property via Auction Alliance, or one of the other big 4.

Well I guess the banks could always just hold a raffle...

Tamboerskloof: Apartment Up For Raffle - The Desperation Kicks In

Got a bond on an 'investment' flat but the rent isn't covering half of it? And when you put it on the market not even the next door neighbours came to show days? Then it's time to hold a raffle!

raffle of apartment R 1500

Fully Renovated Stylish Apartment for Sale.- R 1500 - Yes thats right - one thousand five rand only - and I pay for ALL the transfer/duty/lawyer costs in total into your name !

I think desperate housesellers tried this in the US a while back and it ended in tears and disappointment. I predict the same here.

Besides this scheme probably being illegal in SA (I do believe there are all sorts of hoops charities have to jump through to hold a raffle/competition) anyone who does buy into this shouldn't be too surprised to never hear from the person running the competition, only to find the apartment legally sold via standard channels. If you're desperate enough to hold a raffle for a flat you're desperate enough for that.

Thanks to Reader AN for the link.

Saturday Open Thread

It's a beautiful day in Cape Town. What better time to stay inside and argue with strangers on the internet.

This Is Why I Say...

...don't buy anything built in the last five years.

Thanks to reader RF for finding an actual picture of the collapse.

Hermanus: 1/2 The Town For Sale

Reader GH writes:

Just came back from a few days in Hermanus. I'm not lying when I tell you that virtually every 2nd house is for sale.

Anyone out that side got more information?

ABSA: Extra Money In Your Bond? Not Anymore.

About 10 people have emailed me this story from RealEstateWeb today: Absa home loan shocker. ABSA are now preventing people with certain savings accounts linked to their bonds from withdrawing any extra equity from those bonds without going through an application and jumping through some hoops.

So what's going on here? Well with close to 80% of the mortgage market ABSA have a lot to lose if property prices go south any further and defaults increase. They're already auctioning off repossessed houses as fast as possible but this action means it might not be fast enough. It would seem they expect to be the new owners of a chunk of SA realty soon and are trying to reduce losses at the inevitable discount rate bank repo auction by keeping the extra cash paid into the bond.

Worst Investment In Hout Bay Surprisingly Still On The Market

What a surprise! The worst investment in Hout Bay that we last saw in May is still on the market. To remind you all it's a 3 bed townhouse on the market for R6 million which is tenanted for 5 years (that's not a typo... it really is 5 as in f-i-v-e years) at R28 500 a month. Which means that with a 100% bond over the five year period of the lease you will end up losing R3 163 920. Even if interest rates had to magically drop to 10% for the next 5 years you'd still end up losing R1 764 060 and you'd only need a deposit of R3 000 000 to break even on cash flow.

What a deal. I'll take two.

Investors Dumping In Strand

Strand is a suburb with some of the worst rental yields in Cape Town, probably not helped by the 45 minutes it takes to drive there, and that's when there's no traffic. So it's not suprising with the stagnating market to see investors beginning to exit ASAP.

11 Investment Properties in security complex for sale in Cape Town, Strand, South Africa.
1. 2 bedroom units
2. Signed leases with tenants in occupation
3. One years capital growth
4. All are managed by rental agents

Dumping 11 units in the same complex? The other residents must be absolutely thrilled.

Bank Repo Auctions: Prices Plunge

Reader TA writes:

I've been attending quite a few repo residential auctions and thought i'd send you some figures:

San Marina (Marina Da Gama) - 3 Bedroom / 2 bathroom house
Agent selling price: R749 000
Sold at auction: R425 000

San Marina (Marina Da Gama) - 2 Bedroom / 1 bathroom house
Agent selling price: R599 000
Sold at auction: R415 000

Costa Da Gama - 2 bedroom/ 1 Bathroom house
Agent selling price : R529 000
Sold at auction: R340 000

Pinelands - 2 bedroom flat (92 m/sq)
Agent selling price: R799 000
Sold at auction: R514 000

Rondebosch East 2 Bedroom flat (18 months old)
Agent selling price: R585 000
Sold at auction: R300 000

Table View 3 bedroom/ 2 bathroom house
Agent selling price: R795 000
Sold at auction: R 438 000

Durbanville 4 Bedroom / 2 Bathroom
Agent selling price: R2.25 million
Sold at auction: R1.05 million

Pinelands - 8 bedrooms/ 4 bathrooms (400 m/sq house on 900 m/sq plot in pristine condition) sold for R1.4 million - conservative value by Sheriff was R2.7 million ( a little optimistic but never the less)

Agent selling price is the price the property was going for before the house got repo'd. The auction price is the price knocked down by the Sheriff.

Saturday Open Thread

Got a topic to discuss we haven't covered? This the thread for it?

Rent Vs Buy: Royal Ascot

Here's a 2 bed/2 bath apartment for sale in Royal Ascot(Milnerton) on sale for R1 195 000 with a current rental of R5 500/month fixed for the next year. With a 100% bond the monthly payments are R16 178/month leaving you with a shortfall of over R10 000/month. Here's the payment and yield graph.



Buying in cash gets a return on investment of 5.52%, less than half of inflation. A 66.01% (over R780 000) deposit is needed to be cash flow positive with 2.6% capital appreciation required to not lose any money even with a 50% dowpayment.

70 000 South Africans In Mortgage Arrears

Property24 reports:

Mortgage defaults surge

An increasing number of homeowners are defaulting on home loan repayments, with an estimated 70 000 South Africans currently in mortgage arrears, latest figures from the Alliance Group shows.

Alliance Group CEO Rael Levitt says their research shows that the number of homeowners who have defaulted on monthly mortgage repayments by up to two months have increased tenfold in the 12 months to end-September 2008.

How To Read The Rent Vs Buy Graph

I regularly get email from readers asking how to interpret the Rent Vs Buy graphs we post. To avoid further confusion here's an explanation. First here's a sample graph: a property on the market for R1 000 000, with a rental of R5 000/month, a current bond interest rate of 15.5% and a bond period of 240 months (20 years).



The first thing to remember is that this is two graphs superimposed on top of each other. The first graph is the Monthly Payment/Cash Flow graph which uses the left hand side Y-axes.

The blue Monthly Payment graph is the amount needed monthly to pay off the bond. For example with a 25% downpayment of R250 000 we see that the bond payment is R10 154/month. The purple Cash Flow graph is what is left over when the bond payment is deducted from the monthly rental. In this case with a 25% downpayment every month we will still be required to pay in R5 154/month to cover the shortfall. As indicated on the X-axis we will only be cashflow positive (CF+) with a downpayment of 63.07%, which is indicated by the Cash Flow graph crossing the lower X-axis.

The second graph is the Return On Investment/Capital Appreciation Required graph and it uses the right hand side Y-axis. The red Return On Investment graph shows what the annual percentage return is on the money invested in the property. In our scenario with a 25% downpayment we see that the ROI is about -25%, which means that covering all the shortfalls will have lost our buyer R62 500 of his downpayment. To make up that shortfall we look at the green Capital Appreciation Required graph, which shows that to cover the shortfall of R62 500 and not lose any money the property needs to appreciate by just over 6%.

Auction Alliance: New Record Number Of Auctions!

Auction Alliance has 252 auctions set for October, 40 more than the previous record from last month's 210, which was up from 120 the same time last year!. That's close to a 20% increase in a single month!

Saturday Open Thread

It's Saturday! Which means it's time for our weekly open thread.

Rent Vs Buy: Bellville - Calling All Idiots

Here's a house in Bellville which is "CALLING ON INVESTORS ONLY!!". It's on the market for R1 600 000 and has a current gross rental income of R6 000/month. I'm not going to even bother doing analysis here, just take a gander at this awful payment and yield graph.

Buy This House... Or I'll Raise The Price

Here's a house for sale in Muizenberg;

Join the mad rush to view this bargain property! The owner has decided this is too much of a steal.

Instead of increasing the price all at once, however, it will be going up steadily every week until a sale is achieved! Don't miss this opportunity to get in on the ground.

Because if there's one thing that will sell a house in a declining property market it's a threat that the price is going to go up...

Weekend Reading: Rental Housing Report

Class, here's your weekend reading: The Rental Housing Report from the Social Housing Foundation.

Auction Alliance Breaking Records - Auctions Up 70%

Auction Alliance will be auctioning off +-210 properties this month, the first time they've broken 200 ever. This is a 70% jump from last year September when only 120 or so properties were on the block. A significant chunk of the residential properties are part of ABSA's deal with Auction Alliance through the Rapid Auction Program, a scheme helping to prevent ABSA become, as one source states, 'the biggest landlord in the country'.

Saturday Open Thread

Time for our Saturday open thread...

ABSA Finally Releases House Price Index: Down 9.6% In Real Terms

In our last Saturday Open Thread a reader wondered why ABSA had delayed releasing their August house price index report? Well he emailed later:

I raised the issue that the Absa house price index was late. As you can see they were just delaying the bad news. 9.6% decrease in real terms of large segment housing. Check out the link

Trevor Manuel Quits Along With 10 Senior Cabinet Ministers

Trevor Manuel and 10 Cabinet ministers quit

Finance Minister Trevor Manuel is among 11 Cabinet ministers and three deputy ministers who have resigned.

Their letters of resignation had been received by President Thabo Mbeki "which, regretfully, he has had to accept", the presidency said in a statement on Tuesday.

They included Deputy President Phumzile Mlambo-Ngcuka, who earlier in the day announced her resignation from the position, to which she was appointed after ANC president Jacob Zuma was released from his responsibilities as deputy president in 2005. One of the reasons she gave was to allow a new president the opportunity to choose their own deputy.

The other resignations were of the Ministers of: Defence, Mosiuoa Lekota; Minister in the Presidency Essop Pahad; Intelligence, Ronnie Kasrils; Correctional Services Ngconde Balfour; Public Enterprises, Alec Erwin; Science and Technology, Mosibudi Mangena; Public Works, Thoko Didiza; Provincial and Local Government, Sydney Mufamadi; and Public Service and Administration Geraldine Fraser-Moleketi.

So long Trev!

CPIX Continues To Climb

Surprise! CPIX is continuing to climb despite every bank economist telling us that the inflationary peak had been reached.

Consumer inflation seen accelerating

The consumer price index excluding interest rates on mortgage bonds (CPIX) should accelerate in year-on-year terms to 13,3% in August from 13% in July, RMB financial markets research said on Monday.

RMB forecast a month-on-month increase of 0,5% in August CPIX.

"The upward pressure on the index will probably come from higher processed food prices and residual increases in electricity tariffs and housing costs," RMB said.

Rent Vs Buy: Cape Town CBD - R2.4m Invested, R0 Returned

This loft is on the market for a cool R3 400 000. It attains a gross rental of R15 000, minus rates/levies of R2 000 to give you a net rental income of R13 000/month. With a 100% bond the difference between the monthly bond payment of R46 031 and the rental income is R33 031/month more than twice the rental attained every month!

Now before we go to the payment and yield graph click on that picture on the left. That's what 3.4 bar is going to get you. I've seen warehouses in Montague Gardens look more homely.

Here's the payment and yield graph:

Paying for the place in cash will get you a 4.59% return on investment, about 7%-8% below inflation. With a 50% deposit you still need 3.54% capital appreciation not to lose any money and if you want to be cashflow positive well you're going to have to put down a whopping 71.76% downpayment!! That means you have to invest R2 439 797 to make R0 back. What a deal, I'll take two!

The Great South African Real Estate Agent Cull: 18 000 Gone

Credit Act takes toll on 18 000 estate agents

As the interest rate hikes bite, the number of potential home buyers has halved and houses are spending double the time on the market than previously, spelling hard times for estate agents.

At least 18 000 of them have lost their jobs in the last year as they struggled to sell over-priced homes in a climate in which consumers can't afford to spend.

Estate Agency Affairs Board (EAAB) chief executive Nomonde Mapetla said the economic slow-down has resulted in the number of estate agents registered with them dropping from about 78 000 last year to 60 000.

By some estimations SA can only support 30 000 - 40 000 estate agents, which means there's another 20 000 to go.

And of course the blame for everything goes to the NCA not the more obvious choice of ridiculously high property prices requiring a takehome pay of close to R40 000 a month to afford the average house.

Business Day: We're Notoriously Gloomy, But Correct

Business Day reads our blog it seems:

WITH more than half of employed South Africans now estimated to have impaired credit records due to late or nonpayment of debt, debt counselling company Consumer Assist said recently SA needed a further 2500 debt counsellors to cope with a looming consumer crisis.

That prompted a response from one notoriously gloomy (and so far correct) blogger on the Cape residential property market.

Writing under the pseudonym of CT Bubble, he suggested that there would soon be plenty of unemployed estate agents out there.

These newly jobless agents could not only find new careers as counsellors but also help fix some of the trouble they caused in the first place when they encouraged people to buy what they couldn’t afford.

Ouch.

Here's original blog post they're talking about: Demand For Credit Counsellors Skyrockets.

Saturday Open Thread

Time for our Saturday Open Thread!

Rent Vs Rent: De Waterkant

Aaaah the De Waterkant, the land of shitty rental returns. Why rent a 3 bedroomed house for R20 000/month when you can rent a 3 bedroomed house for R9 500/month. Now while the first ad might be for a furnished home and that ads to the rental there's no way it can account for 110% difference in rental returns.

FNB: Bad Debts Up 180%!

Moneyweb reports:

FirstRand reports bad debts at R4,7bn

FirstRand Ltd, South Africa's second-biggest banking group by assets, reported a 13 percent fall in full-year normalised headline earnings on Tuesday, and said credit market conditions remained challenging.

The firm, the last of the country's four big banks to report full-year results, said normalised headline earnings for the year to end June were 8.8 billion rand.

FirstRand said it had been hit by slower asset growth and higher bad debts at its retail units. Bad debts at its retail unit were at 4.7 billion rand versus 2.6 billion rand in the previous corresponding period.

Rent Vs Buy: Plattekloof - R2 Million Invested = R0 Returned

Here's a house in Plattekloof on sale for R3 395 000 with a rental income of R18 000 (despite the ad saying it's newly built and looks empty). That means with a 100% bond the difference between the monthly bond payment of R45 964/month and the rent is R27 964/month. If you're fully geared you'll be losing over R335 000 every year! Here's the payment and yield graph:



So paying for the place in cash gets you a mediocre 6.36% return on investment, about 6% below inflation. With a 50% deposit you still need 1.76% capital appreciation to not lose any money at all and to break even on cashflow requires a deposit of over R2 000 000! Who would've thought it would have worse returns than a flat in Ocean View Drive. Once costs are taken into account such as maintenance, vacancy and rates the returns are even worse.

Merrill Lynch, Lehman Brothers No More!

What the HECK just happened in America?!? Two major investment banks have been dismantled in a little over a weekend. Lehman Brothers is about to enter bankruptcy and Merrill Lynch is to be taken over by Bank of America. Has this EVER happened before?

Saturday Open Thread

Time for our weekly Saturday open thread.

FNB: Even Rental Activity Is Declining

Renting the way to go

The decline in the number of first-time home buyers has made the rental option more attractive, but people looking for homes to let are limited by affordability, say estate agents.

The FNB Residential Rental Barometer for the second quarter of 2008, released yesterday, showed a decline in activity from a rating of 8.4 to 7.6 . Agents who were polled for the national index said only 59 percent of rental properties on their books were snapped up in less than a month, compared with the 75 percent take-up recorded in the first quarter of the year — a 16 percent decline in activity.

The main reasons given for slowed activity was a 7.43 rating of landlords asking high rentals, and a 6.73 rating for the letting market being a tenants market.

Please note the sentence that I emphasised in the above quote. With the property bubble collapsing landlords (especially the recent buy-to-let crowd who have been losing thousands every month covering bonds that rentals don't pay for) have been hoping that with less property purchases there would be more demand for rental and so rentals will go up. Well as I expected the opposite has happened because in an economic downturn raising rentals, especially with reliable tenants, is a one way ticket to an empty 'investment' property.

Rent Vs Buy: Diep River - Great Opportunity To Lose Money

Here's a 2 bedroomed flat in Diep River on sale for R925 000 with a current rental of R4 800. "GREAT OPPORTUNITY FOR INVESTORS!" shouts the ad. That means with a 100% bond you'll be losing R7 723 every month, which is about 1.6 times the gross rental income. Here's the payment and yield graph:



So paying in cash gets you 6.23% return on investment a good 6% below inflation. With a 50% deposit you still need capital appreciation of 1.9% to not lose any money and to get cash flow positive on the rental income alone requires a 61% downpayment of over R570 000. Take into account ownership cots: rates, levies, maintenance and vacancy and returns are even less.

Clem Sunter: Things Are Going To Get Very Bad

Sub-prime at SA's door

"We haven't seen this since late 1970s," he says.

Sunter points out that one of his friends who wants to retire in the UK is trying to sell his home for four-million pounds, but the best offer he has received is just 1.6-million — 40 percent of the asking price.

"It has even spread to South Africa — you can't sell a house here," said Sunter.

"Things are getting very tough," he said.

"We had minor recessions in 1998 and 2001 — but nothing like we are seeing now," he said.

US Housing Market Nationalised

The US government has taken over control of Freddie Mac and Fannie Mae, who between them own 50% of all mortgages in the USA. In other words, the US housing market has been nationalised to prevent a collapse. So much for a free market eh?

Saturday Open Thread

Got something to discuss that we haven't covered? It's time for our Saturday open thread.

Rent Vs Buy - Bergvliet: Dreams Turn To Nightmares

This house in Bergvliet on the market for R1 850 000 is described as an "INVESTORS DREAM" and is tenanted at R8 500 a month. Buying this on a 100% bond means that the monthly bond payments will be R25 046 a month and the difference between that and the rent is R16 546, nearly twice the rental itself. Here's the payment and yield graph:


If you're the buyer you need to put down a massive 2/3 downpayment (over R1.2 million) to break even on cash flow and even with a 50% downpayment you need a capital appreciation of 2.61% to not lose any money at all. Paying for the place in cash gets you a dismal 5.51% return on investment.

Rent Vs Buy - Gardens Commercial Property

Here's a house in Gardens that has been turned into a small office. It's on sale for R3 400 000 and is tenanted on a two year lease at R18 000. Now before we do anything we need to remember a few things. Firstly this is a commercial property which means that a 33% downpayment is almost certainly mandatory. Secondly because this is commercial property, cash flow is king! Capital appreciation shouldn't even enter the equation.

So what's the yield and payment graph on this place. Let's check it out:


So putting down the minimum required downpayment nets us -13% return on investment, as every month you'll be paying in over R10 000 to cover the bond. Paying for the place in cash gets you 6.35% ROI, about 5%-7% below inflation.

Capital Appreciation Clowns Revealed

This ad for a bachelor flat in Long Street on sale for R399 000 is indicative of how some people (Capital Appreciation Clowns as they've been christened on Realestateweb message boards) have been buying property and relying on nothing else but capital appreciation wheb buying property:

Bachelor flat on Long Street. Superb position. Keen tenants paying R3000 per month - it is a lower than average rental because we told them we were going to be selling. Selling at way under value. Our bond is R450000.00. Remax gave a written valuation saying we should be marketing the flat at R530000.00. Reasonable offers will be considered.

The bond is R450 000 with a tenant paying R3 000 a month, which means every month they're currently paying in R3 092 to cover the difference between the bond payment (R6 092) and the rent, and remember that's gross rental - after expenses like rates, levies and other costs decrease the net rental income.

But you say "The seller is a victim of high interest rates!" but even if we reduce interest rates to 10%, the record lows they reached a few years ago our the seller was still losing R1 342 a month from paying in the difference to the bond.

If the R450 000 bond is indicative of the purchase price of the apartment then we are looking at a potential 11% nominal price drop. Factor in inflation and the loss is closer to 20%.

IOL Wakes Up: Yeah We Might Have A Property Problem

I believe this is the first time I've seen an article on the IOL (South Africas' largest newspaper groups) homepage talking about there being problems in the property market.

Property market in crisis

After a four-year boom during which prices soared, the property market is in crisis, with consumers facing a desperate struggle to get finance to buy or build homes.

Almost 40 percent of would-be borrowers have had their home-loan applications rejected by the four biggest banks since the beginning of the year as the credit crunch, sparked by stringent lending laws, rising inflation and higher interest rates, bites ever harder. Rejection rates have reached record highs.

...

With inflation reaching 13 percent last month, consumers are under pressure - they have racked up more than R1 trillion in household debt, up from R378,5-billion in 2002. They are now being forced to cut back on spending because of higher interest rates and the rising cost of living.

Household debt has TRIPLED in 5 years! Sweet googly moogly that is treading some dangerous water. But of course never fear... the World Cup will save us!

"However, the 2010 soccer World Cup could offset the current negative view of South Africa as an investment destination and this could drive momentum in the residential property market," he said.

Saturday Open Thread

Time for our weekly open thread. Got anything you want to discuss we haven't covered?

REMAX: Sales Are Down 36% - 50%

RealestateWeb reports:
SA's property market crash: grim new stats

There has been a 38% year-on-year decrease in the amount of national property sales transactions (across all property price brackets) between January - July 2008, compared to the same period 2007.

Total properties valued under R499 000 sold this year is 36% less than in 2007. Overall, the amount of sales transactions has decreased year-on-year by 42% for properties priced between R500 000 - R749 000; 39% for properties in the R750 000 - R999 999 price bracket, and 33% for properties with a R1 million to R1, 499 999 value.

In the higher price brackets, the largest decrease is recorded in the R1,5 - 2,5m price bracket: total properties sold so far this year is almost 50% less, compared to properties sold in this value bracket in 2007.

Rent Vs Buy: Protea North Wharf - Invest R1.4 Million, Make R0

The Protea North Wharf is another one of those hotels where the hotel owners get their upfront costs subsidised by "investors" who buy rooms (or rather some vaguely defined 'right' to the rooms income) and then get a share of the profits. Now the market for re-selling these 'rooms' is pretty much non-existent so I'm not so certain this 'room' at the Protea North Wharf on the market for R2 200 000 will sell for anything close to that. The ad claims the "average rental" is 10 000 a month which means with a 100% bond the deifference between the monthly bond payment (R29 785) and the rent is 1.9 times the rental itself (R19 785). Let's look at the payment and yield graphs:

So if you plonk down the full R2.2 million asking price in cash you can expect 5.45% return on investment, less than half of the 12%-13% you could get just leaving your money in a fixed deposit. To break even on cash flow requires a 66.43% downpayment, over R1.4 million, and even with a 50% downapayment you still need 2.67% capital appreciation to not lose any money at all.

There are a number of other reasons why this place will probably wind up earning a lot less in income. For one the hotel takes a cut of the rent (can be as high as 40%), and it's not clear here if the R10 000 a month is before or after that is taken into account, although we have assumed it's after. Also this is a hotel room which requires constant maintenance and cleaning so expect levies and maintenance charges to be higher than normal. And as I mentioned before the resale market for these is virtually non-existent.

Trevor Manuel: Stop Spending Money You Don't Have

'S Africans act like Americans'

Finance Minister Trevor Manuel said on Tuesday evening that South Africans were not adequately saving for tomorrow and preferred instead to consume in a US-like manner.

He said households were highly indebted and consuming in a manner that mimicked patterns in the US.

"They live on debt and are highly leveraged. It is not a basis of stability," said Manuel.

"If they are borrowing for consumption then there is something wrong in the equation," he emphasized.

Manuel said inflation targeting was a necessary policy as inflation hit the poor and those relying on a fixed salary the hardest and thus price stability was needed.

Urgent Property Sales Continue To Increase

Back in December I noted how the number of ads containing the word "urgent" had gone from 1 ad every 3 days in August 2007 to 20 ads in a a few days on Gumtree. Today I tried it again and there are 16 ads containing "urgent" in the past 24 hours alone.

Saturday Open Thread

Got something to discuss that we haven't covered?

50% Of Employed South Africans Can't Pay Debt!!!

Sweet googly moogly! Things are going to get crappy for a lot of people.

Six million can’t pay their debts

Experts told The Times that the economic “perfect storm” — high inflation, including food and fuel, and the resultant interest rate hikes — have driven six million South Africans to the brink.

Rajeen Devpruth, manager of statistics and research at the National Credit Regulator, said that by the end of last year, 6.3 million South Africans had “impaired credit records”, which means their payments were more than three months in arrears or judgment had been obtained against them for outstanding payments.

That’s half of the 13 306 000 South Africans currently employed, according to the latest Labour Force Survey in September 2007.

I Know! Let's Drop The Price 2.7%!

Our favourite Simons Town McMansion foreclosure has had a price drop! Instead of R3 600 000, the've slashed the price to R3 500 000! That's 2.7% off! It's a bargain now!

Johan Rupert: Downturn Will Last 5 - 10 Years

Rupert remains a bear

Remgro chairperson Johann Rupert told shareholders at the group's AGM in Stellenbosch on Thursday that the downturn globally - triggered by the sub-prime crisis - could be a prolonged affair.

Rupert, who warned of the financial crisis early last year, said the downturn - or recession - could last between five to 10 years as banks and major financial services companies cleaned up their operations.

"It's been a bit like getting overweight from eating, drinking and smoking too much, and then been told you have to run a marathon. For some it would take three years just to walk a marathon. So now you have frantic attempts by investment banks to get assets off their balance sheet."

"The best we can hope for - and it won't be quick - is that the system won't collapse in the process."

Ballinrobe: Will They Ever Finish It?

Reader PJ writes in:

I drive past Ballinrobe, a new development being built on High Level Rd in Sea Point every day. The site was empty for at least a year before they started building and in the past year they have been building all they seem to have put in is some foundation pillars. I have yet to see more than 4 workers on the site at any one time. The past two weeks all I saw was two workers who didn't seem to be doing much.

The original completion date was supposed to be June 2008 but they've pushed it back to June 2009, although at the rate they are going June 2010 seems more realistic. The sign on the site claims it's 70% sold, 100% I would guess are speculators. This place must've gone on sale in 2006 at the height of the boom and is going to be completed right in the middle of the property bust. If anything with the lack of workers and progress it looks to me like they're trying to draw out construction so it's completed when (they hope) the property market recovers.

Any readers out there have any more information about this place?

Demand For Credit Counsellors Skyrockets

Thousands more debt counsellors needed

South Africa needs 2 500 more debt counsellors to cope with its growing consumer crisis, debt counselling company Consumer Assist said on Wednesday.

The company's chief executive officer Andre Snyman in a statement said: "The counsellors were needed "to cope with the needs of more than six million indebted consumers, who are losing homes at the rate of 2 000 a month and 6 000 cars a month",

Well there's plenty of estate agents about to hit the pavements due to the "Great South African Estate Agent Cull" so there's one possible source of candidates. They can help their clients who they advised to get into debt in 2006, to get out of it in 2008.

REMAX CBD Inventory Jumps

Does anyone out there track the REMAX inventory in the City Bowl? According to PropertyGenie their inventory has grown by nearly 200 properties in the past week alone.

Update: Seems to have been a computer glitch.

The Estate Agent Cull Hits Sea Point

The Atlantic Seaboard is supposed to be one of the hot spots of the property market in South Africa, supposedly immune to the turbulence elsewhere. But down on the street it's not so rosy. Reader PJ writes:

Took a walk down Sea Point Main Rd and saw that two agencies have recently closed (International Realtors, Wendy Machanik Properties) and one moved to a smaller office (Lew Geffen Sotheby's).

Asking Prices Drop - Vredehoek: 31% (R400 000+) Price Drop

Here's an ad from April for a one bedroomed apartment in Vredehoek:

Charming one bedroom apartment in secure, small, upmarket and sought-after block. Private garden with views of city and Lion's Head. Secure off-street parking

And here's an ad from July for seemingly the same flat (same pictures, almost same description):

Beautiful sunny one bedroom flat with private garden. Small, secure and upmarket building, Vredehoek. Undercover, secure parking. Views of the city and Lion's Head.

The only difference, is the asking prices. The first ad had an asking price of R1 300 000, the second had an asking price of R895 000.

Now that original R1 300 000 asking price was probably never going to be reached but it just goes to show the 'wealth entitlement' people had. They deserve that million rand asking price damn it! It doesn't matter what people can afford!

Saturday Open Thread

Want to talk about something we haven't covered? It's time for our Saturday open thread.

I Know! Let's Drop The Price 2%!

Folks, if it's not going to rent at R5 000 a month, it's not going to rent at R4 900 a month.

FNB: Thank Us Later For Denying You A Bond And Losing Your Deposit

If you put down a deposit on a property and FNB reassessed your loan and denied you your bond causing you to lose your deposit, FNB says that you should thank them because in actual fact you probably were going to lose a lot more money later on:

Some home buyers could lose deposits

Kleynhans said it was possible some customers might lose their deposits on houses if they did not get the bond.

But, he said, the loss of a R30 000 or R50 000 deposit might "in the grand scheme of things" be better for the applicant than a much bigger loss if the client could not service the bond.

It was possible that if the customer was later forced to sell the property he could find himself with a shortfall of R200 000.

Let's say that R50 000 was a 10% deposit. That means the selling price was R500 000. If there's a shortfall of R200 000 then FNB are seeing a 40% nominal drop in house prices. Ouch.

Standard Bank: Our Bad Debts Are Rising

Standard Bank Q1 normalised headline EPS up 7%

STANDARD Bank posted a 7% rise in first-half normalised headline earnings per share (EPS) to 481,8 cents today, but said rising bad debts meant it could not give full-year guidance.

Rent Vs Buy: Strand - Invest R430 000 And Make Nothing

I thought small bachelor flats were the place to go for high yields? This bachelor flat in the strand is on the market for R599 000, while it currently commands a monthly rental of R2 200 a month. That means that with a 100% bond the difference between the monthly bond payment of R8 109/month and the rent is a whopping R5 909, nearly 2.7 times the size of the rent itself! Here's the (dismal) payment and yield graph:

Right so buying the place in cash gives you a fantastic 4.41% ROI, only about 7% below the official inflation figures. You break even on cash flow with a massive 72.87% downpayment of over R430 000.

The Ugliest House In Cape Town

I think I've found it and it's going for a song at R14 500 000 (available for R2 million cheaper at R12 500 000 over here). Have a look at this 3 storey monstrosity:

What the hell is that? Seriously it looks like something I used to build with Lego when I was 5. I particularly love how the entire property is paved to remove any semblance of greenery (except for that horrid paint job). I hope the architect ain't putting that on his CV.