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.