Rent Vs Buy: Tamboerskloof - An 'Asset' Shouldn't Cost You R9K/Month

So you're thinking of buying an investment property? How about this 3 bed apartment in sunny Tamboerskloof on the market for a mere R1 690 000 and luckily it's renting for R7 000/month till November 2011. Or rather it's renting for R7 000/month gross, take away rates and levies of R1100/month the net rental income is R5 900/month.

Now with a purchase price R1 690 000 your monthly payment on a 100% bond is R15 205/month (and that's with 30 year record low interest rates) and the difference between rental and bond payment is R9305/month, over 1.5 times the net rental. Added to that the transfer costs are R120 000, nearly 2 years (20 months to be exact) of net rental income!!!

Here's the yield and cash flow graphs:

Right so if you put down the entire R1.69 million you can look forward to a max ROI of 4.19%, a ROI you'd get if you dumped all your money into a transmission account. To break even on cashflow a deposit of over a R1 000 000 is needed. Even putting down a hefty 50% deposit still requires 1.21% capital appreciation to not lose any money.

Christmas Open Thread

It's Christmas and time for the Saturday Open Thread.

Dear Agents: Please Try Harder - Claremont

If you're selling a house with a pool, please make sure the picture you post of said pool actually looks like a pool and not a mosquito ridden swamp:

Stunning!

Camps Bay: Nothing Says Class Like a Chrome Pole

So I'm busy trawling through the latest property releases on the market and come across this stately Cape Dutch style mansion in Camps Bay (asking price only 25 bar).

That's it on the left, looks pretty classy eh? It looks refined, stately. Dare I say it looks decidedly old money in the middle of noveau riche Camps Bay. Any minute you expect a dude with a monocle to come sauntering out in a tweed jacket saying things like 'Pip pip cheerio' and 'Good help are so hard to find these days'.

And then I came across this picture:



Now unless my eyes are deceiving me in my old age, that is a stripper pole mounted on a fully mirrored base, conveniently placed in front of another massive mirror...

What the Frikkadel!?!?

Here's a tip to any potential buyers: take a portable UV lamp with you when you check out the place because it suddenly doesn't seem so classy anymore...

Dear Agents: Please Try Harder

Here's an ad for a 2 bed apartment somewhere in the City Bowl on sale for R699 000. Now the place looks pretty crap but that's besides the point. Let's look at the ad copy:

2 bedrooms, both with parquet floors and built-in-cupboards. Living room opens onto balcony with wonderful city, harbour views. Tiled kitchen, bathroom and living room. Currently tenanted until end of Dec 09. Perfect for 2010 rentals!

Notice that last two sentences that I highlighted? This place has been on Gumtree for at least a year but the ad has not changed. Is the flat still tenanted? Who knows! Who cares! That attention to detail on the agents part plus the fantastic photos in the ad just compels me to make an offer!

Saturday Open Thread: Kinders Van Die Wind..

It's the Saturday Open Thread! This weeks topic: Windiest suburb in Cape Town?

Milnerton? Vredehoek? Grassy Park?

Sea Point: 2 Years = R40 000 Appreciation

In Feb 2009 this 2 bed/90m2 apartment was asking R1 150 000. Just under 2 years later a 2/3 bed/110m2 apartment in the same block has an asking price of R1 195 000. That 1.5%/year capital appreciation is about what you'd earn with your money in a transmission account (and no levies!).

Saturday Open Thread

Like sands through the hourglass these are the Saturday Open Threads of our lives.

Bad Architecture: Sea Point

Regular Sea Point reader JP sent in a link to this monstrosity:


JP writes:

This... thing... is on the market for a cool 5 mil. And nothing says Espana (or is it Italia... I don't even think the building knows) than that sheet metal automated gate.

Remember folks: Bad architecture is a crime against your eyes.

Saturday Open Thread

It's the Saturday Open thread!

Protea North Wharf: You Just Lost A Lot Of Money

Are you in the market to lose R400 000 in capital value over two years? Are you interested in buying into a resale market that is so small it might as well not exist? Do you enjoy having 'administrative' fees chop 20% off your rental 'income'?

Then buying a room in a hotel is for you!

Take, for instance, the Protea North Wharf situated in sunny Cape Town. In 2008 a room was on the market for R2.2 million, today they're going for a steal at R1.8 million. And with an estimated R10 000 income (in 2008, before fees) you'll only be losing R6 000/month unless you put down at least a R700 000 deposit and that's at today's rock bottom interest rate.

FNB: Prices Are Still Weakening

The Times reports:

Average house price growth has continued to slow, according to the November FNB House Price Index released on Wednesday.

"The average house price growth slowdown continues, with the November FNB House Price Index recording a year-on-year rate of increase of 3.8 percent," said John Loos, FNB Home Loans strategist, in a statement.

Here's a lovely little snippet from later on

Loos warned that long term, a high household debt-to-disposable income ratio would hold back the residential housing market. In the second quarter of 2010, this ratio was 78 percent.

Payment on debt still accounts for nearly 80% of disposable income. That is horrendous.

Rent Vs Buy: Glencairn Heights

Here's a 3 bed/2 bath house in Glencairn Heights currently on the market for R2 100 000.

But why pay R20 000/month in bond payments when the same house is rented out at R7 500 (for another year). The difference between the net rental income (before expenses) is R11 394/month, about 150% of the rental itself. You need a 60% deposit to break even on cash flow and your max ROI is 4.29%. Take off rates, taxes, maintenance and the numbers get even worse.

Here's the yield graph:

Saturday Open Thread: Cape Town's Contribution To Ireland's Woes

So as I'm sure many of you are aware Ireland is in a little bit of trouble, thanks in part to the various dealings of it's banks who funded many property developments that went ka-blam.

Now I remember the early 2000's Cape Town was filled with talk of Irish money coming in and throwing up new developments all over the place.

The Cape Royale in Green Point for example was originally backed by some dodgy Irish Developer and was called The Clarendon, before the The Clarendon in London forced them to change their name.

I also suspect our favourite Sea Point development The Ballinrobe was funded by money from the Emerald Isle - Ballinrobe being an actual town in Ireland.

So collective brain, what other Cape Town developments were funded with Irish Euros.

Saturday Open Thread: Bad Architecture Is A Crime Against Your Eyes

It's time for the Saturday open thread. As a topic starter have a look at this photo of a serious contender for the new ugliest house in Cape Town:

It's like a castle and a warehouse had drunk sex and disowned the offspring.

Marcus Fires Another Bullet

The Reserve Bank cut the Repo Rate another 50 basis points to 5.5%. And despite interest rates now at 30 year record lows the property market is still a dog.

Saturday Open Thread

Todays conversation starter is on the proposed new Amalfi development in Mouille Point. From an email:

Which stupid (wealthy) person will pay 4.5m for a 100sq meters 1
bedroom apartment when the going rate for a fully furnished 2 bedroom
apartment in the best blocks beach road is only 10,000 per month!!

Add the 2500 per month levy to the 4.5m purchase price as well!!

What about parking bays ?

Never mind Amalfi... when are they going to start building on the open pit next door to Newport Deli?

Saturday Open Thread: Grand Slam Tour Kickoff Edition

It's the Saturday open thread!

Today's topic starter: Decent property journalism? Does it exist?

Update: Here's a comment I'd like to highlight:

When I was freelancing and trying to break into “real” journalism I suggested pieces on SA’s property bubble to several editors – partly inspired by the things I was reading on this blog. I quickly learned that was the best way to ensure they stopped replying to your emails.

We're Heading Back To Negativeland

According to the ABSA House Price Index:

Price growth in the value of middle-segment homes for which Absa approved mortgage finance (see explanatory notes) continued to slow down up to October this year. The growth in the weighted average nominal value of small, medium and large houses came to only 1% year-on-year (y/y) in October, bringing the average price of a middle segment house to R1 005 800. Revised price growth of 3% y/y was registered in September. On a month-on-month basis the average nominal value of middle-segment homes declined further in October, but the pace of monthly contractions slowed down somewhat over the past three months.

In real terms the average value of homes in the middle segment of the market was down by 0,2% y/y in September this year (up 1,9% y/y in August), based on consumer price inflation tapering off to 3,2% y/y in September from 3,5% y/y in August. The September year-on-year drop in real price levels was the first since November last year, with prices declining in real terms on a month-on-month basis since May this year.

And have a look at this graph:



If you've bought in 2009 you've been 'renting from the bank' (and paying 2x-3x the market rent at that) with no price appreciation since 2008 in real terms. In nominal terms you've been doing the same since 2009. Add bond costs on top of that and you've lost a lot of money in the last 2 years.

And all this is happening with 30-year record low interest rates.

Saturday Open Thread: Currie Cup Final Edition

WP You Lekka Ding!

Also: Just noticed a massive dump of property on the Atlantic Seaboard this week. Selling season is officially here.

Same House: R800 000 Price Difference

I know the property market is volatile and agents will differ on the selling price of a property but R800 000? Really?

Leapfrog - R2 950 000.

Ronnie Matthews - R3 750 000

Either that or there was a massive asking price drop and not everyone was informed.

From The Comments

Just attended an auctionalliance auction. 313 Empire went for 2.1m + fees. Originally sold for 3.4m in 2007. And that's an awesome flat...

Sunday Open Thread

It's the Sunday Open Thread!

Blast From The Absolute Past: Fernwood

Here's a 3 bed house for sale in Fernwood for R12.5 million. If anyone thinks the bubble is over, back in 2006 (seriously that's like the fourth article we ever wrote for this blog) it was on the market for R6.5 million.

Back in 2006 the going rent on this place was R16 000/month. I wonder if the rent it attains now will cover the R125 000/month bond payment?

Also... tweleve bar and only three bedrooms?

Saturday Open Thread

It's the Saturday Open Thread!

Saturday Open Thread: WP Vs Sharks Edition

It's the Saturday Open Thread. WP JOU LEKKER DING!

Parklands: Where House Prices Go To Die

Here's a bank repo property in Parklands with an asking price of R699 000. According to the ad in 2006 it sold for over a R1 000 000... Oh well... that's Parklands.

Saturday Open Thread

It's the regular Saturday Morning Opening Thread. This weeks conversation topic: One more interest rate cut? Yes/No?

Tuesday Open Thread

Sorry for the delay but I've been enjoying the fresh mountain air of the Drakensberg for the past 10 days. Normal posting will continue but here's an open thread anyway...

Saturday Open Thread

With 10 minutes to spare it's the Saturday Open Thread. This week's conversation starter: Shoddy building standards over the past 7 years.

Saturday Open Thread: Rate Cut Edition

The Reserve Bank cut the repo rate 50bps. That means property is going up right?

Saturday Open Thread

It's the Saturday Open Thread!

Sharemax About To Implode?

According to RealEstateWeb Sharemax have not made payments for August. If they implode expect half of Pretoria to go down with them.

Asking Prices Crater At The Orangerie

Remember back in the good old days when a 2 bed/2 bath at The Orangerie was on sale for R2 975 000? I guess the R2 300 000 they're asking for it now can't be too much of an encouraging sign for current owners.

The scary thing is waaaaay back in 2008 you couldn't find a flat with the same specs as the ones above (+- 120m2 2 bed/2 bath) for less than R3 100 000!

Saturday Open Thread

It's cold, it's rainy, it's the Saturday Open Thread. This weeks conversation starter: Double dip recession: Yea or Nay?

Saturday Open Thread: Sharemax or Ponzimax?

It's the Saturday Open Thread! This weekends reading: Realestateweb's (so far) 3 part series on the Sharemax Ponzi Scheme Property Syndication. It's nice to see actual journalism for a change from Realestateweb.

• Prakke takes issue with Sharemax valuator, auditor


• Sharemax MD starts "special project"


• Sharemax’s black hole syndications

Saturday Open Thread

It's the Saturday Open Thread!

Rent Vs Buy: Cape Town CBD

Here's a 1 bed apartment for sale in Long Street on the market for R1 195 000. It's tenanted till January 2011 at R4500/month. Rates and levies total R1441/month leaving a net rental of R3059/month. A 100% bond will require a monthly repayment of R11532/month meaning that the monthly shortfall is R8473/month, nearly 3 times the net rental! Here's the yield graph:

Down Payment	Monthly Payment	Cash Flow	Annual Income	ROI	Cap. Appr. Required
R0	R11532.01	R-8473.01	R-101676.10		8.51%
R119500	R10378.81	R-7319.81	R-87837.69	-73.50%	7.35%
R239000	R9225.61	R-6166.61	R-73999.28	-30.96%	6.19%
R358500	R8072.41	R-5013.41	R-60160.87	-16.78%	5.03%
R478000	R6919.21	R-3860.21	R-46322.46	-9.69%	3.88%
R597500	R5766.00	R-2707.00	R-32484.05	-5.44%	2.72%
R717000	R4612.80	R-1553.80	R-18645.64	-2.60%	1.56%
R836500	R3459.60	R-400.60	R-4807.23	-0.57%	0.40%
R956000	R2306.40	R752.60	R9031.18	0.94%	-0.76%
R1075500	R1153.20	R1905.80	R22869.59	2.13%	-1.91%
R1195000	R0.00	R3059.00	R36708.00	3.07%	-3.07%

Just to break even on cashflow will require a deposit of R878 000, over 70% of the selling price and paying full price in cash will get you a return on investment of 3%.

Saturday Open Thread

It's the Saturday Open Thread. This weeks topic to riff on: "Sunset Beach - Worse architecture or worst architecture?"

Saturday Open Thread

With an hour to spare it's the Saturday open thread.

Saturday Open Thread

It's the Saturday open thread!

Upper East Side: New Development, Same Old Problems

Upper East Side is a mixed development in Woodstock that was highly touted as a 'green building' and a leader in urban renewal. Reader GS sent us a link to a blog started by residents who chronicle it's slow descent into, as they describe it, 'An Urban Khayelitsha in the heart of Woodstock'. Here's a sample from their latest entry:

-The lift was in-operational last night and many of the tenants were yelling at each other banging on the steel doors to 'stop jamming the lift', it was kind of like a prison movie with people on several levels yelling and banging on the steel. I figured that it had to be construction workers, whom still bang on things past 5pm (despite the Body Corporate Rules), because it was on the 6th floor for over 15 minutes (this was the only operational lift) and the stairs were closed off. Then the lift zoomed down to the -1 floor without stopping anywhere else which I've discovered that you can only do with a builder key. It was strange though because it was at about 630pm and they should be cleared out the building each night at 5pm, but I think some of them live here now because they often are here way past hours.
-Though I'm all for getting along with all walks of life, it's kind of a nuisance when the construction workers try to pick you up in the mornings and in the evenings while they shower with the door open and strip down to their underwear in plain sight, and I'm really hoping the developer will perhaps tell them it's inappropriate to say 'Hey mommie' and 'hey girl' to residents, not to mention running around past my car while I'm unlocking the doors. So I've been parking in a different spot because it's actually quite scary as this is how I was hijacked once upon a time.
-Also, the lake that floods the parking lot every day is still a problem, but I have a SUV so I'm okay, but I'm surprised the developer hasn't sorted it out yet, it's kind of funny the residents here affectionately refer to as "Lake Victoria East", and then when it rains it's "Upper Victoria Falls", because it seriously comes down from the ceilings in the garage.

Follow the rest of the drama at Upper East Side Cape Town.

Saturday Open Thread

With 15 minutes to spare, it's the Saturday Open Thread!

Post World Cup Open Thread

The World Cup is for all intents and purposes over. It's time for the post-partum depression to kick in.

Saturday Open Thread

It's the Saturday Open Thread! Vamos Argentina!

Buy The Bachelor Pad, Get The Bachelor Car

Here's a 43m2 bachelor apartment for sale in the CBD for only R1 300 000. That's a bit steep for 43m2 right? Well to sweeten the deal the owner will throw in a used Mecedes SLK 350.

I guess he's trying to kill two depreciating assets with one stone....

Saturday Open Thread

It's time for the Saturday Open thread!

Saturday Open Thread

It's the Saturday Open thread!

Sunday Open Thread

Shooweee... with all the sport on the go I clean forgot the Saturday open thread...

Saturday Open Thread

The World Cup is 5 days away and it's time for the open thread!

Super 14 Final Saturday Open Thread

LET'S GO STORMERS LET'S GO!!!

And feel free to discuss and property news...

Saturday Open Thread - Stormers Vs Waratahs

It's Saturday, it's the open thread and if you'll excuse me I'm off to Newlands...

Saturday Open Thread - Stormers Vs Bulls

It's the Stormers Vs Bulls Saturday edition of the Open Thread!

Ballinrobe: Take The Fork Out! It's Back!

Much maligned (at least here) development The Ballinrobe in Sea Point seems to be back in action after construction stopped because they violated height restrictions. Sea Point reporter JP writes:

Drove past The Ballinrobe the other day and looks like building is back on. Guess the developers managed enough snot and trane to get City Council to retroactively approve their height restrictions.

This place was supposed to be finised over a year ago and now it looks like they're going to miss t he world cup tourists!

JP also sent a link to an ad from Ballinrobe on Gumtree. Read it and smell the desperation:

The developers are willing to combine Unit 103 and Unit 104 or Unit 104 & Unit 105 – Only possible with a full commitment from YOU!

Saturday Open Thread

It's the Saturday Open Thread!

Glencairn Heights: 18 Months Later, R290 000 Cheaper

Back in November 2008 this house in Glencairn Heights was on sale for R1 985 000, along with a used Land Rover as an incentive. 18 months later the same house is for sale for R1 695 000, although this time there's no car thrown in to sweeten the deal. I can't tell from the ad if it's still the original seller who couldn't sell the house and is now selling it R290 000 cheaper than they were asking 18 months ago or if it's the person who bought the house back then and now realises they're paying a massive bond and the days of 25% price growth they were pegging everything on are long gone and has decided to get rid of the albatross.

In this market either of those are feasible.

Saturday Open Thread

It's the Saturday open thread.

Saturday Open Thread - Cheese Edition

Nearly missed posting the open thread... that's what you get when you spend the day eating cheese washed down with copious amounts of Sauvingnon Blanc.

Ugliest House Ever Built In Cape Town Still For Sale

Who would've thought that the ugliest house ever built in Cape Town is still for sale at the bargain price of R14 500 000. This crime against your eyes has been on sale since at least August 2008. Buying this place will cost you not only a cool 14 bar but also your sense of style and the respect of your friends...

Saturday Open Thread

It's the Saturday Open thread...

Saturday Open Thread - End of Summer Edition

Folks, I'm calling it - Summer is over. Get ready for the wind and the rain. And an open thread!

Saturday Open Thread

It's the Saturday Open Thread!

Saturday Open Thread - Rate Cut Edition!

What effect will the 50bp rate cut have if any?

The Rockwell: You Just Lost A Lot of Money

In September 2007 a 1 bed apartment in the Rockwell had an asking price of R1 520 000.

2 1/2 years later a 1 bed apartment in the Rockwell has an asking price of R1 550 000.

I bet that R30 000 in capital appreciation really takes the sting off the R300 000+ in bond payments.

Your Architecture Is Bad - Crappy SA Architecture Blog

With the mad rush to throw up developments in the last couple of years there has been a rise in just some terrible architecture in South Africa. Luckily Your Architecture Is Bad is on the scene to document these crimes against your eyes. Check it out!

Ballinrobe: Why The Pawpaw Hit The Fan

Seems the developers decided to ignore height restrictions right before the Cape Town City Council decided to start cracking down on such offenders. Here's a comment from a previous thread:

So the developers are Irish and if they finish the building the top floor will contravene their zoning height restriction.

They started building the building too high.

Am pretty sure that the top floor is where all the cream is, so they are faced with some tough decisions...

Saturday Open Thread

It's the Saturday Open Thread!

Ballinrobe: Stopped Building, Still Selling

So the Ballinrobe stopped building a while ago but that hasn't stopped the developers trying to sell units. I guess the thing is basically built they have to complete it, so keep on selling...

Saturday Open Thread - Selling Season Wind Down

The summer selling season is winding down. Were sales targets met? Are there more Estate Agent culls on the horizon?

Defence Minister Stops Paying Bond On Unfinished Home

IOL Reports:

Defence Minister Lindiwe Sisulu stands to lose the luxury Sandton home she owns with her husband after failing to pay bond instalments and R160 000 worth of levies.

The former housing minister and her husband, Professor Rok Ajulu, borrowed almost R2-million to build the Riverclub, north of Joburg, house in 2004. Ajulu believes it's now worth over R3m.

Now the couple will have to launch a legal bid to keep the unit from going under the hammer at a public auction set down for March 23.

The Cape Times has learnt that, due to their bond account falling into arrears, Standard Bank turned to the courts to repossess the property.

Saturday Open Thread - New Developments

Yea or Nay? Personally I wouldn't touch anything built in the last seven years.

Saturday Open Thread - Eskom

So Eskom will be raising electricity tarriffs 25%. If you're an estate agent do you tell customers this is good for house prices or great for house prices?

Saturday Open Thread - World Cup Price Gouging

Seen any World Cup Price gouging starting? Best example is SAA: Need to go to Johannesburg from Cape Town for business during the world cup? It's going to cost you R7 280!

Balllinrobe: Stick A Fork In It... It's Done

Regular Sea Point reader PJ writes:

Construction on the Ballinrobe on High Level Rd looks to have stalled. The site is locked up and trash is piling up behind the gate. Stick a fork in it... it's done. It's now just a giant hulking concrete jumble of boxes visually stinking up High Level Rd.

Saturday Open Thread: Worst Architecture In Cape town

Where have you seen the worst architecture in Cape Town? In my eyes the reigning champ is still this monstrosity we wrote about back in August 2008:



In terms of an entire suburb, Sunset Beach is just choc-a-bloc full of massive boxes seemingly designed by builders sticking plans of rooms together like Lego. Parklands may be soulless and boring but Sunset Beach is an assault on your eyeballs.

Rent Vs Buy: Green Point - R1.17m = 0% return

Here's a 2 bed apartment in Green Point on the market for R1 900 000 which attains a monthly gross rental of R7 200. The flat is 62m^2 so R1 900 000 means the cost per m^2 is over R30 000/m^2 so this is in no way a value for money buy.

With a 100% bond the monthly payments are currently R18969/month which means the difference between that and the rental is R-11769 which is over 160% of the gross rental itself!

The bond costs alone are R139 000 which is over 18 months (one and a half years) of rent. Subtract rates/levies, maintenance and vacancy costs and the net rental income is probably closer to R6000 if not lower. Here's the yield graph:



To break even on cashflow with the gross rental requires a deposit of just over 62% of R1.17 million. Even with a 50% deposit you need capital appreciation of 1.44% to not lose any money. Paying for the entire property in cash nets you a return on investment of 4.55%. I think there are transaction accounts out there paying equivalent interest than that.

This block looked familiar and so I went diving off into the archives and found that in January 2008 the rental for a 2 bed apartment in this block was R7 000. In Jan 2010 it's R7 200. That's an annual rental increase of 2.8%, well below inflation. However the asking price in 2008 was only R1 250 000. Me thinks someone needs to sell at R1.9m to avoid losing any money (and hopefully make a profit) from paying in to cover the bond for the past few years. Specuvesting at it's finest.

Saturday Open Thread

Want to chat about a topic we don't usually cover? Johannesburg? Durban? Anything north of the Boerewors Curtain for that matter?

Mutual Heights: You Just Lost A Lot Of Money

In Feb 2008, the asking price for a 1 bed loft apartment in Mutual Heights was R825 000.

In Feb 2010, the asking price for a 1 bed loft apartment in Mutual Heights is R750 000.

Rentals In Trouble At The Top End

Just bought a R3 million 2 bed flat and thinking of renting it out for R15000 or so a month?? You might want to reconsider. Business Report writes:

The top end of the residential letting market, with monthly rentals of R12 000 a month or more, is showing signs of financial distress.

Payment trends deteriorated significantly in this rental bracket in the fourth quarter of last year, with the number of tenants who made no payment towards their monthly rental increasing to 21 percent from 12 percent in the previous quarter, according to the latest rental payment monitor compiled by TPN Credit Bureau.

In addition, the percentage of tenants in good standing in the R12 000 plus rental bracket decreased by 8 percentage points to 64 percent between the third and fourth quarters.

The Edge: You Just Lost A Lot Of Money

In December 2007 the asking price for a 2 bed/2 bath apartment in The Edge was R1 395 000. Two years later and the asking price for a similar apartment is R1 475 000. That works out to an appreciation of about R40 000/year, about 2.86%/year.

If we bought an apartment for R1 395 000 and then decided two years later to sell at R1 475 000 how much money did we make (or lose)?

If an owner had a 100% bond the bond payments over the last two years were about 17300/month (when interest rates were at 14%) to about R14000 today, so let's make it R15000 as an average just to be conservative. Over two years the total bond payments would have been R360 000 with transfer duty another R75 000. Insurance and maintenance is about 1% of purcahse price per year so another R28 000. So we're looking at total input costs of approximately R460 000.

Despite paying in R360 000 in bond payments, you would only have paid off R40 000 on the loan capital (the balance of R320 000 covering the interest so in actual fact you've been renting from the bank for R13 000/month). Take away the estate agency's 6% commission on selling and you'll walk away with R1 386 500. The balance of the bond is R1 355 000, leaving you with a profit of R30 000.

So that's R30 000 in profit from the sale minus R460 00 in bond payments and purchasing costs leaving you with a net loss of R430 000. What an investment. Put my name down for two.

Saturday Open Thread

It's the Saturday open thread!

Saturday Open Thread

It's the Saturday open thread! Want to talk about something we haven't covered? Now is your chance.

Some Orangerie Gossip

Orangerie Week continues! There's nothing we love more here then a nice piece of skinner (that's gossip for you non-Afrikaans speakers). This from the comments section in an earlier entry on the Orangerie:

I have been told that all the flats on top floors were bought off plan by estate agents, before the public knew about the flats going to be built.

I do hope these agents are making sure that when they show potential buyers around the Orangerie they show them apartments that they don't have a financial interest in.

The Organgerie: Rent Vs Buy (Again)

Folks it's Orangerie week here on Cape Town Property Bubble, because it's the gift that keeps on giving. For instance here's a 2bed/2bath 157m2 apartment in the Orangerie for rent at R14 000/month. Despite overwhelming demand, five days later the same flat is now available for sale at R3 400 000.

On a 100% bond your monthly payments are R33 944/month, the difference between that and the gross rent being R19 944/month or about R240 000/year. Added to that the bond costs are R275 000, worth about 20 months (1 3/4 years) rent. And that's all for gross rent. Take away levies (which I will bet are not cheap in this block), rates and maintenance and the picture gets even worse.

Here's the yield graph:



To break even on cash flow you need to put down just under R2 000 000. I repeat to not lose ANY money at all you need to invest close on two bar. Paying for the place in cash you can expect a ROI of just under 5%.

The Organgerie - It Gets Worse

If you didn't like the 2 bed/2 bath flat in the Orangerie for R2 975 000, then perhaps you'll want to invest in a 1 bed/1 bath flat. Only R2 650 000. For 85m2 which works out to about R31 100/m2.

Ballinrobe: Still Not Finished

Our regular Sea Point writer PJ write in about the Ballinrobe development, which we last heard about in August 2008:

Guess what, it's a year and a half later and Ballinrobe is still a concrete shell uglying up High Level Rd. Looks like my prediction of them finishing it in June 2010, 2 years after they were supposed to finish, is more prescient than ever. I wonder if all of the off plan buyers are still alive it's been so long...

Saturday Open Thread

It's the Saturday morning open thread!

Rent Vs Buy: The Orangerie

Finally! After watching it being constructed The Orangerie in Orange Street is finished! Out of the way welfare pensioners (a CPOA old age home was demolished to make way for it)! We need some shoddily built overpriced apartments.

Anyway so we haven't had a Rent Vs Buy analysis in a while so why not today. Here's a 2bed/2bath apartment on the market for R2 975 000.That means on a 100% bond you will be paying R29 701/month. Or you can rent the exact same apartment for R11 750 (that's gross not net). Now to be clear I would never advocate anyone rent a 2 bed apartment for R11 000+/month but that's just what the asking rate is at the moment for this joint (and that's if they achieve it). The difference between the bond and the rental is R17 951/month meaning that after year one you'll have lost R215 000. And it gets worse, the transfer duty on this property is over R230 000, which means you could rent this place for two years and be in the exact financial position as someone who bought it, except they will have paid in over R600 000 in bond payments in that time. Will capital appreciation make up the difference in two years?

I'd just like to add a final thought here: For close to 3 bar I'd like a decent kitchen, not a 'kitchen nook' in the middle of the dining/living area or whatever name developers call it.

Here's the yield graph:



So a deposit of R1 800 000 is needed to break even on cash flow. Paying for the whole place in cash gets you 4.74% ROI and that's before levies (which won't be cheap for this place), maintenance and vacancy costs.

Anyone got more info on the Orangerie? Is it a ghost town? Let me know at capetownbubble@gmail.com

Foreign Press Notices SA Housing Bubble

The Business Insider reports:
South Africa's World-Beating Housing Bubble Is Getting Completely Ridiculous

Saturday Open Thread - How's The Selling Season Going

The selling season is in high gear. Let us know how it's going in this open thread.

Camps Bay: Sales Hit The Brick Wall

Reader GD writes:

Saw this statistic posted over at this thread on relestateweb. If it's true... OUCH!

SAPTG suburb trend: Camps Bay

Year	No. Sales
2007	120
2008	88
2009	3

Now assuming conditions don't get worse (highly unlikely), looks like Camps Bay is forecast for 12 sales year ending 2009 - an unhealthy 86% drop in volumes.

Update: This was originally posted on realestateweb in 2009. If anyone has current number of how many houses sold in 2009 in Camps Bay let me know.

Saturday Open Thread - Predictions for 2010

It's the first open thread for 2010. What's going to happen this year?