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.