What role does the municipal evaluation play in determining the price you are willing to pay for a property ?
I got into a bit of an argument with an estate agent when I told her that a property that's 25 % over the municipal valuation is overpriced. Even if the house is in a very good condition (which was definitely not the case for that particular property).
I would trust neither the municipal nor the estate agents valuation, especially at the current time. To be conservative, take the lower value and subtract 30% - that will give you roughly the value the property will achieve in an auction, which is the only real way to arrive at a true valuation.
Bizarrely, white friends of mine live in a semi. They recently found out that their side is valued at a few hundred k more than next door which is home to their coloured neighbours. They are in the process of getting it revalued. Municipal valuations, what a joke.
There are many people who cant quite figure out the South African mindset when it comes to property in the recession economy. The following is a comment exchange on a News24 article about the glut of vacant commercial properties on the market in SA. The second comment was the eye opener for me.
"anon Aug 29 2010 20:43 Yes, but will any of these idi0ts drop their rent? No. They prefer to sit empty. There is a rental revolution about to happen, where many portfolios will now be sold at losses. No tenants = No value. Many buildings are now for sale at crazy prices - "potential" they will tell you. Those who know anything about commercial know that potential means nothing. The choice of blue chip tenents will always be paramount."
"Elaine Aug 31 2010 09:00 Dear darling Anon. Why the .... should they lower rent and hence have to pay in for you to have the privilege of renting property? If one does not get a decent (fair) rent the tenant does more damage than its worth so leaving it empty is the better option for the owner. Grow Up and stop expecting others to pay for you to have a house, office, workshop etc. Owners have those properties because the income is their SALARY why don't you drop your salary?"
Wow...err are we all talking about economics here???
Elaine is a little bit deluded in thinking that there's such a thing as a "fair" rent. And possibly publicizes her class pretentions by calling renting property a "privilege".
If the market doesn't want to pay what you want, then you can choose not to rent it out. Fair enough, it's your choice. But just because you haven't experienced dropping nominal prices, rentals and salaries in a high inflationary economy, doesn't mean it doesn't happen. All 3 of these have happened in the UK over the last 2 years. Salaries as well.
I'm starting to agree with some commentators that this is going to drag out over quite a few years. People are simply not going to drop their asking prices or rentals. Maybe in real terms, but not nominally. There seems to be an idea that property has some kind of inherent, "fair" value. Prices will stagnate until inflations catches up.
Btw, I would be surprised if municipalities have even the remotest competence in determining value.
I agree that CT will NOT experience a bubble burst like we saw in the USA. Prices will not implode, but rather the owners will hold on for years and years. Prices will be flat and growth way below inflation, making home ownership more affordable year over year. But it will be a slow and painful process.
I'm in Canada right now and will probably move back to CT in 3 years' time. I am expecting to pay *roughly* the same prices in 2013 as what I am seeing online right now.
Looks like 2 Ave Brittany is back on auction / market.
This house has been auctioned twice that I know and been on the market for 2.5 years.
It is now an auction AGAIN, this time with Michael James.
It's not even the poor schmuck of an owner, it's the banks that keep up this charade.
Last time the auction was a Sherriff's auction and it was knocked down for a price well below the outstanding bond on the property. The bank then refused the highest bid and then "sold" it to someone else at a vastly inflated price, who (suprise, suprise) was refused finance.
It makes me laugh. It's not just the agents, the auctioneers and the owners who are deluded and trying to screw you. The banks are the worst culprits.
Just how many PIP are the banks sitting on? Artificially inflating the market...
30 Ave Fresnaye is on the market after sitting derelict for several years.
850 sq. metres of rubble-strewn, uneven ground, needing EXTENSIVE prepwork before you can even lay a foundation for a house.
It's subdivided already and is held in a trading trust, so is due for VAT and suits a developer in its present state.
How much do they want? 8.5m ex VAT. That's R10k per sq.m for unusable land.
So let's do some maths now: 4.25 land cost + 1m prep + 4m build for a 3 bed house (inc. holding costs for the duration of the build) is 9.5m cost to developer. Add 25% margin onto that and you get the princely sum of R11.5m for the house.
SA swamped under debt, the lowest rates in our history, and still the property market flatlines. Can you imagine what would happen if the banks released even a tiny fraction of the repo'ed properties on their books? 40 percent price drops in a month or two.
Mailed a couple of these to CT Bubble but p'raps he didn't get the mail. Here, for your viewing pleasure, are some of the latest asking price falls for the 200-odd places in the City Bowl and Atlantic Seaboard I monitor. (all Privateproperty.co.za ref numbers).
Woodstock (J43986) - was R8m in July, is now R6m - drop of 25%.
Clifton (J42374) - was R25m, now R19,5m - drop of 22%
Sea Point (J40839) - was R1,195m in July, is now R950k - drop of 20.5%
Sea Point (J40542) - was R2,6m, now R2,095m - 19.4% drop
Sea Point (J41761) - was R950k, now R850k - 10.% drop.
Deflation. It's not just houses, in imported electronics it's highly noticeable. I've been in the market for some computer gear lately and I decided I'm holding off. Prices for a 23 inch monitor for example - dropping like a rock. Purchased a digital camera for R2100 last month at Game. Same camera now going for R1699
I had no idea one could, with a straight face, offer a penthouse in Bellville. Nevermind one that doesn't exist yet. Whose this tenant forking out 32k p/m rent? A mole?
19 comments:
Quick question to all the property pros here.
What role does the municipal evaluation play in determining the price you are willing to pay for a property ?
I got into a bit of an argument with an estate agent when I told her that a property that's 25 % over the municipal valuation is overpriced. Even if the house is in a very good condition (which was definitely not the case for that particular property).
Anyone care to share their experiences.
I would trust neither the municipal nor the estate agents valuation, especially at the current time. To be conservative, take the lower value and subtract 30% - that will give you roughly the value the property will achieve in an auction, which is the only real way to arrive at a true valuation.
Bizarrely, white friends of mine live in a semi. They recently found out that their side is valued at a few hundred k more than next door which is home to their coloured neighbours. They are in the process of getting it revalued. Municipal valuations, what a joke.
There are many people who cant quite figure out the South African mindset when it comes to property in the recession economy. The following is a comment exchange
on a News24 article about the glut of vacant commercial properties on the market in SA. The second comment was the eye opener for me.
"anon Aug 29 2010 20:43
Yes, but will any of these idi0ts drop their rent? No. They prefer to sit empty. There is a rental revolution about to happen, where many portfolios will now be sold at losses. No tenants = No value. Many buildings are now for sale at crazy prices - "potential" they will tell you. Those who know anything about commercial know that potential means nothing. The choice of blue chip tenents will always be paramount."
"Elaine Aug 31 2010 09:00
Dear darling Anon. Why the .... should they lower rent and hence have to pay in for you to have the privilege of renting property? If one does not get a decent (fair) rent the tenant does more damage than its worth so leaving it empty is the better option for the owner. Grow Up and stop expecting others to pay for you to have a house, office, workshop etc. Owners have those properties because the income is their SALARY why don't you drop your salary?"
Wow...err are we all talking about economics here???
Elaine is a little bit deluded in thinking that there's such a thing as a "fair" rent. And possibly publicizes her class pretentions by calling renting property a "privilege".
If the market doesn't want to pay what you want, then you can choose not to rent it out. Fair enough, it's your choice. But just because you haven't experienced dropping nominal prices, rentals and salaries in a high inflationary economy, doesn't mean it doesn't happen. All 3 of these have happened in the UK over the last 2 years. Salaries as well.
I'm starting to agree with some commentators that this is going to drag out over quite a few years. People are simply not going to drop their asking prices or rentals. Maybe in real terms, but not nominally. There seems to be an idea that property has some kind of inherent, "fair" value. Prices will stagnate until inflations catches up.
Btw, I would be surprised if municipalities have even the remotest competence in determining value.
Well said Benjamin.
I agree that CT will NOT experience a bubble burst like we saw in the USA. Prices will not implode, but rather the owners will hold on for years and years. Prices will be flat and growth way below inflation, making home ownership more affordable year over year. But it will be a slow and painful process.
I'm in Canada right now and will probably move back to CT in 3 years' time. I am expecting to pay *roughly* the same prices in 2013 as what I am seeing online right now.
Looks like 2 Ave Brittany is back on auction / market.
This house has been auctioned twice that I know and been on the market for 2.5 years.
It is now an auction AGAIN, this time with Michael James.
It's not even the poor schmuck of an owner, it's the banks that keep up this charade.
Last time the auction was a Sherriff's auction and it was knocked down for a price well below the outstanding bond on the property. The bank then refused the highest bid and then "sold" it to someone else at a vastly inflated price, who (suprise, suprise) was refused finance.
It makes me laugh. It's not just the agents, the auctioneers and the owners who are deluded and trying to screw you. The banks are the worst culprits.
Just how many PIP are the banks sitting on? Artificially inflating the market...
This will tickle you...
30 Ave Fresnaye is on the market after sitting derelict for several years.
850 sq. metres of rubble-strewn, uneven ground, needing EXTENSIVE prepwork before you can even lay a foundation for a house.
It's subdivided already and is held in a trading trust, so is due for VAT and suits a developer in its present state.
How much do they want? 8.5m ex VAT. That's R10k per sq.m for unusable land.
So let's do some maths now: 4.25 land cost + 1m prep + 4m build for a 3 bed house (inc. holding costs for the duration of the build) is 9.5m cost to developer. Add 25% margin onto that and you get the princely sum of R11.5m for the house.
That is R27k per sq.m. ex VAT
SMH
"Consumer debt has ballooned to R1.4trn from R360bn in 2002 and 46% of 18m credit-active consumers have an impaired credit record"
http://www.moneyweb.co.za/mw/view/mw/en/page292516?oid=504791&sn=2009+Detail&pid=287226
SA swamped under debt, the lowest rates in our history, and still the property market flatlines. Can you imagine what would happen if the banks released even a tiny fraction of the repo'ed properties on their books? 40 percent price drops in a month or two.
Mailed a couple of these to CT Bubble but p'raps he didn't get the mail. Here, for your viewing pleasure, are some of the latest asking price falls for the 200-odd places in the City Bowl and Atlantic Seaboard I monitor. (all Privateproperty.co.za ref numbers).
Woodstock (J43986) - was R8m in July, is now R6m - drop of 25%.
Clifton (J42374) - was R25m, now R19,5m - drop of 22%
Sea Point (J40839) - was R1,195m in July, is now R950k - drop of 20.5%
Sea Point (J40542) - was R2,6m, now R2,095m - 19.4% drop
Sea Point (J41761) - was R950k, now R850k - 10.% drop.
The list goes on. Will keep you posted.
His name was Deflation
He had a twinkle in his eye
He said sell up now buddy boy
or kiss your nest egg goodbye
Deflation. It's not just houses, in imported electronics it's highly noticeable. I've been in the market for some computer gear lately and I decided I'm holding off. Prices for a 23 inch monitor for example - dropping like a rock. Purchased a digital camera for R2100 last month at Game. Same camera now going for R1699
@Benny. Electronics always depreciate over time so that's not something to be happy about. Plus, have you heard the rand is getting stronger....
Check out this BS on gumtree!
http://capetown.gumtree.co.za/c-Flat-House-Real-Estate-vacant-land-properties-for-sale-97-profit-in-min-2-Years-have-a-look-at-this-one-W0QQAdIdZ228918940#
Hahahaha seems like they getting desperate. You have to be a real fool to fall for that twaddle. The same guy is also offering the following:
http://capetown.gumtree.co.za/c-Flat-House-Real-Estate-vacant-land-properties-for-sale-Stunning-Penthouse-apartment-with-stunning-views-with-tenant-W0QQAdIdZ228879787#
Which if you follow it to Google Maps you get the following (Click street-view):
http://maps.google.com/maps?daddr=Rogers+St,+Bellville+7550,+South+Africa&hl=en
I had no idea one could, with a straight face, offer a penthouse in Bellville. Nevermind one that doesn't exist yet. Whose this tenant forking out 32k p/m rent? A mole?
SuckerJack
@ Anon
I well aware that electroninc stuff drops in price, computers especially, over time but there is more to it this time. You don't have to believe me.
@ "penthouse apartment" above.
Read the fineprint in the "ad":
Final rental to be confirmed AFTER sale!
What a load of @#%!
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