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.