Boxing Day Open Thread

It's the Saturday open thread.

Saturday Open Thread

This is the Sautrday open thread.

What's Happening at Treoc?

There are rumours floating around that Treoc, a well known SA property investment scheme, is in trouble with the banks. This article, which I can't read because it's subscribers only, at the Cape Times mentions

A SOMERSET West property scheme that allegedly duped the four major banks into overexposing thousands of investors to about R5 billion rand in bonds, has come under the spotlight in a sequestration inquiry in Cape Town

Coert Coetzee, who is the Chairman of Treoc (Coert reversed = Treoc geddit) metions it in passing in his own blog

I had a meeting today with my legal team regarding a newspaper article and as I understand it now, it is alleged that on a specific client’s bond application a certain bond originator did not disclose the bank’s required information to them. At this stage I do not know whether the fault lies with the originator, bank official or even the client not disclosing the correct information.

However, I am very upset and I ordered a full investigation. I will not hesitate for one moment to take swift and decisive action against the guilty party.

So does anyone out there have more information about what is being alleged? Did Treoc expose the banks to R5 billion in losses?

Update:

A report in the Cape Times shows claims that the Treoc duped the four major banks into overexposing thousands of investors to an estimated R5 billion in bonds. Its says Treoc Property Investments advised and organised loans for an inexperienced 29-year-old investor to about R2.9 million in bonds from different banks on a salary of R17 000. Financial records show that Treoc applied to four different banks for bonds for the Goodwood man on the same day, and got them. A former Treoc director, attorney Jose Delgado, who left in 2008, was subpoenaed to explain why, as a joint "independent" trustee, he did not advise the young man that he was getting into trouble. When it was put to Delgado that Treoc director Coert Coetzee was "selling fraud on creditors", Delgado answered: "You can look at it that way." Treoc, an investment company directed by Coert Coetzee, offered property investment courses to laymen on how to create and operate property trusts. Treoc did everything in-house: applying for bonds, sourcing properties, administering a rental pool, and offering related financial services.

Saturday Open Thread

It's the Saturday open thread.

World Cup Draw Saturday Open Thread

It's the Saturday open thread!

Million Dollar World Cup Rental - On Sale For Half a Decade

When I heard about the $1 000 000 World Cup rental I knew immediately it could only be one property: this 5 bed Clifton mansion on the market for R80 000 000 (check the umbrellas).

Now this property I've been aware of for a while. Every few months Pam Golding includes it as part of their pull out property feature. It's been on sale for YEARS. Hell I remember at least 4 years back when it was on the market for R40 000 000.

And a final thought: What's the point of renting a beach side mansion in the middle of winter?

Saturday Open Thread - The Great Real Estate Agent Cull

Sea Point reporter JP wrote in

Noticed today 3 estate agencies are now empty - Anne Porter, ERA and Chas Everitt. Not sure if they closed for good or moved to smaller offices..

What's the status of the Great Real Estate Cull in your area?

Senator Park: "Needs Some TLC... And A Bulletproof Vest"

Here's an ad for a bachelor in Senator Park, in Long Street:

Bachelor Flat overlooking Long Street.
Needs some TLC
Great Investment Opportunity

But before you put in that offer...
Senator Park - 'hell hole of a place'

"Sometimes you hear terrible screaming and the next day you see blood all over the walls."

It's just one of the horrors a Senator Park tenant has experienced in the "hell hole of a place".

The tenant in the Keerom Street building, who does not want to be named for fear of reprisals, said despite attempts by security services and managers to curb problems, the situation had become unbearable.

So yeah.. needs some TLC... and a bullet proof vest when you go to collect the rent.

Saturday Open Thread

It's the Saturday Open Thread.

Saturday Open Thread

It's the Saturday Open Thread!

Royal Carlisle: Early Buyer? You Just Lost R100 000.

Remember Royal Carlisle? They're STILL trying to sell units, despite being "80% sold out" after the block was completed in May 2009, by basically admitting that early buyers (who bought for between R650 000 - R690 000) just watched R100 000 - R130 000 vapourise into thin air.

Selling Season Start Open Thread

It's the beginning of the traditional Summer selling season in Cape Town. Lots of stock coming onto the market means lots of stock has to sell or languish during winter when the winter lull in March rolls round. It's make or break time for a lot of agencies.

Saturday Open Thread

It's the Saturday Open Thread. Go Cheetahs!

Saturday Open Thread

It's time for the Saturday Open Thread. Jeez, when am I going to start posting actual content?

Saturday Open Thread

It's Saturday and the open thread. Also... WP JOU LEKKER DING!

Saturday Open Thread

It's the Saturday Open Thread... you really should be outside though.

Saturday Open Thread

It's the Saturdau open thread, although with this weather I'll understand if you prefer to be outside than commenting on blogs.

Saturday Open Thread

Better late than never... it's the Saturday open thread.

Saturday Open Thread

It's the Saturdy Open thread.

Tri Nations Victory Open Thread

In honour of the Bokke winning this morning this open thread edition has been renamed the Tri Nations Victory Open Thread

Saturday Open Thread

It's the first Saturday open thread of spring.

Saturday Open Thread

It's Saturday, it's the open thread and the Boks are about to crush the Ozzies.

Saturday Open Thread

It's Saturday and that's time for the open thread.

Sunday Times Doubting One & Only Sale

On the 29th of June we posted an article titled R110 Million Sale Falls Through For Seeff which cast some questions if whether the R110m sale of a penthouse in Sol Kerzner's new V&A Waterfront One & Only development had fallen through. We did so because in listings for the development 3 out of the 3 penthouses built are listed for sale, when there should only be 2.

And quite coincidentally (I'm sure) according to RealestateWeb, the Sunday Times ran an article this past Sunday saying literally the same thing, that the sale was in fact staged by Sol Kerzner as a "sale" to himself with the penthouse being returned to the rental pool of the hotel. And no doubt if a buyer could be found for it would be sold off without a seconds thought as the article we wrote earlier here showed there are in fact 3 penthouses for sale.

I haven't bought the Sunday Times in a while (prefer the non-tabloid Business Day Weekender these days after they gave me a shout out a year ago) so if anyone has the article let me know if it mentioned anything about the supposedly sold apartment coming back on the market and if they attribute that nugget of information to anyone.

And Sunday Times reporters if you're reading, let me know if you need any more story ideas.

Saturday Open Thread

It's the weekly open thread.

Saturday Open Thread

Time for the open thread.

Rent Vs Buy: Bloubergstrand - Invest R1.8m, Make R0.

This 2 bed/2 bath apartment in Blouberg is on the market for R2 650 000. That means with a 100% bond you will currently be paying R27352/month to cover the bond. Or you could rent it for R8 000/month, which means that the difference between rental and bond payment is R19352/month, nearly 2.5 times more than the rental income itself! Here is the dismal Payment and Yield graph.

Right, so paying for the place in full nets you a massive 3.62% return on investment, and to break even on cash flow you need to plonk down over R1 800 000 (a 70% downpayment). Putting down a 50% downpayment of R1 325 000 will still lose you over R60 000/year. Once you take into account rates, levies, maintenance and vacancy costs and the returns will be even lower.

Saturday Open Thread

'Tis the Saturday Open Thread.

Saturday Open Thread

It's time for the Saturday open thread, which is incidentally the 600th post of this blog.

Gill Marcus Is The New Governor Of The Reserve Bank

Discuss.

Saturday Open Thread

Got some news you want to share? The open thread is for you.

Saturday Open Thread

The weekly open thread is open for business.

Saturday Open Thread

The Saturday open thread is back.

R110 Million Sale Falls Through For Seeff

Back in June 2008, Seeff were crowing because one of their agents had sold a penthouse at Sol Kerzner's One&Only development at the V&A Waterfront for a hefty R110 million. Here's a quote:

The first of the three super-luxury penthouses which hotel magnate Sol Kerzner is developing on his One&Only Hotel Cape Town in the V&A Waterfront has been sold by Seeff at a record price of over R110 million.

Now read the following quote from this listing:

One&Only 3 EXTRAORDINARY PENTHOUSES FOR SALE.

Now I never did too well at maths, but if you have three penthouses and you sell one, that should leave two for sale. So why are three on sale? Also why has the new listed price dropped R10 million.

Saturday Open Thread

It's time for the open thread!

Saturday Open Thread

It's Saturday, it's the open thread.

Saturday Open Thread

After last weeks jaunt into Sunday, we're back at the original Saturday open thread.

Sunday Open Thread

An open thread by any other name would smell just as sweet...

The Commercial Property Bubble Is About To Burst

Just as South Africa wakes up to the fact that the residential property bubble has burst and prices are falling, another property sector, the commercial sector, is about to hear the sound of pawpaw hitting the fan.

Like the residential bubble, the mainstream media has all but ignored the fact that the commercial property market was built on easy credit and lax lending standards. As Noseweek details in this months issue, the good times are over and banks are facing massive writeoffs.

Saturday Open Thread

It's time again for the Saturday Open Thread.

Saturday Open Thread

Saturday Open Thread time is here again.

Estate Agency Owned Auction House In The Works

I've been hearing rumblings that the major SA real estate agencies (Seeff, Pam Golding, Rawson et al) are going to launch a jointly owned auction house to try and get some stock off their books. Currently the majority of real estate auctions are done by Auction Alliance who have agreements with ABSA and FNB to get rid of properties off their books.

Anyone out there with any more info on a possible agency owned auction house?

Saturday Open Thread

It's the Saturday open thread!

Innaguration Day Open Thread

It's the Saturday Open Thread, sponsored by the Inauguration of Jacob Zuma.

House Price Drop Officially Hits -10%

House prices continue to deteriorate

The steady deterioration in house prices continued in April, according to FNB's House Price Index released on Monday.

This was a result of a sizeable oversupply that had built-up in the residential market.

The number of owners trying to sell houses due to financial pressure was a key driver of the oversupply.

According to property economist John Loos, the April FNB House Price Index had reached double-digit year-on-year average house price deflation for the first time, to the tune of -10,2%.

This put the average house price level back to the level at the end of 2006, Loos said.

Saturday Open Thread

It's the Saturday Open Thread.

Saturday Open Thread

Work is still kicking my ass so unfortunately updates are going to be reduced over the next couple of weeks. If you've got a story feel free to send it to capetownbubble@gmail.com. Here's the Saturday open thread.

Saturday Open Thread

It's Saturday, which means it's open thread time.

Century City: 18 Months On The Market And Still Going Strong

This 2 bed flat in Century City has been on the market for at least one and a half years with the price bouncing up and down between R780 000 and R800 000. Will someone just buy it already and put the seller out of his agony.

And look at that view, Sandrift East never looked so beautiful...

Saturday Open Thread

It's the open thread!

Dubai? Really?

So this is a bit out my jurisdiction but I saw this ad running in the ad bar at the top of my own site and had to comment:

Seriously? Are there people still buying off plan in Dubai? That entire country has literally stopped building. Dubai is probably more screwed than most other places.

Rent Vs Buy: Stellenbosch

Here's a 3 bedroomed flat in Stellenbosch on the market for R1 500 000, with a monthly rent of R6000/month. According to the ad it's the 'best investment'. Considering it's in Stellenbosch I would assume it's a student flat which means one thing: high maintenance costs! Let's look at the yield/payment graph.



Paying for the place in cash gets you a 4.8% ROI with a downpayment over 67% required (over a R1 000 000) to just break even on cash flow. With a 50% downpayment you need a 2.66% capital appreciatin return to not lose any money at all. Take off rates, levies and maintenance and the returns drop even more.

Saturday Open Thread

It's the Saturday Open Thread

Waiting Won't Help; Hous Prices Won't Drop - Seeff

Reader MA sent in this scan from Die Burger circa June 2006:

The World Cup Will Do Sweet FA For The Property Market

If you're one of the suckers out there who bought an 'investment flat' in the past 2 or 3 years to cash in on the World Cup then I really feel sorry for you. The World Cup is doing absolutely nothing for the property market. Let's take a look at this example. Here we have a 2 bedroomed flat in Green Point literally across the road from the Green Point World Cup soccer stadium. It's on the market for R795 000 and attains a rental to the princely sum of R3000/month. Take off the monthly rates and levies of R312 and R598, which comes to a comes to R910/month, meaning that the net rental income is R2090/month. On a 100% bond your monthly bank payment is R9985/month and the difference between that and your rental income is R7795/month, a whopping 3.7 times the net rental itself! Let's take a look a the dismal yield graphs.



Ugh.. so paying in cash you can expect a maximum return on investment of 3.5%, about 7%-8% below just leaving your money in the bank. To break even on cashflow requires a 75% downpayment, over R590 000, and with a 50% downpayment you need 4.31% capital appreciation to not lose any money at all.

When 'investments' literally across the road from the World Cup stadium are doing as dismal as this then you have to laugh at the idiots advertising properties in Parklands and (I swear I'm not making this up) Gordons Bay as places to invest to cash in on 2010.

FNB Jump On The Auction Alliance Bandwagon

Following ABSA and it's Rapid Auction Programme(RAP), FNB is now partnering with Auction Alliance in the FNB Quick Sell Programme to get repossessed homes (or if they're following ABSAs lead, forcing sellers into auction before repossession) off their books.

Thanks to reader HG for the link.

Saturday Open Thread

Sorry for the lack of articles, the boss only unchains me from the desk on weekends now. Here's the weekly Saturday open thread

Saturday Open Thread

It's been a light posting week due to looming deadlines, but here's the Saturday open thread.

Vredehoek/Devils Peak On Fire - Residents Evacuating

Photo by Coda. More photos here.

Saturday Open Thread

Another hot Saturday, and another open thread.

Mouille Point: How You Know The Seller Has No Clue

Folks sometimes an advertisement comes along which just perfectly illustrates that there are sellers out there that have no clue what the hell they are doing. Let's take a look at this gem:

STUNNING SEA FRONT APARTMENT IN MOUILLE POINT. 3 BEDS, 2 BATHS. FITTED KITCHEN WITH ALL APPLIANCES. LOCK-UP GARAGE AND SECURE PARKING BAY. PRICE R5,000,000 OR RENTAL R15,000 PER MONTH.

So let's analyse this ad. If you were to take out a 100% bond on this apartment you would be paying R62 176/month, which means that the difference between the rental (R15 000/month) and the bond payments is R47 176/month, over three time the rental itself! The owner is either selling it for way too much, or the rent is way too low.

Let's take a look at the (awful) payment and yield graph:

I'm not going to even comment, it pretty much speaks for itself.

Rent Vs Buy: Somerset West - Endless Options To Lose Money

This double story house in Fernwood (in Somerset West, not Newlands) is on the market for a cool R2 400 000 and described as a 'wonderful investment opportunity'. It rents out for R9 000/month which means with a 100% bond monthly payments are R29844/month and the difference between rental and bond payment is a whopping R-20844. You'd lose close to R250 000 holding onto this while praying for +10% capital appreciation! Here's the payment and yield graph:

So paying in cash gets you a dismal 4.5% return on investment, less than half you'd get if you just left your money in the bank. You need R1.67 million (a hair under a 70% deposit) just to break even on cash flow and with a 50% downpayment you still need 2.96% capital appreciation to not lose any money. Take off rate, levies (sure to be huge for a house this size in an estate), maintenance and vacancy and that 4.5% ROI starts sliding down

Saturday Open Thread

It's hot.. it's Saturday.. it's the open thread.

The Logic Is Impeccable

Observe the following snippet from this listing selling a loft apartment in Port Elizabeth. PE is usually outside of my interest area but his just perfectly illustrates the completely idiotic ideas that were rampant, and probably still are, during the bubble.

This loft is already tenanted at +/- R2500 pcm, bond monthly installments +/- R4500 - you can therefore own the apartment and only have to pay in R2000 per month!!! Great Investment.

If you're paying in R2 000/month for an asset that is not increasing in value (and probably dropping in todays market), that dear readers, is not an investment; it is the very definition of liability.

Big Price Drops In Strand

Reader Bean Counter writes:

This house was R6.9 million in Feb and is now priced R4.9 million. That's 29 percent in one fell swoop, but perhaps still not enough - interesting to see if this place moves even at this "cheap" price. I doubt it, as this looks like one of those classic Old SA hellholes, a sort of central hotel thing on a busy road in the sandblasted misery of the Strand.

Saturday Open Thread

It's the Saturday Open Thread!

Hayibo Tears Parklands A New One

Online satire site Hayibo had this to say about Parklands, our choice for worst suburb in Cape Town:

'Apocalyptic' Parklands in Koeberg meltdown scare
Disaster management teams were rushed to Cape Town's Koeberg nuclear reactor this morning amid reports that a suburb near the power plant had been devastated by radiation. Rescuers confirmed that they had found a "desolate wasteland populated by dazed zombie-like people" but added that there was no need to panic as this was "an average day in Parklands".

...

"It strikes your soul. It's a deep, tearing sadness than human beings can want to live in face-brick McMansions built on shifting beach sand, between a highway splattered with squashed skunks on the one side and an unstable nuclear reactor on the other."

Thanks to reader Bean Counter for the link

Milnerton: Royal Carlisle Developers Slashing Prices

Royal Carlisle is an about to be completed (transfer in May 2009) development in Milnerton and is supposedly 80% sold out. That last 20% however is turning out to be tougher than expected.

2 bed/1 bath apartments were on the market for R790 000 and are now going for R590 000 while 1 bed apartments were going for R550 000, then according to the developers own site, reduced to R490 000 and now down to R420 000. And these reductions are taking place for a block that only requires a R10 000 deposit and offers R3 500/month rental assistance!

I would hate to be one of the early buyers who bought off plan at R790 000 (or even R490 000) only to watch over 25% of my 'investment' disappear.

Saturday Open Thread

It's Saturday and that means... open thread!

Rent Vs Buy: Sea Point - Quiet Road = Silent Profit

Here's a 2 bed apartment in Sea Point in a 'quiet road' (does such a thing exist in Sea Point?) on the market for R980 000. It achieves a gross rental of R3 900/month. With a purchase price of R980 000, monthly payment on a 100% bond will be R12543/month and the difference between rental and bond payment is R8643, well over twice the gross rental (and the net rental income would probably be closer to 2.5 times if note more). Here's the income/yield graph:

Buying in cash you max ROI is 4.78%, about 5%-6% then leaving your money in the bank. With a 50% downpayment you still need 2.8% capital appreciation to not lose any money and you'll only be cash flow positive with a 68% downpayment (over R675 000!). Add in expenses like rates, maintenance and vacancy and the results are even worse

Rent Vs Buy: Gordon's Bay Never Disappoints

Staying in the Helderberg-ish area let's have a look at this 2 bed flat in Gordon's Bay. It's on the market for R629 000 and has a current gross rental of R2 400/month. Taking into account the levy of R432/month leaves you with a net rental income of R1 968. So on a purchase price of R629000 with monthly payment on a 100% bond of R8051/month the difference between rental and bond payment is R-6083, over three times the net rental income! Let's take a look at the no doubt terrible yield graph:

Ouch. A 3.95% ROI if you pay in cash and a whopping 75% downpayment required to be cash flow positive. Even with a 50% deposit you still need 4% capital appreciation to not lose any money at all. Take away other costs like taxes, maintenance and vacancy and the results get even worse

Somerset West: Asking Price Down 40% But Will Double Soon

Sometimes I wonder if people read back their ads to themselves before clicking on the submit button. Observe this gem for a house on the market for R 1 720 000:

was in market 2 years ago @ R2.8m, urgent sale plse plse plse no agents, no agents comm's payable will be worth double this in few short years

So let me get this straight, in two years the asking price has declined 40%, from R2 800 000 to R1 720 000, but that's not really an indicator of anything and in another two years the price should have doubled again.

South Africa Had The Largest Property Bubble. Will Our Crash Be The Worst?

The following was written by regular reader Bean Counter:

A small piece of news that wouldn't have made it into any South African newspapers this weekend: according to a UDC economist, property prices in Ireland are going to fall 80% from peak to trough.

Let me say that again. 80 PERCENT from peak to trough.

In case that doesn't mean anything to anyone in good old sleep-walking South Africa, have a look at the graph of the Economist's figures, and see which bubble came second to our own.

We already know that the UK market is in freefall - 15% last year, another 25% estimated this year - and Spain is in deep doo-doo, as its economy based on the bubble crumbles. Lots of reports of large groups of young unemployed people spending their days sitting in town squares. For all fellow Europessimists, watch Spain carefully: it has the real potential to be become a very nasty place in the next few years. Young + unemployed + Spanish + hungry = shooting.

Finally, nobody needs an introduction to the bloodbath in the US, where liar loans were invented and where the 2009 Depression was born.

So let's look into the crystal ball, starting at the low end of the graph. If the US troughs at 30% it will have done well. God knows how far Spain will fall, but let's be generous and say it troughs at a 40% fall. Experts are predicting a total fall of 40% in the UK, but the British economy seems to be totally trashed, so I'm betting on closer to 50%. And so to Ireland.

80% sounds almost loony, but you never know. Let's be conservative, and say that Ireland will drop a total of 60% peak to trough, 20% better than the UCD people estimate.

Alarm bells going off yet? They should. It's basic maths. The bigger the bubble, the louder the pop. The higher prices rose, the further they have to fall.

Which brings me to SA, the undisputed global leader in overinflated house prices. In light of the other bubbles, is there any reason to believe we won't fall by over 60%? 70%/ 80?!

After all, our market rose by 244% between 1997 and 2005.

OK, so here's what the bulls and John Loos and Andrew Golding will say:
1) You can't compare SA to those other bubbles because our banks are healthy and our economy seems solid.
2) We're different because we had a huge segment of the population suddenly getting richer (Black Diamonds and new black elite), and that would have led to a "healthy" bubble.
3) World Cup 2010!

The World Cup is going to do exactly nothing for our economy: it did very little for Germany, and that was at the height of the boom years across the world. By 2010 the world will be picking its way out of Depression, and nobody is going to want to buy a freaking house in crime-riddle SA. So you can ignore point 3.

But how about 1 and 2? Do they hold water. I think they do, but only to a certain extent. I just don't believe that the black middle class could create that kind of supply and demand by itself.

In short I think maybe about 100% of the 244% could be ascribed to healthy, normal growth (led by the new black middle class, helping SA catch up to a normal international standard), but that still leaves 144% of speculative madness. In other words, a bubble the size of Spain's.

We will be incredibly lucky to bottom out at 40%. I think 50% is more realistic, but 60% is a possibility.

Enjoy the ride!

Saturday Open Thread

It's the Valentines Day Edition of the Open Thread

The Claremont: Asking Prices Crater

Reader BG writes:

The Claremont is a fairly new development on Claremont Main Rd. Last year bachelor apartments had an asking price of R650000 while 1 bed apartments were going for R850000. This year a 1 bed is going for R550000 negotiable! I'm unsure if that's for a bachelor apartment (15% asking price drop) or for a 1 bed apartment, which would be a 35% drop in asking price!

Sea Point: Don't Be Fooled By The Price - It's A Slum

Our regular Sea Point reporter PJ writes:

I saw this ad on Gumtree for a 90m2 flat in Sea Point going for R1.5 million. Don't let the price fool you, that block is a slum. I doubt the going rentals in that place will cover a quarter of the bond payment and maintenance costs (if there are any) must be huge.

What that photo doesn't show is immediately to your left is a Shoprite and directly across the road are a liquor store, both the biggest bergie magnets in Sea Point with various dodgy characters hanging around morning, noon and night.

Saturday Open Thread

It's time for the Saturday open thread. Here's a conversation starter: The SA Reserve Bank has cut the repo rate to 14% and people think the worst is over. The Bank of England cut their rate to 1%(!) and everyone there believes the worst is still coming.

Suprise! Worst Investment In Hout Bay Still On The Market

The worst investment in Hout Bay is still for sale! We last saw it back in October 2008 and the asking price of R6 000 000 still hasn't changed. And with the rent locked in at R28 500 for five years (seriously what idiot land lord negotiated that lease agreement), unless you put down over R3.8 million as a deposit, you'll only be losing a couple hundred thousand a year.

SA Propery Market Mauls Caprice

I remember when the local press were falling over themselves to hail former model, now lingerie saleswoman, Caprice Bourret and her "savvy" property purchases in Cape Town and Johannesburg. Oh well no more Top Billing appearances for Capirce.

Fall of the house(s) of Caprice: The former model reveals how her property assets have slumped by hundreds of thousands of pounds

If all this sounds bad, her investment in Johannesburg has fared even worse. In early 2006 Caprice decided to buy a house in South Africa because she was launching her lingerie range there.

Spurning Cape Town, she chose a wealthy suburb in Johannesburg, imagining that retail links would be easier to forge from a major business centre. She bought a four-bedroom house with one acre in the suburb of Bryanston for a bargain £300,000 and spent about £400,000 doubling its size.

The home now boasts a huge master bedroom with two fireplaces, its own private lounge and separate dressing area, a triple garage and a luxurious entertainment area featuring a bar, pool tables and dance floor. It is on the market for 5.3 million rand ( £373,000).

Caprice had expected her business to do well in South Africa - she is a fairly well known face there from her modelling days - so she bought the house purely for her own use as a base.
Caprice Bourret's home in Bryanston, Johannesburg

Since she wasn't planning on letting it she didn't take out a mortgage and paid cash instead, so it's entirely her own capital she is losing.

The rand stood at 9.5p at the start of 2006, but between April and September that year it lost 25 per cent to around 7p, where it still stands today, so even if her property had retained its original value

Caprice would have lost nearly £250,000 through the currency fluctuation alone. Factor in a 20- 25 per cent slump in house prices and the value of her investment has nearly halved.

'I know it's a bad idea to sell at the bottom of the market,' she says with a moan. ' But I am pulling my business out of South Africa and I have no more need of that house.

'I could hold on to it, but in my opinion it's going to take years before the market recovers and renting it in the meantime is a risk - and there's a much higher chance in South Africa that tenants may trash it. It seems best just to swallow my pride and cut my losses.'

Rent Vs Buy: Sea Point

Here's a bachelor flat in Sea Point on the market for R795 000, with a gross rental income of R3200. With a 100% bond your monthly payment is R10468/month, with the difference between that and the rental income being R7 268 - more than 2.27 times the rental itself! Here's the payment and yield graph:

Pay for the place in cash and you can expect a 4.83% return on investment. About 7% below what your money would earn sitting in the bank. Just to get cash flow positive you need to put down R551 984m a hair under 70%, as deposit. Put down 50% deposit and you still need over 3% capital appreciation to not lose any money at all. Take of rates, levies, maintenance and vacancy costs and the returns drop even more.

Saturday Open Thread

It's Open Thread time!

Rent Vs Buy: Cape Town CBD - You Say Urgent But I Don't Think You Mean It

Here's a 2 bedroomed apartment in the Cape Town CBD on sale for R1 400 000 (hat tip to reader AS for the link), with a current rental income of R6 000/month. This sale is listed as "urgent" but when you consider the terrible rental yields you can expect I don't think they quite mean it. Here's the payment and yield graph:

So with a 100% bond the difference between rental and bond payment is R-12435, over twice the rental itself. You only break even on cash flow if you put down over 2/3 depost (R944 346) and even with a 50% deposit you still need 2.76% capital appreciation to not lose any money. And this is with the gross rental, deduct maintenance, rates, levies and vacancy costs and the numbers get worse.

When It Doesn't Sell, It's Time To Beg

We last saw this Green Point apartment in May 2008. It was on the market for R1 895 000 with a tenant paying R8 500/rent.

Now the seller is asking for a buyer to just take over his bond and take it off his hands for R1 550 000.

More Bank Repos Struggling To Sell - Milnerton

Reader TA sent in a link to this bank repossessed house in Milnerton on sale for R1 300 000. It was listed in December 2008 as on sale for R1 650 000. According to TA it was initially listed at R1 900 000, which means it's dropped R600 000 in price, a 31.5% drop in asking price.

Looking at the pictures on the latest ad, it seems it's never been occupied.

A John Loos Retrospective: 2006 - 2009

Here's some quotes from chief FNB property shill John Loos as collected by Reader Bean Counter:

"I think later in the decade towards 2008, house price inflation will start to pick up." – June 2006

“So I don't see the end of house-price inflation for the country as a whole, and I think that by about next year you could start seeing a recovery in house-price inflation after some further decline this year...I think commercial property returns are going to be excellent for the rest of the decade.” – April 2007

“I expect to see a gradual uptick in demand for residential property towards the middle of the year...I don't think one should probably wait much longer. If one's holding out for price deflation I think you're probably going to be disappointed... I don't think it's a situation where we're going to see price deflation on a significant scale.” – February 2008

“You mustn’t count residential property out, from a point of view of getting into the market. The good time to get into residential property is probably just about here, as residential is probably near the bottom of the cycle.” – September 2008

“Yes, I’m afraid the whole global crisis has gone substantially further than most of us expected - it’s taken the property downturn that started back in 2004 to worse levels, and we’re into price deflation and there’s not a lot we can do about the situation as to where we are.” -- Business Day Summit business show transcript, January 13 2009

Remember folks our pal Loos works for the bank first. What they need to hear he tells them.

Saturday Open Thread

Saturday Open Thread time is here!

When Bank Repos Don't Sell - Milnerton

You know the market is tough when even bank repos don't sell. Here's two ads for the same 3 bedroomed flat in a block called Nautica in Milnerton, one from the end of October 2008 and one from today.

• Oct 2008 - BANK REPO - MILNERON, NAUTICA - R1 700 000


• Jan 2009 - MILNERTON / NAUTICA - BANK REPO - R1 700 000

You'll notice the price has not changed even though it's supposedly negotiable and supposedly below market value.

Buy My House And Let Me Rent From You - Mowbray

With price growth stagnating (or decreasing), bond payments at record highs and rents staying pretty level some people seem to be deciding it's in their financial best interest to sell their house and rent it back:

3 bedroom house for sale. wooden floors in most of the rooms and built in cupboard in 2 of the rooms. fitted kitched, large grounds with access through the garage(remote). Owner is prepared to rent the house for 6 months to 1 year.

Saturday Open Thread

Last Open Thread of the holidays before the regular schedule picks up again.

Saturday Open Thread

The first open thread and the kick off to 2009!