It's the Saturday Open Thread. This week's topic starter: Property Disasters - What do you know out there that have been utter real estate disasters. My contribution is
Senator Park which still requires an armed guard when the landlords collect the rent.
43 comments:
What do people think of STONEHURST ESTATE IN WESTLAKE near Tokai? There are so many properties for sale at the moment. The area on the slope of the mountain is so windy that you cannot even stay in your garden, the maintenance are getting higher and when the wind blows you just cannot sleep. These properties seem to be very expensive for what they are and where they are.
I drive past Stonehurst every day..and Guantanamo Bay pops into my mind every time I look at the place..not sure who christened it but it fits..all those zink roofs must clatter like hell in the wind..it came I think third in the most expensive real estate in SA survey..
You need to go past Stonehurst at night. Very few lights on. homogenous hell. cant see why anybody would want to live there.
Ballinrobe - Hulking over High Level Road, sitting empty.
Amalfi - buy now! almost all gone! only 2 apartments left! the best investment on the Atlantic Seaboard!
Orangerie - City Bowl, guaranteed investement, buy in early.
The Bantry - all the estate agents on the Atlantic seaboard have bought a unit already, shouldn't you? What do you mean you have to build to the plans we submitted to council?
The Cape Town stadium and recently opened "park". We're all paying through the nose for that white elephant. TEAR IT DOWN.
CRRRAASSHHH...Just found a property I sold in mid-2007 for R640,000 going for R795,000 on Pam Golding's site. Even if they get the asking price (which they won't) that means the place hasn't even kept up with inflation since I sold it. Ouch.
Drove past the Orangerie yesterday, it was just a mass of Show House boards. Rats leaving a sinking ship? People slowly realising that if they don't sell by the end of this summer selling season they're never going to sell?
buy when there's blood in the streets
Hear Hear ..and buy from the sheriff at that - in execution.
Dear Cape Town property bubble
Quick question, off topic. What's the average residential rental increase in CT? We've just been asked 12 percent by our landlord. On a 14k monthly rental, that's a whack. Am I being unreasonable to want to negotiate? How much room do I have to negotiate? It's being done through an agent.
Thanks
@anon
you have all the room in the world to negotiate, but your annual increase should have been in your original contract?
It is not prudent to leave the negotiation to the end of the year, when there is significant value to you to stay in the property. You are now at a disadvantage.
14% is a joke. Negotiate and if he doesn't budge find another place and move out.
Tenants who can reliably pay 14K/month in rent are worth their weight in gold to a landlord with any common sense.
I haven't checked my lease agreement to see what it stated upfront. Stupid not to have negotiated it a year ago, I know. Was previously in own home then sold. I think they are willing to do 10 percent, and I'm not keen to move so we'll have to see. Lesson learned I guess. Thanks for your comments.
Why on earth is it ALWAYS 10%? Doesn't matter if inflation is 14.5% or 4.5% they always want a 10% increase!
What really doesn't make sense is that some landlords would rather you move out if you don't automatically accept a 10% increase. Even if you have paid on time every month for years and years.
Landlords, please explain? Would you rather lose a good tenant in the hopes of getting a 10% increase from a potential defaulter or even worse, letting your property sit empty?
10% increases are a hangover from the days of double digit official inflation way back in the bad old days and have no place or justification today.
The contract should state a yearly increase on present CPI rate. Since these days the stats are cooked in line with Internationally Accepted Practice it is guaranteed to save you plenty. If you dont get a CPI rate tell them to take a hike.
When has the CPI ever been true reflection of inflation? Who cares how much milk and bread has increased when your rent goes up 14%, and the same with medical, insurance, rates, electricity etc. Interesting read on the front page of the Sunday Times this week was how we are seeing a rather large food price inflation boost globally. Couple that with the local electricity problem and the standard 10% real inflation of everything else and you perhaps have the setting for a bubble pop? The catalyst being the extremely low interest rates that are bound to increase. Estate Agents have reported a HUGE increase in the amount of property inquiries between the R800 000 - R1 300 000 mark, which is an indication of what many FTBs can afford. These have been selling well and the few EAs left are surviving off these and the odd baby boomer exchange every now and again. What happens if the repo rates double?
Not meaning to sound like a total pessimist but I believe the worst is yet to come in SA.
Everything is rapidly increasing: electricity, food, petrol, tolls, increases across the board and ALL in excess of the reported 3.5% CPI.
Salary increases at most companies are linked to CPI so people just cannot keep up with these increases.
As the previous comment mentioned, when CPI starts to tick up (and it is guaranteed to very shortly), it is going to be catastrophe.
I hope I am wrong but all signs point towards a melt down.
My office had a 2% annual increase over the last 2 years - residential went up 10% in total over a 3 year period.
Your landlord is taking a greedy fat chance to pay off his bond. The rent / house price ratio is out of whack because houses are twice the price they should be ... NOT because rents are too low.
Has your salary gone up 14% ... thought not.
incidentally, talking of overpriced houses - here's a link for some fine looking homes in the US for sale between R250,000 and R 350,000 - yes, thats rand not dollars.
http://realestate.yahoo.com/promo/4-bedrooms-for-the-price-of-4-wheels.html
In the US the crash has done what it needed to.
This still needs to happen here.
Check out some great graphs at
http://housepricesouthafrica.com/blog/
to compare SA's real house price graph to the US. The main part of our crash is still to come.
There's a Scary household debt graph just gone up as well.
It seems presently we have a fake inflation rate that bears no relation to real inflation which is keeping interest rates artificially low which is preventing houses from properly crashing.
I just re-negotiated my monthly rent with my landlord.
The previous contract stated a 10% increase. I did some investigation online for similar properties in the area and told my Landlord that I thought a 5% increase was fair.
He accepted. The bottom line is, if you move out, the landlord will need to find another tenant and pay the estate agent a month's rent in fees. So even if he gets a 12% increase it means nothing if he has to pay fees for a new tenant. So negotiate a 5% - 7% increase and if he has a brain, he will except it.
Maybe this is off topic but it's something that I have been thinking about.
I started working 2 years ago in the financial profession. At the moment I barely earn enough to afford my own place to rent. I'm ok with that - I don't have the experience to command a big salary.
My goal is obviously to move up the ladder and get one of those plum jobs you see advertised. The ones that are circa R1,000,000 p.a.
Based on this salary my gross monthly income would be R83,333 with a net monthly income of around R50,000 give or take a couple thousand.
On this salary the banks are probalby only going to give me a bond of 1/3 of gross which is R25,000.
That might sound like a huge amount but I live in Cape Town and around here that will only get a nice 2 bedroom apartment in town.
So my question is, why are prices so out of whack with earning potential? I don't know many people who have the potential to earn in excess of R1m per year.
How can first timers EVER get onto this ladder with prices where they currently are?
This is a problem.
@ Anon
if you are 2 years in the financial services industry you should already be pulling down R1,000,000 - if you aren't, take a long hard look in the mirror - in ten years' time you should be done and dusted
@ last anon
LOL what a load of BS. Please tell me what graduates earn R1m with two years experience. CA's don't. Actuaries don't. So who?
@anon who can't afford a house
Take a look at the real house price charts I linked to in my last post - house prices in SA are double what they should be in real terms - THAT'S why they are unaffordable. In the 80s and 90s your salary bought you twice as much house. Or, look it at another way, if someone in your position back then bought a house, and you, in the same job today looked at the same house, you could only buy half that house.
This is wrong because houses should only keep pace with inflation.
Now If that house price halves in real terms, you can once again afford to buy it.
That's whats going to happen. It has happened in the US. SA now has to catch up.
@ Anon
Money market dealers with 2 years' experience earn that with their eyes closed and one hand tied behind their backs
Best you take a good look in the mirror
R1 million is not big money these days
I know good cosmetic salesmen earning more than that
Seldom read such BS about people earning over a million, you must be high on drugs. Am a manager at a int. Bank and know what gets paid
@John
I would also like to meet these "good cosmetic salesmen" earning in excess of R1m per annum. I call BS on this.
Anyway, money market dealing isn't a job. Make a lot of money, yes - add value to the economy - no.
Plenty cosmetic salesmen earning over a bar
I know of one gent selling ladies' leg cream, specialised, and writing over a million a month business
You guys are out of the loop - plenty people pulling down R1 bar plus these days
Is nothing special
Get over yourselves
@ last anon
Ladies leg cream you say?
And I suppose the gent selling ladies arm cream earns R1 billion a year and the moon is made of cheese?
No need to be sarcastic - that first anon made claims which are consistent with my own experience
You asked for examples, so I am giving them to you - if you don't want something then don't ask for it
And to Mr "manager of international bank" hardly qualifies one to talk abaout what happens in the real world, does it?
Real world, as in not sheltered employment
It's only money. Used to make over a million a day. My friend made billions by selling cigarettes. Only problem it was in Zimbabwe and noone was buying costmetics LOL.
No need to be sarcastic?
Says the self-styled Max Factor of SA...
By your comments about "sheltered employment" I can only assume you lack the intellectual resources to have studied at a tertiary education.
Chip on your shoulder much?
Leg cream salesman and 22 year olds with blindfolds and one good arm earning 100k a month. Now I finally know whos behind the demand for overpriced houses in Cape Town!
Lets move on....
I hope I am wrong but all signs point towards a melt down.
No you are not wrong, but its bigger than you think. You are living in an historic period when the entire global financial system is in meltdown, or rather a slow motion train wreck, courtesy of OTC derivatives.
Secondly this education will inform and teach you that Nixon closing the gold window in 71 didnt alter 6 thousand years of monetary history.
There is one fundamental mistake made in this discussion, specifically by CJ. I think his calculations and reasoning is correct. But there is a factor used that is very slippery, the measuring stick used here is the ZAR adjusted for "so called inflation". The reality is that the inflation component is much bigger than published and changing very quickly. It is responding to massive amounts of paper created. This process has destroyed the value of the rand. So in reality house prices are falling but you can't see it. The rand is devaluing against real fundamentals like Gold and Silver. Take the Kruger Rand R2000 in 20001 and now R10 0000, that's 80%. Gold in ounces today buy you more house than it did in 2001. So in 10 years houses had fallen over 80% when your measuring stick is precious metal. So it is reasoned we should measure against average salary i.e. value of property as a factor of earnings. We have semi-skilled people in this country earning a million a year, and we have skilled people who earned 10K in 2001 and their increases were 5% PA. Whose salary do we measure with? There is no average salary in SA, so the comparison with America breaks down on salary as shown. America has just printed several trillion dollars which is being processed by the economy. Their housing is being heavily influenced by banks dumping re-possessed property. Here there is a definite drop in foreclosures in housing. Look I'm not very pro-property but for political reasons not investment reasons. The likelihood of housing falling significantly in ZAR terms is unlikely.
Oops
Should read:
Take the Kruger Rand R2000 in 2001 and now R10 000
I'm with Goldilocks on this. The economic rules we are familiar with broke down starting in 2008, possibly before. We now have to look at aconomic rules from 100's and even 1000's of years ago to find things that work. We are very quickly approching a bartering type economy.
@froggy
You raise some valid points - inflation figures have been messed around with by politicians worldwide and often bear no correlation to what is happening on the ground - so is that messing up the real price charts ? The problem is, those are the figures that world economic decisions are based on so if they are invalid then the whole structure becomes unstable.
So one has to say, they may not be that accurate, but is all we have got.
Likewise, I agree, finding average anything in stats in SA is a quagmire. But again, we have to use what we have got.
What we do have is a lot more inflation than the rest of the world. And we rocketing food prices and a rand that is weakening, this is going to get a lot worse. So inflation will rise and if house prices are stable, they will still fall in real terms.
But of course, if inflation rises, then so do bond rates, and rising bond payments in a environment of record personal debt and stagnant house prices means people will be forced to sell their homes as the bond starts to cripple them ... and so prices will fall.
So in the end it will be a combination of rising inflation and falling house prices going on for 5 or 6 years that will ultimately give us the 50% real fall we need.
One more point - the gold thing is interesting.
Obviously, buying houses around 2000 would have set you up nicely for the housing bubble that occurred over the next decade.
Interestingly, if you had instead bought gold, at that time, you would have done even better.
You can see in places like the US, the chart of housing priced in gold shows that in the years coming up, it will be time to sell gold and buy housing again. That makes sense because gold will be at record highs and housing will be at the end of the crash.
Historically, last time one should have sold gold and bought housing was in the early 80s. The time will be coming back again soon.
Of course, that doesn't mean housing will be going up then, it might just be that gold goes down. In the same way that in 2000, when housing should have been replaced by gold, housing didn't actually go down, what happened was gold went up more.
If you have bought gold keep it in fact many wealthy people are actually putting 50% of their wealth in physical Gold.The US dollar will melt down due to QE,China is asking for a new world currency.Gold is your best bet if you can buy it and keep it at home do so.In regards to housing market the bottom has gone.Estate agents are fabricating things in order keep things upbeat.Last week news24 reported that houses in the Atlantic sea board are selling for 30% under asking price,so if these stable areas are being impacted on imagine Parklands and Blouberg areas.This week we had a report that the West coast housing market is improving.I thing something is Rotten in the state of SA.
To anonymous above who is into buying lots of gold and keeping it at home ... what did you say your address was ?
NB Dunes restaurant in Hout Bay had a 1.5 ton safe full of cash stolen in the middle of the night last week ...
@Froggy,
Yes the property bubble is actually a paper bubble, property is just a more popular and easier accessible store of value than other forms; like fine art, classic cars etc. Its not the best store of value like gold which is divisible, malleable, portable, untarnishable etc, all of which property is not, but it is still effective to a very large degree. The credibility of property as a store of value is diminishing fast and golds is still rising, as it should be.
Saving wealth in paper money creates malinvestment as does people saving their excess wealth in property. Think on this sentence for a moment before moving on. The world needs a physical savings medium, separate from paper, which cant be easily expanded in volume but rises in value and doesn’t create distortions in property and stock markets etc. Physical gold is this wealth asset, not paper gold as in ETFs and unallocated accounts where there is little physical backing, PHYSICAL GOLD ONLY.
None of the comments above have made any provision for rentals earned from a property one is holding. For me it about cashflow, capital growth is just cream. Gold may have gone up more, but it doesn't earn "dividends" like rent.
Disaster means a major misfortune or calamity in an area subsequently proclaimed by the Governor to be in a state of disaster as a result of the misfortune or calamity.It effects to the property.
_______
Miami Title Company
Post a Comment