Asking Price Reduction In Durbanville

A big thank you to readers who send in data about housing markets they have their eyes on. Reader TM sent in this list of properties he's been keeping hie eye on in Durbanville.

Ref	Price	Date
44183	R1750000	23/10/2007
44183	R1550000	31/10/2007
45027	R3100000	22/08/2007
45027	R2995000	31/10/2007
45340	R3300000	23/10/2007
45340	R2900000	31/10/2007
45343	R1895000	23/10/2007
45343	R1750000	31/10/2007
45649	R2100000	04/09/2007
45649	R1995000	31/10/2007
45729	R1650000	28/09/2007
45729	R1600000	31/10/2007
45770	R929000	01/10/2007
45770	R899000	23/10/2007
MP100321	R3300000	08/10/2007
MP100321	R2899000	31/10/2007
MP100370	R1195000	29/08/2007
MP100370	R1150000	28/09/2007
MP100370	R1128000	31/10/2007
MP104471	R1295000	23/10/2007
MP104471	R1225000	31/10/2007
MP104875	R640000	08/10/2007
MP104875	R620000	31/10/2007
MP104881	R945000	08/10/2007
MP104881	R915000	31/10/2007
MP104913	R3000000	01/10/2007
MP104913	R2650000	31/10/2007
MP106388	R749000	08/10/2007
MP106388	R699000	31/10/2007
MP107358	R1295000	23/10/2007
MP107358	R1285000	31/10/2007
MP108685	R2200000	23/10/2007
MP108685	R1900000	31/10/2007
MP110395	R1275000	29/10/2007
MP110395	R1250000	31/10/2007
MP110965	R2200000	23/10/2007
MP110965	R1900000	29/10/2007
MP59155	R1195000	14/09/2007
MP59155	R1125000	23/10/2007
MP69431	R699000	01/10/2007
MP69431	R679000	31/10/2007
MP76164	R566000	14/09/2007
MP76164	R549000	31/10/2007
MP76188	R1800000	10/09/2007
MP76188	R1695000	08/10/2007
MP84556	R970000	06/09/2007
MP84556	R935000	31/10/2007
MP85047	R1660000	30/08/2007
MP85047	R1599000	08/10/2007
MP85047	R1590000	31/10/2007
MP88765	R1195000	14/09/2007
MP88765	R1080000	01/10/2007
MP89563	R899000	06/09/2007
MP89563	R890000	31/10/2007
MP92627	R850000	14/09/2007
MP92627	R800000	23/10/2007
MP94027	R2750000	22/08/2007
MP94027	R2395000	31/10/2007
MP94265	R1175000	20/09/2007
MP94265	R1150000	31/10/2007
MP95379	R1895000	14/09/2007
MP95379	R1849000	18/10/2007
MP95379	R1799000	31/10/2007
MP96294	R1100000	08/10/2007
MP96294	R1075000	23/10/2007
MP96302	R1975000	22/08/2007
MP96302	R1925000	14/09/2007
MP99543	R795000	22/08/2007
MP99543	R750000	14/09/2007
MP99543	R725000	31/10/2007
MP99547	R1895000	22/10/2007
MP99547	R1750000	31/10/2007
MP99548	R3300000	08/10/2007
MP99548	R2899000	23/10/2007

90K Price Drop In Two Days

Here's a 2 bedroom house with 3 attached flatlets. On the 29th of October the asking price was R1 280 000. On the 31st of October the price is down to R1 190 000 and the seller is 'motivated'. Now according to the ad you could be earning close to R10 000 a month on rent if you rented everything out and if the seller bought for less than the current asking price they should be easily cash flow positive. So why sell?

25K Rent For Cartwrights Corner?

Nothing smells more of a desperate specuvestor trying to cover their bond than an ad asking for R25 000 in rent for a 2 bedroomed apartment.

And you call that a kitchen?

Asking Prices in Durban

Reader SZ sent us this spreadsheet of asking prices on houses he's been keeping his eye on in Durban. It seems like people are deciding it's better to die by a large number of small cuts than rather price downward in one big cut. I call that catching a falling knife. A number in green means that the price was reduced from some higher price. A number in red means that the property was removed from the market and then brought back on, an old trick agents use to pretend like the property is brand new on the market.

Escombe	10 Cowell St, Queensburgh	810000	790000	760000
New Germany	32 Lewis Walter St	760000	760000
The Wolds	11 Glockner St	785000	765000
Waterfall	142 Valley drive	850000	830000	800000
Westville	58 Severn Drive	900000	850000	800000
The Wolds	8 Janine St, New Germany	795000	775000
Crestview	44A Rainbow Drive, Waterfall	930000	895000
Escombe	20 Philips Rd, Queensburgh	770000	770000
Caversham Glen	17 Plymouth Rd, Pinetown	795000	750000	740000
Malvern	9 Rodney Rd, Queensburgh	850000	830000

Interest Rates Going Down? Don't Bet On It.

Inflation won't be tamed any time soon - Moody's

Moody's, the international ratings agency, yesterday poured cold water on hopes that inflation would soon be tamed.

It said household spending could have more steam than initially expected, raising the possibility that inflation may remain outside the Reserve Bank's target band of between 3 percent and 6 percent for longer than previously thought.

Reserve Bank Raises Repo Rate 50bps

Mboweni raises repo rate

South Africa's central bank raised its key repo rate by 50 basis points to 10.5 percent on Thursday, above expectations, as inflation remains above the target range and despite a slowdown in some economic indicators.

The half percentage point rise is the third this year and brings to 350 basis points the increases since June last year to tame rising inflation pressures, partly driven by food and fuel costs, and robust consumer spending.

Only seven of 19 economists polled by Reuters last week forecast rates would rise on Thursday.

But But... The World Cup!

Ah the 2010 World Cup. It's the perfect reason to buy a property for R395 000 with a tenant renting for R1 700/month. It doesn't matter if the property is located over 40km from the nearest world cup venue (with only one of the most congested highways in the city between you and the stadium) or that it has a pititful 5% ROI (before rates, maintenance and vacancy cotsts) when paid for entirely in cash. I mean the World Cup right? It says so in the ad. It has to be a good investment.

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R4769.13	R-3069.13	R-36829.56
R39500	R4292.22	R-2592.22	R-31106.60	-78.75%
R79000	R3815.30	R-2115.30	R-25383.65	-32.13%
R118500	R3338.39	R-1638.39	R-19660.69	-16.59%
R158000	R2861.48	R-1161.48	R-13937.74	-8.82%
R197500	R2384.56	R-684.56	R-8214.78	-4.16%
R237000	R1907.65	R-207.65	R-2491.82	-1.05%
R276500	R1430.74	R269.26	R3231.13	1.17%
R316000	R953.83	R746.17	R8954.09	2.83%
R355500	R476.91	R1223.09	R14677.04	4.13%
R395000	R0.00	R1700.00	R20400.00	5.16%

Property Price Growth: Less Than Cash

Standard Bank reported (via RealEstateWeb) property price inflation was 5.7% year on year. That's less than cash. That kind of growth is a death knell to speculators. They're relying on double digit inflation to make up for their horrendous rental returns, which in most cases for newly bought flats is cash flow negative before taxes, maintenance and vacancy.

Rent Vs. Buy: The Rockwell

The Rockwell is complete (despite 20% of the apartments still being on sale) and rental units are also now available.

A 1 bedroomed unit is renting for R 5 500 while the cheapest 1 bedroomed unit I can find for sale costs R1 520 000.

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R18352.10	R-12852.10	R-154225.14
R152000	R16516.89	R-11016.89	R-132202.63	-86.98%
R304000	R14681.68	R-9181.68	R-110180.11	-36.24%
R456000	R12846.47	R-7346.47	R-88157.60	-19.33%
R608000	R11011.26	R-5511.26	R-66135.09	-10.88%
R760000	R9176.05	R-3676.05	R-44112.57	-5.80%
R912000	R7340.84	R-1840.84	R-22090.06	-2.42%
R1064000	R5505.63	R-5.63	R-67.54	-0.01%
R1216000	R3670.42	R1829.58	R21954.97	1.81%
R1368000	R1835.21	R3664.79	R43977.49	3.21%
R1520000	R0.00	R5500.00	R66000.00	4.34%

Meanwhile a two bedroomed unit is renting for R7 500 and the cheapest I could find an equivalent one for is R1 810 000.

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R21853.48	R-14353.48	R-172241.78
R181000	R19668.13	R-12168.13	R-146017.60	-80.67%
R362000	R17482.79	R-9982.79	R-119793.42	-33.09%
R543000	R15297.44	R-7797.44	R-93569.25	-17.23%
R724000	R13112.09	R-5612.09	R-67345.07	-9.30%
R905000	R10926.74	R-3426.74	R-41120.89	-4.54%
R1086000	R8741.39	R-1241.39	R-14896.71	-1.37%
R1267000	R6556.04	R943.96	R11327.47	0.89%
R1448000	R4370.70	R3129.30	R37551.64	2.59%
R1629000	R2185.35	R5314.65	R63775.82	3.92%
R1810000	R0.00	R7500.00	R90000.00	4.97%

In both cases you've got to put over a million in down payment just to get positive cashflow and that's before rates, maintenance and vacancy. And those sub 5% ROIs don't exactly look promising.

Rent Vs. Buy: Century City

Here's a flat for sale in Villa Italia in Century City. Asking price is R799 000 and it's tenanted for the next six months. "Great!" you say "what's the rental income?". How about R3 000 a month. Less monthly levy R806.71 and monthly rates about R350. That comes to a whopping R1843 rental income. I actually don't want to calculate the yield here because I know it's going to be horrible but here goes...

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R9646.92	R-7803.92	R-93647.08
R79900	R8682.23	R-6839.23	R-82070.78	-102.72%
R159800	R7717.54	R-5874.54	R-70494.47	-44.11%
R239700	R6752.85	R-4909.85	R-58918.16	-24.58%
R319600	R5788.15	R-3945.15	R-47341.85	-14.81%
R399500	R4823.46	R-2980.46	R-35765.54	-8.95%
R479400	R3858.77	R-2015.77	R-24189.23	-5.05%
R559300	R2894.08	R-1051.08	R-12612.93	-2.26%
R639200	R1929.38	R-86.38	R-1036.62	-0.16%
R719100	R964.69	R878.31	R10539.69	1.47%
R799000	R0.00	R1843.00	R22116.00	2.77%

Egads! 2.77% ROI when you pay in cash and R700 000 needed just to break even. What an investment. I'll take two!

Buy My House Then Let Me Rent From You

This ad is hilarious. The seller wants to sell the house to you for R850 000, then rent it from you for R3500 a month. What's that? 1/3rd of the cost of the bond? At least you don't have to search for a tenant right?

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R10262.68	R-6762.68	R-81152.22
R85000	R9236.42	R-5736.42	R-68837.00	-80.98%
R170000	R8210.15	R-4710.15	R-56521.77	-33.25%
R255000	R7183.88	R-3683.88	R-44206.55	-17.34%
R340000	R6157.61	R-2657.61	R-31891.33	-9.38%
R425000	R5131.34	R-1631.34	R-19576.11	-4.61%
R510000	R4105.07	R-605.07	R-7260.89	-1.42%
R595000	R3078.81	R421.19	R5054.33	0.85%
R680000	R2052.54	R1447.46	R17369.56	2.55%
R765000	R1026.27	R2473.73	R29684.78	3.88%
R850000	R0.00	R3500.00	R42000.00	4.94%

5% ROI when you pay cash and break even at a mere R600 000 down. Meanwhile our seller puts his R850 000 in a 9% fixed deposit and the interest pays the rent and he still has R35 000 left over at the end of year for a nice holiday.

Gordon Institute of Business Science: Property bubble collapse "could be severe"

Associate Professor in Finance and Economics Adrian Saville from the University of Pretoria Gordoon Institute of Business Science wrote the following about the SA property market:

In short, not only is SA residential property over-valued, but the economic conditions and the market psychology on which a property price bubble thrive are in place.

If we are in a bubble, then the implications are potentially significant. The collapse of a bubble would have adverse wealth effects, which in turn would place a brake on consumer spending. Where property has been financed through debt, the effects on individuals’ balance sheets could be severe.

Thanks to Chuckmeister who posted this link in our comments section. I thought I'd highlight it on the front page.

Same House: Two Prices

Here's two listings for the same 4 bedroomed house in Kalk Bay with a R250 000 price difference between the two.

REMax - R2 950 000
Engel & Volkers - R3 200 000

Banks: Prices are going to double! We swear!

Moneyweb has another article full of bank economists promising housing prices are going nowhere but up!

Doubling your money in 5 years

Want to turn R500 000 into R1m in 5 years? Property - particularly affordable housing - is the place to be.

That's according to those who are ploughing big money into bricks and mortar, like property developers. But even life assurers, who have an interest in promoting other asset classes and investments, are seeing the returns to be had in property.

People with a vested interest in prices going up are saying prices will go up? Who would've guessed.

As I asked in the comments section of that article:

Are salaries going to double in 5 years time as well? Or will those entering the market then (todays 17-20 year olds) be straight out of luck and destined to rent forever?

Somehow I doubt it.

Meanwhile: "South Africa's net savings rate is currently below zero, making the country even more dependent on foreign flows to fund economic growth."

Up and Down and Up

This apartment has been on sale since April 2007 (if not earlier). It was initially for sale for R1 465 000, then reduced to R1 395 000 and now is back up to R1 425 000. Because when no one wants to buy at R1 395 000 your best bet is to raise the price R30 000.

Rent Vs. Buy: CBD

We haven't done any of these for a while. And remember the rental income is before rates, maintenance, taxes and vacancy.

Upmarket Apartment In the Cbd For Sale: Sale price R1 575 000. Currently rented for R5700.

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R19016.15	R-13316.15	R-159793.82
R157500	R17114.54	R-11414.54	R-136974.43	-86.97%
R315000	R15212.92	R-9512.92	R-114155.05	-36.24%
R472500	R13311.31	R-7611.31	R-91335.67	-19.33%
R630000	R11409.69	R-5709.69	R-68516.29	-10.88%
R787500	R9508.08	R-3808.08	R-45696.91	-5.80%
R945000	R7606.46	R-1906.46	R-22877.53	-2.42%
R1102500	R5704.85	R-4.85	R-58.14	-0.01%
R1260000	R3803.23	R1896.77	R22761.24	1.81%
R1417500	R1901.62	R3798.38	R45580.62	3.22%
R1575000	R0.00	R5700.00	R68400.00	4.34%

Fully leveraged you're only going to lose R160 000 a year. And even if you pay the full asking price you'll get a whopping 4.34% annual return on investment. Even putting down a R1 million downpayment loses you money...

Buyers Market? Hardly

In a bid to get someone to buy a house business banks are already calling it a buyers market in the residential property sector. Please don't believe the bulldust. It's a buyers market when prices have reverted to the historical mean and sellers are still forced to discount. A 6 year property bubble does not unwind in 3 weeks.

Reserve Bank Raises Rates

Prime lending rate is now 13.5%. And there's another on the way.

An Anecdote

privateproperty.co.za sends me an email with the properties that are on show in the areas I am tracking. Usually it's one property every month or so. Today's email? Four.

Selling A House Becoming Difficult

Homeowners struggling to sell their property

Three out of four residential properties are now being sold for less than the asking price and the average time a home remains on the market before it is sold has increased from eight to 10 weeks.

Jan Kleynhans, the chief executive of First National Bank (FNB) Home Loans, yesterday attributed changes in the market predominantly to the implementation of the National Credit Act in June and the cumulative effect of interest rate hikes over the past year.

Market activity is now at its lowest level since the inception of the FNB Property Barometer survey in 2003.