PRETORIA – House prices in the cities of Cape Town and Johannesburg have shown the steadiest increase of all the major metropolitan areas in the country since the turn-around from negative growth in the second quarter of 2009. This is according to the latest house price index released by property research group Lightstone. The index (recorded until March 2010) also shows that properties in the ‘affordable’ band are performing well above other bands like the ‘luxury’ and ‘mid value’ bands.

Although Johannesburg has led the pack in annualised month to month house price inflation for 2010, the city’s figures took a dip from 8.7% in January and 9.2% in February to 8.6% in March. Cape Town however did not see the same reversal. Figures for the Mother City were 7.7% in January, 8.8% in February and 9.0% in March 2010. In the February/March period figures for the rest of the metros remained flat, accept for eThekwini which rose from 5.4% to 5.5%. The Nelson Mandela Metro fared the worst over this period declining from 2.0% to 0.8%.

Property price inflation also increased steadily for both coastal and non-coastal properties since the 2009 turnaround began, although it seems that the rate of inflation is starting to decrease for non-coastal properties. These figures were 7.4% in January, 8.2% in February and 8.4% in March 2010. Coastal properties on the other hand have retained a steadier pace of increase for 2010 at 4.5% in January, 5.3% in February and 7.4% in March.

Lightstone CEO Anthony Miller warned that the month-to-month data sets for February and March should not be seen in isolation and that they could contain data anomalies owing to various factors. 

Freehold properties have also outperformed their sectional title counterparts. Freehold property inflation was 7.9% for January, 9.0% for February and 10% for March this year, whereas sectional properties have shown a decline from a flat 7.1% in January and February to 6.8% in March.

According to the Lightstone data, the most lucrative sector remains the mid and affordable bands. Inflation in the affordable band rose from 10.9% in January, to 14.3%, but declined sharply to 12.6% in March this year.  In the mid-sector figures were 8.3% in January, 9.1% in February and 9.3% in March, compared to the luxury and high value sectors which showed increases of 7.3-8.0% and 7.2-8.0% respectively.

FNB Property Strategist John Loos says their Estate Agents Survey shows that Cape Town was indeed the city with the strongest demand in the 1^st quarter of 2010, but that the rate of decline in inflation was quicker for Cape Town than Johannesburg during the 2^nd quarter of the year. Loos also confirmed that the Nelson Mandela metro was their weakest performer during the 1^st quarter, mainly because industrialised cities were worst hit by the recession.

Loos was however, surprised by the sharp decline in the affordable price band shown by the Lightstone data and says that their figures don’t correspond. He added that their coastal figures were also somewhat different and showed much weaker performance. “They [Lightstone] measure their coastal properties as properties within 500 metres from the shoreline. We measure whole coastal towns and our data definitely showed year-on-year deflation in the first quarter of this year.”

Lightstone’s Anthony Miller confirmed the differences in data capturing methods for coastal properties and said that he would like to see another month or two’s data before drawing any conclusions on the coastal property market or any other trends for that matter. According to Miller, an early speculative conclusion may be that “there is a recognition that the market has largely bottomed out and that people who have capital are looking to buy bargain holiday properties”.

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Sectional Title

One of the ‘issues’ with which sectional title trustees and their managing agents have to deal with time and again is the contentious subject of where the sectional title owners’ responsibilities end and where those of the trustees start.  The issue is complicated by trustees also being owners of sectional title units who provide their time and service free of charge.

Firstly, the owner is responsible for the maintenance and cleanliness of the interior of his section.  This includes some items such as the doors and windows, but it does not include the exterior and its maintenance.

Secondly, the owner is also responsible for insuring all movables and content in his section, but the permanent fixtures such as doors and windows are covered by the Body Corporate’s building insurance policy.

There is one exception. If the geyser which serves his section is located outside the unit, as is often the case, it remains the responsibility of the sectional title owner to maintain such a geyser.

Thirdly, the owner has the responsibility for paying the levies.  In some cases, says Bauer, owners renting out their units have assumed that the tenant will pay these – but that is not the case.

Fourth, the owner is responsible for seeing that everyone who lives in or visits his unit – including his tenant and the tenant’s family – complies with the Conduct Rules of the scheme.  It is not, as is often thought, the trustees’ or managing agents’ duty to keep occupants or tenants in line in this matter, says Bauer.  The trustees’ duty is simply to warn the owner if rules are broken and to keep on doing so until he takes action.  The owner, for his part, may after issuing several verbal or written warnings to his tenant, be forced to terminate the lease and in some cases forcefully evict the tenants.

This responsibility of the owner of the sectional title unit, adds Bauer, is particularly important when it comes to exercising the right to use the common property such as gardens, parking areas and swimming baths.  The owner has to see, that his family or his tenants behave appropriately in these areas.

Fifth, a particularly important owner responsibility is to prevent the unit being used unlawfully, ie, for any purpose or in any way that is contrary to the intentions of the scheme’s developers and/or the prescribed Management Rules.  (These intentions are often shown or implied on the sectional plan or defined in the registered rules of the scheme.)  It could, for example, be wrong to run a business from a unit and it would certainly be wrong to sublet space in it on a short-term basis without the permission of the owner.  It would also be wrong to allow the tenant to have more than the prescribed number of occupants (a common and very serious offence) or to use the unit for commercial entertainment.

Sixth, a rule that is often overlooked is that the Body Corporate must be notified by the owner both of changes in ownership and of mortgages relating to the unit.  The owner must also ensure that the Body Corporate is given up-to-date information on the address at which he resides and can be contacted.

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

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Shortage of properties on sale

Gerhard Kotzé looks at how you can take advantage of the shortage of houses on the market. Property buyers, buyed by the more positive mood in the market, are finding that there is something of a stock shortage in some respects, even at this early stage of the recovery cycle.

This is due to large numbers of sellers now withdrawing their properties from the market in anticipation of receiving a higher price “down the road”.

Buyers can find ample stock, wide choice and value in recently completed sectional title and cluster developments.

While we have what amounts to something of a shortage of pre-owned freehold properties we have precisely the opposite in the case of cluster and sectional title projects where developers with long lead times were hard hit by the recent property market recession.
Whereas property supply and demand usually works in tandem across all categories, there is now a divergence which works to the advantage of buyers.

Nor is the situation likely to change in the short term, he believes in that the supply of cluster and sectional title units is likely to remain in surplus for the immediate future, despite a lack of plans passed and new building activity.
There is therefore a brief window of opportunity for buyers to acquire such properties, probably at good prices, before supply moves into general equilibrium across the board once more.

On the other hand as far as freehold properties are concerned, sellers may be over-optimistic about the likelihood of obtaining higher prices later, particularly if they make the mistake of returning to the market in say, six to nine months time, expecting to see a significant increase in the general level of prices.

The joker in the pack on this scenario is what is likely to happen to the market post-World Cup when the euphoria dies down and the country’s economy has to re-invent itself.

Then of course there is the ever-present possibility that interest rates may increase again. There are already hints in the media that the current low levels of interest rates may not last much longer as the economy recovers.

Finally of course there is the old property adage that if you sell at a particular stage of the market cycle, you will also be buying into prevailing market levels and that, all things being equal, there is no particular advantage to be had from delay.
 

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