Archive for August, 2009
South African property owners have over the past 20 months weathered several major storms with commendable success – but one factor, crime, is still a cause of concern and a serious dampener on the property market, says Tony Clarke, MD of Rawson Properties.
“Those who own property in SA,” said Clarke, “should have been impressed by the way confidence has returned to the property sector – but this confidence would have been at a far higher level if only we had not had a serious crime problem.”
The property market, he said, had successfully come through a number of major crises: the Zimbabwean crisis, the Eskom power cuts, the global financial meltdown, the National Credit Act (which more than any other factor slowed down house sales), the banks’ inability to give mortgage bonds as previously, the Polokwane Congress and the establishment of the Zuma regime (with a new but largely unspecified agenda). Then, too, there had been the new, radical insistence on time-consuming training for agents to bring them up to professional levels – a wise but, in Clarke’s words, an “expensive” move.
“All this,” said Clarke, “came on top of the huge debt problem that South African homeowners and consumers got themselves into which in the housing sector has led to ongoing repossessions of many thousands of houses, the effect of which will be to keep prices down for the foreseeable future.”
All these challenges, said Clarke, have been, or are being, lived through without killing off the property sector – and the fact the South Africa has managed this bears witness to the resilience of the property market and the ongoing perception that property is still the safest of investments.
“If, now, South Africans start achieving an improved crime record, the stage will be set for a full-scale revival driven by pent-up demand for homes, which increases month by month.”
Clarke said that only those close to the residential property scene realise just how strong the need for houses has become.
“Right now,” he said, “South Africa has the fastest growing middle class in the world, a fact confirmed by several reports, and the majority of these newly empowered people want to upgrade their living standards and become homeowners.
“That is the first reason for faith in residential property. The second is that our basic fiscal strategies, policies and bank reserves are satisfactory. South African banks did not, like so many of their First World colleagues, fall apart recently in the global recession.
“Then, too, we have shown an impressive ability to host international events on the sporting, conference and tourist front and this, it seems, has had a good public relations effect worldwide.
“Add to these factors, the boost that the 2010 World Cup is already starting to give to our economy and the increased exposure worldwide that South Africa will enjoy as a result of it, and we have yet another reason for confidence.
“The challenge now, therefore, is to get on top of our fast increasing crime problem.”
In certain areas, said Clarke, crime is now the number one reason for emigration – or at least for keeping the possibility of emigration alive in people’s minds. This, he said, had been confirmed in FNB’s latest report which indicates that crime is now responsible for some 45% of all emigration. It has also, he said, been responsible for a new trend, seen throughout South Africa – “semi-gration”. This he defines as a tendency to move to areas in South Africa where life is thought to be safer.
“Fourteen percent of high net worth individuals are reported to have moved elsewhere in SA primarily for safety reasons,” said Clarke. “The major beneficiaries of this have been the coastal areas of the Southern Cape – George, Knysna, Plettenberg Bay and Mossel Bay in particular, and the northern and southern coastal towns of KwaZulu Natal.”
In the circumstances, said Clarke, the new Commissioner of Police’s initiatives aimed at reducing crime are very welcome.
“If these initiatives show even moderate success, this could be the start of a new era, one in which reduced crime helps the property recovery.
“In my view, the signs are already there that the market has bottomed out and will grow steadily, with “normality” in prices and trading conditions evident by mid-2010. If the crime situation can be controlled the revival will be even more spectacular than even those of us who have always been optimistic have previously predicted.”
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
Is the residential property sector going through the worst recession since the 1939-1941 slump – or are the difficulties exaggerated?
Bill Rawson, Chairman of Rawson Properties, has said that in his view this recession is not as bad as that of 1969 and 1991 and the 1976-1977 Soweto riots period – while Rawson’s MD, Tony Clarke, said this week that, although he does not foresee a real recovery for 12 months, some of his group’s latest sales figures have been very encouraging.
“We have a company policy of not revealing figures – but I can say that our sales in July were 57% up on those of June, which itself was a reasonably good month.”
Clarke said that the only really reliable guide to trends in property sales are based on six months’ performance but, here again, he said, the overall trends indicate that by this year there will have been half a year’s steady growth.
“Overall growth in the second and third quarters seems now certain,” he said.
Asked to what he attributes this, Clarke said the banks are slowly easing up on their lending criteria and many indecisive, hesitant buyers who were hanging back waiting for signs that the market was at its lowest point are now investing.
“In general,” he said, “they are taking twice as long as before to make up their minds and are much more demanding of value than previously but they are no longer just waiting.”
Although Rawsons has traditionally been strongest in the middle and lower middle categories, any review of sales, said Clarke, will show that they are now a force to be reckoned with in the upper brackets – not only in Cape Town but also in the northern suburbs of Johannesburg such as Dainfern, Fourways and Bryanston.
For further information contact Tony Clarke on 021658 7100 or email tony@rawsonproperties.com.
Statistics and figures produced by SPS (Selected Property Services), a computerised properties for sale information facility supported by nine prominent estate agencies serving the Bloubergstrand, Table View, Parklands, Flamingo Vlei, Sunset Beach, West Beach and Sunningdale precincts of the Western Cape, indicates that stock levels are now lower then they have been for 24 months and that the homes on offer vary in price from R330,000 to R12,5 million, says Mike Abrahamse, franchise principal for Rawson Properties in Blaauwberg. <!–more–>
“Five to six months ago,” said Abrahamse, “we had 600 plus homes on our stock list. We are now down 25% to 350.”
This is significant, said Abrahamse, because it indicates that more and more homeowners are surviving the downturn and no longer need to sell their homes. This, in turn, he says, will lead to those homes which are for sale no longer having to cut prices as drastically as before and will, in fact, start to escalate upwards.
“I see demand increasing soon to the point where it more than matches the supply. As the “slack” gets taken up, so will prices start increasing,” said Abrahamse.
Another reason for supposing that prices are set to rise, said Abrahamse, is that it is now nine months since the first interest rate drop (in December 2008) and it always takes almost exactly that length of time for the benefits of such an interest rate change to be felt in the house market.
“It does not take a rocket scientist to predict that five successive interest rate falls since December will now start having an effect,” said Abrahamse.
The first signs of a recovery in the US and European house market, said Abrahamse, have been evident for just over three months now – and SA usually lags about six months behind these pace setters in the housing sector.
“All things considered, I am, therefore, willing to predict that the housing market in the areas we serve, and in SA generally, will come out of its winter hibernation and, encouraged by easier access to bank finance and lower rates, will move into a higher gear by the fourth quarter of this year.”
What does this mean for the potential investor?
It means, said Abrahamse, that if they are serious about buying at the best possible price, they should do so in the next two to four months.
“We all know that the right time to buy is at the end of a down cycle or the start of an up cycle and that is in my view close at hand. I just cannot see prices going any lower in our area.”
For further information contact Mike Abrahamse on 021 557 5514 or email blaauwberg@rawsonproperties.com.
The “amicable and mature” resolution of the disagreements between SSETA (Services Sector Education and Training Authority) and the Estate Agency Affairs Board puts the whole real estate profession back on track towards achieving the advanced educational standards which will be its defining characteristic after 2011, says Tony Clarke, MD of Rawson Properties. <!–more–>
As long ago as the early nineties Clarke was calling for professional qualifications to become mandatory for all agents and franchise principals and was heavily involved in the setting up of the requirements for the now-accredited qualifications.
“It became clear a long way back,” said Clarke, “that the industry had to be able to assure its clients that the agents they were dealing with had to have the same level of educational and competency qualifications as were introduced to the banking and insurance industries. Now that SSETA and the EAAB have reached agreement this goal once again becomes achievable.”
The new NQF4 qualifications, said Clarke, make it essential for the agent to be found competent on 20 “unit standards” and to acquire 150 “credits”, each of which involves ten “notional hours”, divided 30/70 between classroom study and practical work.
“After the 1 500 hours put in here,” said Clarke, “the agents will be very much better equipped than agents of former years who were often thrown in at the deep end immediately after being accepted for the job and getting a Fidelity Fund Certificate. At the end of their first year such agents were fully accredited – without proof of competency being called for.”
Asked if the new qualifications will not prove too difficult for some agents, Clarke said that those who struggle will inevitably take longer to qualify but will be assisted with ongoing training to reach competency.
Under the new SSETA/EAAB agreement SSETA is recognised as the quality assurance body for the accreditation of estate agents’ study material and the EAAB undertake to provide sufficient assessors and moderators from their ranks to serve SSETA in its QA assessments.
The EAAB text book for the NQF4 qualification remains the standard work but will be reviewed and amended regularly by SSETA.
SSETA promised to consider re-launching their suspended bursary scheme. It is hoped, say SSETA, that a similar scheme will become available for franchise principals (who are required to write NQF5 examinations).
“The decks are now cleared for us to move forward and make SA estate agents among the best qualified and most competent in the world,” said Clarke.
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
Those fortunate applicants (still only 65% of the total) who are granted home loans by the banks should take note that the loan package will usually include insurance on the property – and this will be issued by the bank itself. <!–more–>
“That may sound a reasonable deal but it has to be realised firstly that the client is not obliged to accept this particular insurance (even though he is legally committed to insuring the property) and secondly, that bank insurances can on occasion be significantly higher than what an independent broker can achieve for his client,” said Bill Rawson, Chairman of Rawson Properties.
Recently, said Rawson, he came across a case in which the bond recipient would have paid double the rate he was later granted by a non-aligned broker if he accepted the bank’s package.
“As was previously the case on mortgage loans,” said Rawson, “the banks have often been in unchallenged positions for many years – but today’s consumers are more cost and efficiency conscious and, once they are made aware of their rights, they will not put up with expensive insurance. It is up to them and their agents to check the rates charged against what they can get on the open market.”
For further information contact Bill Rawson on 021 658 7100 or email bill@rawsonproperties.com.
In a recent statement Bill Rawson, Chairman of the Rawson Properties group, went on record as saying that, with building costs up 55% in three years and, although likely to level off, showing absolutely no signs of returning to previous levels, the sooner those contemplating improvements to their homes or investment properties get them started, the better. <!–more–>
Recently, however, Rawson has also pointed out that the boom which is still benefiting the big construction groups – WBHO, Group Five, M&R and others – has now ended for the “bakkie builders” who rely largely on residential contracts which have been cut off by the lack of development and consumer finance.
“Their availability,” said Rawson, “is another good reason to get going on improvement now. He, himself, has this year done exactly that on several properties.”
“The challenge facing the landlord looking to upgrade is, however, that many of the so called artisans now in the building industry are not in any real sense qualified or fit for skilled, sophisticated work.”
It is increasingly necessary, said Rawson, to pay for specialist teams to handled skilled work which 20 years ago might have been done by most apprentices and tradesmen teams.
“The demise of the apprenticeship system has left a gap only partly filled by an increase in off-site manufacture and clever substitute materials.”
As a result, said Rawson, quality custom-designed building with good finishes is now costing up to R15 000 per m² and taking far longer to complete whereas simpler repetitive work can be had for R6 000 per m².
Certain contractors and developers, said Rawson, were far-seeing and built up core teams of good trained artisans whom they have kept in work year round. They have also sustained ongoing relationships with reliable subcontractors whom they pay timeously and, again, keep supplied with a steady flow of work.
“This, of course, has been the tactic at Rawson Developers and others like them – and it has resulted in reasonably good standards being maintained – but the fact remains that one has today to pay high for both design and contractors to get custom designed work.”
For further information contact Bill Rawson on 021 658 7100 or email bill@rawsonproperties.com.
There have been very few residential property developments in South Africa for some 24 months now – bank restrictions on development and bond lending have almost closed down this type of initiative, says Bill Rawson, Chairman of Rawson Properties. <!–more–>
“Only exceptional projects with absolutely assured sales have been able to attract funding,” said Rawson, “but, although this is regrettable, the lack of new stock will inevitably make existing stock far more valuable. In all our franchises we can see a situation arising in which the pent-up demands for homes will lead to price rises in the next twelve months.”
The value of existing stock, added Rawson, will be enhanced by the increasing cost of building.
“The rise in building costs in the last two years has been nothing short of phenomenal. If and when developers get going again they will still not be able to produce new stock at prices that compete with existing homes.”
Those delaying improvements and upgrades, added Rawson, should not do so.
“I cannot see any likelihood of building prices falling – all we can predict is that at some stage the price increases will level off.”
Repeating what he has said on several previous occasions, Rawson said that those investing in residential property now could well be buying at a 25 to 30% discount on the peak prices of 2006/2007 and in certain instances (e.g. on repossessed properties) they can get returns of up to 12%.
“The average return is still only 4 to 5% but many of our clients are doing far better than this. Considering that the banks are now offering only 7% on fixed deposits (with no likelihood of an increase until rates rise again), residential property, on which rentals increase year on year and which will appreciate at close to 10% per annum from now on, is still a wise investment choice.”
Asked if commercial, industrial or retail property is not a better option than residential right now, Rawson said that there have recently been a number of long vacancies in some of these properties but rented residential properties are still in high demand.
For further information contact Bill Rawson on 021 658 7100 or email bill@rawsonproperties.com.
Rawson Finance, the Rawson Properties’ dedicated bond origination team, increased the number of offers to purchase handled by them from June to July this year by 23% and they are confident that further similar upswings will be possible in the next half year, said Rob Lawrence, National Manager of Rawson Finance. <!–more–>
“It is,” he said, “no secret that our hit rate is higher than average and that we have now consolidated our position but this upswing testifies also to two things – the first is that the banks are slowly easing up on their loan criteria, and being more receptive to applicants. The second is that the demand – and sales – is highest in the lower middle and low end of the market where we have special strengths and are part of the Rawson franchises serving those sectors.|
Right now, said Lawrence, demand in the R300 000 to R800 000 bracket has been building up for two or more years but has not been wholly deterred by the lack of credit.
“A further slight easing of criteria here will see this market really move – and the good news is that certain applicants (in selected salary brackets) are now getting 100% loans from certain banks.”
Sales in the upper and upper middle market, he said, are also picking up but there is far less reliance here on bonds – agents are reporting that as many as 40% of their sales are to cash buyers and 50% or higher deposits here are not unusual.
Lawrence added that “it makes a big difference” to be an in-house team serving your own group.
“We are conscious, all the time, of the fact that the agent will have worked long and hard to secure the offer – and that if the sales does not go through he does not eat. This motivates us to be as efficient as possible.”
In today’s market, said Lawrence, the successful bond originator is the one who knows which application a bank will look on favourably and which they are likely to reject.
“To take a simple example, certain banks are very wary of anyone who is self-employed. Others are quite comfortable in this field provided that there is proof of sustainable income. We have to tailor our applications to meet the banks’ demands – not try to persuade them to alter their criteria, and one of the most important steps we do in this respect is to ensure that they rectify past credit lapses and eliminate possible future over-borrowing opportunities, e.g. through store cards.”
Although there is absolutely no likelihood of the SA residential sector reviving the boom conditions of 2006/2007, the slow but steady improvements now being experienced, said Lawrence, point to improving turnovers and sales prices being achieved by mid-2010 .
For further information contact Rob Lawrence on 021 658 7100 or email rob@rawsonfinance.co.za.
John Birkett, the Rawson Properties Claremont franchise agent who specialises in sectional title (mainly apartments) sales in the Southern Suburbs “academic belt” – from Mowbray to Newlands, at the Rawson Group’s bi-annual awards, took the prize for the second highest sales in the entire group, which gives employment to some 800 agents. <!–more–>
He was also the top agent in the Units Sold category and won other prizes.
Hoping that his success would inspire others Birkett was asked to address a training session – and pass on something of what he has learned. Many of those who attended said that this was the best talk they had ever been given. Birkett himself said, “It was mainly common sense – if you really think about your career it becomes clear what you must do. The problem is that many never really analyse what they are doing or where they are going.”
Among the points listed by Birkett, some of the most relevant were
- know who your buyers are and what they want.
“In my case,” he said, “95% of those to whom I sell are students or buying for students, whether as investors or as parents. Knowing this, I know where and how to promote myself.”
- let it be known that you have plenty of stock. People distrust the agent with limited options to offer. If you do not have enough stock make contact with other agents to ensure they will share their stock with you, but be prepared to share your stock with them.
- if you do not have what a buyer is looking for, search for it. If necessary approaching the owners of homes who were not planning to sell, or properties that are to rent.
- when you don’t have appointments, keep working: canvass for stock, follow up on your contacts, research the market – and market yourself.
“There are 101 ways to make yourself better known – try them all.”
- when you have initiated an offer; see the deal through, no matter what sacrifices you have to make in time or money.
- never fail to keep a promise.
- find new and better ways of doing the same things you did before.
- return regularly to old business. Those who bought satisfactorily before may well now be ready to move on or to buy further properties or will send you a referral..
- try to advertise in the same spot week by week so that people know where to find you.
- develop a routine and stick to it.
- network – ask existing clients to give you contacts you might follow up on.
- try and give up smoking, drink only in moderation and if it slows you down avoid it. Stay fit through exercise. Develop an outlook, a philosophy, and keep positive under all circumstances – and whatever you do, do it well. When there is no action, do not fuss – you cannot be 100% successful 100% of the time.
- if you find the job is not your cup of tea, have the courage to move on to something that suits you better.
Birkett’s advice obviously has been right for himself – his latest success at the bi-annual awards is by no means his first – he has held his position in the top three “Highest Fees Earned” since 2001, his second year of selling. Even in his first year he made it into the top ten.
One of the Rawson Group’s most successful agencies, Bergvliet, owned and run by John Weston, has, it seems, proved that if you give real service, there is no need to drop your commission – and you can insist that you handle all mandates on an exclusive sales basis. <!–more–>
Writing for the Rawson in-house magazine, Weston said that, on reviewing their efforts two years ago, he and his team felt that they were putting so much time and money into every sale that there was absolutely no need for them to cut commissions – and most clients, accepting their dedication, were happy to sign a sole mandate agreement.
Weston also started turning down mandates where the client insisted on radical overpricing.
The formula, said Weston, has proved successful. Sales last year were 20% up and this year is likely to see a similar improvement.
Explaining where he is “coming from” Weston said that he and his colleagues aim to establish a completely Christian, 100% ethical agency in which the clients’ interests will always be put ahead of their own.
This, he said, involves their learning to act as “consultants” not as “sales agents”.
“Our first goal is to do what is best for the client – this could involve helping a desperate seller to hold onto rather then to sell his home or persuading him to help his offspring finance a new home now rather than after his death. It also involves taking immense care with bond applications to see that they conform to National Credit Act criteria – 90% of our bond applications are successful and many clients are getting 85 or 90% bonds.”
Weston’s team operate throughout Bergvliet, Meadowridge, Diep River, Heathfield, Plumstead and Southfield. The wide diversity of homes in this area, he said, enables him to serve the upwardly mobile and the downscalers in a price bracket of R400 000 to R5 million plus.
For further information contact John Weston on 021 715 5674 or email bergvliet@rawsonrproperties.com.
