Archive for January, 2010
The City of Cape Town, pursuing, as always, a strict, environmentally conscious policy, has introduced a new flood plain and river management policy which, says Paul Henry, MD of Rawson Developers, is well intentioned but likely to give rise to numerous problems.
“The long term effect of the new rulings will be to reduce the value of any developable property close to a wetland or river system – for the simple reason that the owner cannot now be sure that the original zoning status of the land e.g. for a high density project, will be honoured.
“All property owners, but especially those who had hoped to capitalise on their site’s proximity to a wetland, are bound to challenge the law if it results in their projects being reduced in bulk or held back.
“I get the impression that these new rulings have been pushed through without much consultation with the ratepayers and/or developers who have been, or might be, involved with developments close to water systems.”
The laudable objections of the new policy, says Henry, are
- to reduce the risk of buildings being exposed to flood areas;
- to protect and enhance the water courses and wetlands’ ability to act as drainage systems;
- to enhance the appeal and value of these areas;
- to facilitate their integration in an aesthetically pleasing and socially uplifting way with the urban landscape; and
- to introduce an element of standardisation in the approval and/or modification processes that are applied to development near ecologically sensitive areas.
Henry said that many of SA’s river systems are choked by invader species such as water hyacinth and typha (the common bulrush) and the proliferation of these has been boosted by nutrient runoff from artificially fertilised agricultural holdings. Pollution is noticeable in most SA rivers today – the Jukskei in Gauteng and Umsinduzi in Kwazulu Natal being among the worst affected.
Often, too, raw effluent is found in rivers which, it was thought, were protected by supposedly sophisticated but now overloaded sewerage schemes nearby.
Henry said that in one area with which he is especially familiar, the Diep River estuary (of which the Milnerton Lagoon forms a part) canoeists are now way of taking to the water in summer because faecal pollution is so prevalent.
“This can cause a whole range of infections and is particularly dangerous if swallowed, as does happen with children playing in the beach area. It is now accepted that the choking of Diep River has gone so far that the river would be totally stagnant in summer if it were not for the inflow of waste water effluent.”
Asked what he would do if he was in a position to dictate council policy, Henry said that he would try to introduce plans for appropriate wetland associated developments and would at once set about cleaning up the rivers – “a perfect opportunity to create useful employment for those out of work”. In many areas, such as the suburbs of D’urbanvale in Durbanville, volunteers do valuable work cleaning up wetlands under the guidance of a nature conservation office – but this type of work, says Henry, should be in the hands of full time employees trained by the local authorities.
In the Cape, he said, rivers such as the Kuil, draining into False Bay, the Disa running into Hout Bay and the Diep draining into Zeekoeivlei, are now very real carriers of disease.
Henry said that he would also like to see an education programme put in place to educate people on the importance of the country’s rivers and wetlands and ensure that pollutants are kept out of the rivers.
For further information contact Paul Henry on 021 658 7100 or email paul@rawson-developers.co.za.
In his 15 years of commenting publicly on South Africa’s housing sector and, in particular, the position of developers, no statement that he has previously made has evoked anything like the response of his latest, said Paul Henry, Managing Director of Rawson Developers.
This statement criticised the government’s policy of appointing contractors for low cost housing mainly on the basis of their previously disadvantaged credentials and without reference to their track record or experience.
Henry said that emails and telephone calls from all over the country had come in following the publication of the statement and had confirmed that many people are frustrated and disillusioned by the way the good intentions of the previous Housing Minister, Lindiwe Sisulu, have failed to translate into delivery at anything like the required pace.
Henry said that two facts have emerged clearly from the many calls that he has received as a result of his statement.
“The first is that there is a very large pool of talented individuals with the experience and training to tackle housing delivery who, for one reason or another, are currently excluded from the process. This is a tragedy for South Africa.
“The second factor to become crystal clear is that the new Minister of Human Settlements, Tokyo Sexwale, faces a massive challenge – which he has acknowledged – because Sisulu’s “Breaking New Ground” policy has been ineffective.”
The aim of the BNG policy, said Henry, was to eradicate shack settlements by 2014. In reality, however, there has been an increase in the number of unserviced shack settlements all over the country and a desperate shortage of affordable housing.
“There are,” said Henry, “three factors which are ensuring that the whole situation will continue to deteriorate. These are:
- the rapid growth of the South African population
- the ongoing move to the cities and the flight from the rural areas (a worldwide trend), and
- the influx of impoverished refugees, asylum and work seekers from other countries.
“This scenario inevitably calls for a rapid increase in the delivery of low cost homes, in most cases made available at minimal prices or low rentals.
“However, this is not happening because red tape and bureaucratic inertia in the Planning and Land Use Departments at provincial level and in the City Councils make it impossible to deliver at anything like the required rate, even though the money has often been allocated.”
The situation, added Henry, is complicated by the fact that many of those who have received free or subsidized housing often use the units as income earners rather than live in them themselves.
“Being very short of cash they sell or rent the homes and move back to a shack, thereby perpetuating the problem.”
Henry said that any review of successful shack clearance/low cost housing units worldwide (but notably in India and Brazil) will show that until the state makes full use of the private sector in all phases of the operation they tend to remain bogged down.
“The danger of involving the private sector,” he said, “is that corruption can creep in. However with a strong minister such as Sexwale in charge this can be prevented. The plain truth is that where developers, spurred on by the prospects of profit, are employed, we tend to see red tape cut, solutions found and delivery speeded up.”
Asked what “solutions” he as a developer would prioritise, Henry said,
“The first step would have to be a massive upgrading of informal settlements: 4,2 million South African households at the moment do not have basic sanitation and clean water services.
“Secondly, we need to see far more vacant land serviced within the next 24 months, with the necessary sewerage, water and electrical reticulation, in order to allow those with the initiative to build for themselves to do so.”
Plots of this kind, he said, should be sold on a freehold basis at very low costs – anything from R500 to R1,500, but the subsequent shack building should be controlled to ensure that no homeowner exceeds the space allocated to them.
Thirdly, said Henry, the government should encourage developers to experiment and make use of the many innovative less expensive building systems that have appeared regularly in our technical journals and at such public exhibitions as Rand Easter Show.
“To date we have seen a sad history of these almost invariably being rejected by the City Councils because they are not as neat and as easily understood as the traditional, boring concrete block systems. However they can very often be more aesthetically attractive, thermally efficient and in most cases a lot cheaper.”
Henry mentioned in passing the innovative use of straw bales, rubble and concrete systems, and sandbag walls.
As a fourth step in speeding up the delivery process, said Henry, he would encourage far more widespread use of the popular three storey walk-up apartments when new developments are being considered. These, he said, still provide the cheapest high density solution.
“I do not wish to give the impression that solving the housing crisis in South Africa will be easy – it is very definitely a complex subject – but that is exactly why we need the involvement of all those with in-depth experience from the private sector.”
There are signs, said Henry, that the New Settlements Minister, Sexwale, being himself an entrepreneur, will not be so suspicious of profit-orientated developers and will be willing to involve them at every stage of the process, observing all the protocols that ensure total transparency. This, he said, bodes well for the future.
“We could, therefore, be looking at a situation in which in the year ahead large scale land releases with services and far more rapid delivery of homes become a reality. It is certainly encouraging to see that the Minister is tackling the repair of some 3,000 existing homes with vigour and determination.”
For further information contact Paul Henry on 021 658 7100 or email paul@rawson-developers.co.za.
Every prediction made eight months ago at the launch of the Blouberg Coastal Property Trust’s R10 million three storey eight unit Spring Tide development is being fulfilled, says Mike Abrahamse, Rawson franchise principal for Blaauwberg – and the sole mandate marketer for this latest Gary Vos development in his area. Abrahamse has been involved to date with four Blouberg Coastal Property Trust launches.
“Spring Tide”, situated only 100m from the beach, will be fully complete by 1st February 2010. It comprises eight units of which six are sold, leaving only two units with two bedrooms each to be signed for – both of which are priced at R1,098 million.
One of these, said Abrahamse, is on the ground floor with its own private garden. The other is on the first floor. All the apartments share a communal garden with a landscaped braai patio.
“As on all Gary Vos developments,” said Abrahamse, “much attention has been given to the finishes and fittings. As you would expect in so upmarket a development, all the kitchens and bathrooms have quality granite tops in a ‘desert sand’ colour.”
As with other new Gary Vos projects, said Abrahamse, those buying to rent out either full time or part time will be in a strong position.
“We can virtually guarantee that for a unit of this type, capable of sleeping four adults, a rental of R25 000 per month will be obtainable over the holiday season or R5 500 monthly, year round. Although some property trend watchers are only now awakening to the fact that this sector of the West Coast is becoming increasingly popular and fashionable – and property price rises here are always ahead of the average. It has taken time for this realisation to become widespread.”
For further information contact Mike Abrahamse on 082 5555 390 or email mike.bw@rawson.co.za.
The number of distressed property owners in South Africa is still on the rise and residential properties are still being “taken back” by banks (and other creditors) at a rate that is almost unprecedented in the history of our country, says Tony Clarke, MD of Rawson Properties.
This situation, he says, can put the tenants in such properties at risk: they can lose their homes as a result of their landlords being unable to meet his regular monthly bond repayments.
The Cape Dutch legal principal on which SA law regarding this matter has traditionally been based, says Clarke, is “huur gaan voor koop”. This means that the tenant’s lease and welfare take precedence over other considerations. If the owner of the property is falling behind in his bond repayments the bank is expected to show restraint, at least initially as regards evicting the tenant and is expected to find some other solution.
In practice, says Clarke, what happens is that, when it is clear that the bondholder cannot meet his obligations, the bank will apply for a court order authorising the repossession of the home and the sheriff will then put it up for auction on the date advertised.
“At this first auction the home will be sold on the condition that the lease continues to be honoured by the buyer. If, however, the bank finds the bids at the auction to be unacceptably low, they can then ask for a second auction, with no conditions attached. The tenant in these situations will have to negotiate a lease with the new owner, failing which he has to vacate the property.”
The whole question of tenants’ rights and tenants’ suffering if evicted through no fault of their own has recently received attention in the US Congress, says Clarke.
Faced with the large number of homes on which the bondholders have fallen behind in their payments, President Obama, in May, signed the “Helping Families Save Their Homes Act”.
This specified that tenants of any repossessed homes have to be given 90 days to find alternative accommodation. This new law will remain in operation only until December 2012 – by when, it is believed, the US economy will have recovered sufficiently to make repossessions a fairly rare occurrence.
Clarke said that some form of legislation of this kind might be acceptable in South Africa but, he pointed out, such a law could be used by a defaulting bondholder to extend the period during which he remains in possession of the home: he has only to produce a signed lease, possibly with a fictitious tenant, to delay the auction by three months.
It has been suggested, says Clarke, that no bondholder should be allowed to sign a lease without getting it approved by the mortgagee.
“In theory this would seem to be a good idea. In practice I cannot see it being a workable proposition because the bank does not have the time and resources to go about approving vast numbers of leases,” said Clarke.
In the circumstances, said Clarke, to protect themselves, tenants signing a new lease should insist that the owner gives them written confirmation that up to the date on which they take occupation that he has been conscientious and thorough in maintaining his bond repayments.
“A check of this kind will often reveal that some bondholders are not reliable landlords and are in danger of losing their properties – avoid them at all costs.”
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
A review of credit regulations by the banks and the government’s financial policymakers right now could ease the position of the many potential, but not affluent, homebuyers, says Bill Rawson, Chairman of Rawson Properties.
Speaking recently at a Rawson function, Rawson said,
“It concerns me to see from the latest expenditure analysis that South African consumers are falling into the same trap that has caught so many in emerging economies. They are spending in the wrong areas.”
The figures, said Rawson, reveal that a dramatic upswing in the spending on non-essential items such as furniture and white goods has been taking place recently.
“While this could be seen as an encouraging sign that the economy is recovering, it represents a complete rejection of the savings mentality which the state claims to want to foster – and it is a sign, too, that widespread property ownership, another declared government goal, is still seen as beyond their reach by large numbers of less wealthy people” said Rawson.
“We have been promoting the stabilising, wealth creating virtues of ownership for two decades – but right now, it seems, the emerging middle class is frittering away its incomes on goods which will have little or no resale value. This exactly the scenario we should be avoiding.”
Although he remains a supporter of the basic principles of the National Credit Act, talks between the State and the banks, said Rawson, are now needed to bring about a lightening of the strictest NCA rulings – which have effectively cut the bond issue rate by 60%.
“I know,” said Rawson that the banks are still battling with repayments and I know we have seen real improvements in the rate at which bonds are now being made available – but we are nowhere near a situation where the family with earnings of, say, R8 000 to R15 000 per month can really start planning to buy a home.”
Action is needed swiftly, added Rawson, because on figures he has seen it looks as if the banks expect interest rates from late 2010 to rise y some 3%, wiping out much of the ground gained by having a prime rate at 10,5%.
“Rises of this size will further disadvantage those who have little or no capital to get them onto the home owning ladder.”
Those who are able to take action now, said Rawson, should do so, possibly asking for a fixed rate for the next ten years.
Rawson also drew attention firstly to the comments made in April by his MD, Tony Clarke, in which he pointed out that bond payment difficulties in the UK have been partially solved by allowing buyers to take mortgages on 30 to 70% of the property’s value initially.
“Even the economists got this wrong: they predicted a rise in the demand for credit but the opposite has happened. The money supply figures have grown by only 2,67% compared to 4% previously. This indicates that it is time to stimulate the economy and the housing market in particular.”
For further information contact Bill Rawson on 021 658 7100 or email bill@rawsonproperties.com. P
Another leading figure in the Cape residential property sector, Mike Abrahamse, franchise principal for Rawson Properties in Blaauwberg, says that all the “signs” in his area point to the slump in the residential market now ending.
“It has been along recession but in my area (I cannot talk for others) there are signs that we are now out of the doldrums.”
Asked for statistical evidence of this, Abrahamse said that his franchise’s sales figures for September, October and November are 300% up on those of the same period last year – and, he added, in 2008, his area has remained one of the better performers in SA residential property.
“I think,” he added, “that we can find four reasons for this very welcome improvement.”
The first, he said is that the 500 base points interest rate drop has, as he predicted earlier this year, at last started to impact on the market.
“It always takes a year for an interest rate drop to have full effect,” he said. “This time the recovery, if that is not too strong a word, has been slower than usual – but it is now beginning to be evident.”
The second factor leading to a rise is that the banks’ much reported new willingness to lend bond finance is becoming a reality, albeit slowly.
“We have at last begun to see a few instances of 100% bonds plus costs being granted. If this trend now speeds up, we will all benefit.”
The third reason, said Abrahamse, is the simple rejuvenating effect of spring.
“Cape buyers do not exactly go into hibernation in winter but they certainly do become more positive and active when summer makes an appearance.”
The fourth reason, said Abrahamse, is that some of the ‘men-in-the-street’, often protected by a trade union, are now earning wages that were no more than a pipedream a decade ago.
“This means that at the bottom of the market we are seeing more activity than ever before and this has a domino effect on the whole market.”
In his own franchise, said Abrahamse, the relocation to a high-profile position on Blaauwberg Road has done much to attract clients. Two recent “walk-up” buyers have come in looking for properties valued at over R7 million.
Despite the relatively tough market this year, Rawson Properties’ Blaauwberg franchise has continued to attract agents: they now have 16, making them one of the biggest agencies in the area.
“What is more,” said Abrahamse, “almost all are very experienced.”
For further information contact Mike Abrahamse on 021 557 5514 or email mike.bw@rawson.co.za.
Rawson Developers have become one of the first Cape companies to break out of the “freeze syndrome” which has resulted in dozens of projects being put on hold.
Rawson Developers announced this week that they are going ahead with the development of 70 apartments in Klip Road, Grassy Park.
The 6315m² site, says Trevor Weston-Green, Rawson Developers’ planner and strategist, is convenient because it is next to a public park and within walking distance of a retail complex, schools and taxi ranks. In addition, the Ottery Hypermarket is less than ten minutes’ drive away.
The project will have its own children’s playground.
Cape architect, Gordon Hart, has designed the 51m² two bedroom units in two and three storey walk-up blocks. Buyers will be able to choose many of their finishes if they sign on timeously. The kitchens will have ovens, hobs, sinks and granite tops. Floors will be tiled or carpeted.
The price per unit starts at R469 990, which includes VAT, transfer and bond costs. Buyers will be encouraged to apply through Rawson Finance for bonds. This Rawson division, said Paul Henry, MD of Rawson Developers, has had an excellent track record recently in achieving a high success rate for bond approvals despite the stringency of the National Credit Act criteria.
“The big attraction of the scheme apart from the price (which is exceptional in today’s market) is its security,” said Henry. “Not only will the project be encircled by an electrified fence, it will have guards on duty round the clock.”
Henry and Weston-Green both testified that the competitive unit pricing was partly due to their using Rawson’s own in-house construction team. This has recently launched a civils arm which, using Rawson Construction’s plant is able to operate at rates not obtainable on the open market.
Rawson Construction is willing to work on non-Rawson projects and is increasingly doing so.
For further information contact Trevor Weston-Green on 021 658 7100 or email trevor@rawson-developers.co.za.
Residential property landlords hoping for a big step-up in their 2010 rents will almost certainly have to think again – and the reason for this is that Eskom’s proposed price hikes, which could add 30% to most householders’ bills as well as 10% to what is paid on municipal rates and services, will make budget tightening in the year to come essential.
This was said by Rob Lawrence, National Manager of Rawson Finance. Mortgage bond approvals, he added, will also be affected by the Eskom price hikes because potential buyers’ disposable incomes will be reduced.
“This,” said Lawrence, “is a pity because the whole scenario has been looking a lot rosier in recent months. Between May and September submissions for bonds in our company rose by over 100% and grants by just on 60%, and I understand that this has been the experience of other companies as well.
“In months ahead, we could, however, see a levelling off not only because of these increased costs but also because, too, many of the really good buys have now been taken up – the desperate must-sell-as-soon-as-possible sellers are no longer so evident.”
Lawrence said that sales figures, although still rising and causing deflation in prices to dwindle almost to zero, will also probably feel the effect of the increased electricity costs.
“Real estate agents in situations like these traditionally advise clients to continue to look for property but to scale down their expectations, the wholly valid argument being that it always pays to get in on the property owning ladder as soon as possible and to cut your suit according to your cloth. This is good advice for current times.”
For further information contact Rob Lawrence on 021 658 7100 or email rob@rawsonfinance.co.za.
Tony Clarke, MD of Rawson Properties, discusses this contentious issue.
One of the questions that he is most frequently asked, says Tony Clarke, is “should I fix the interest rate on my mortgage bond and, if so, at what rate and for how long?”
This question has arisen even more frequently since the SA Reserve Bank left the rates unchanged at the last Monetary Policy meeting. This gave some market watchers the impression that the bottom of the rate cycle is not far off – although many expect one more 50 basis point drop before the rates once again start their upward climb.
“When asked about rate fixing,” said Clarke, “No one can give hard and fast advice. I can, however, point out the conditions and terms on which rates are fixed and leave the homebuyer to make up his own mind.”
Those contemplating fixing their rates, said Clarke, are usually motivated by a desire to know exactly what their monthly expenditure will be in the foreseeable future.
Points to be borne in mind if fixed rates appeal to you, Clarke said, are that all rates have become more expensive as a result of the money supply crunch and that fixed rates vary depending on the size and length of the loan. Bonds for 80% or less of the loan value will qualify for a better rate than those for 81% to 100% of the value.
Similarly, the longer the loan period, the greater the likelihood that the borrower will have to pay a high rate, while the smaller the total value of the loan, the higher the rate will be. The credit track record of the borrower will also be taken into account.
Currently, says Clarke, fixed rates are being issued at 0,5% to 1,5% above prime. This means that the fairly large body of borrowers who in better times were able to secure loans 0,5 to 2% below prime are unlikely to benefit from a move to fix the rate now.
It has, too, to be realised that rates vary from bank to bank – it pays, therefore, to “test the waters” – and to know that no SA bank will fix your rate until the day the loan is registered. Prior to that the borrower will be given “indications” as to what he can expect to pay but these will be subject to change week by week.
Those who do like the security and peace of mind of a long fixed period, loan (say for ten years) will right now quite possibly find themselves paying a 15% rate i.e. 4,5% above the current rate and 5% above what many believe the rate will be in three months time.
“Any borrower wanting a fixed rate has, therefore, to become an amateur economist and to try and assess where interest rates will go once the deflation in house prices ends (probably by early 2010) and the economy starts to show inflation generating real growth – which most people believe will take another year.”
Clarke revealed that he himself has never fixed rates, preferring to try and negotiate the most favourable terms possible at the time of purchase – although, he said, he is sympathetic to the desire of those on limited incomes to fix their rates, provided they remember that “banks are not in business to lose money”.
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
