+2007…

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Newsletter No. 4 – October 2007

Introduction…                        

Dear Clients & Colleagues

Welcome to our 4th quarterly newsletter. Once again, we hope you find this newsletter is informative as to the latest property industry trends, news & opinions. In addition, this edition outlines another project recently completed by mfs Developers & Quantity Surveyors CC.

As mentioned in our last newsletter, this edition will look at the new National Credit Act and the impact it has had on the property market. We will also look at the impact of the latest interest rate increase as well as touching on the issue of foreign property ownership.

Please feel free to email with your comments and any questions you would like to see discussed in these newsletters.
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QS…

Our most recently completed project is House Mc, a luxury 3 bedroom home in the High Constantia Estate designed by Indigo Architects. The design opens the living spaces to timber decks on either side of the house which overlook a beautifully landscaped garden, bordered by a natural fynbos edged stream on the South boundary. Upstairs, dormer windows project from the bedrooms to make the most of the surrounding mountain views.

The Construction work was undertaken by Fraser Construction who proved an invaluable part of the project team as they endeavoured to keep costs in check whilst maintaining the high standard of finishes and detailing as expected by the Architect and client.

In progress… North East elevation

Completed… South East corner overlooking the perennial stream

All in all this has been a fantastic project to be involved in, running near flawlessly from start to finish.
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Property News…

The NCA:

Now that the NCA has had been in place for a few months, it is worthwhile examining the affect it has had on the property market. But before we get there, the legendry property economist Erwin Rode, gives us a layman’s breakdown of the NCA requirements. Rode (click here for the full article) quotes the spokesman for ABSA, Phillippa Vermoter:

“The NCA basically requires from credit providers to lend consumers no more funds than they can comfortably afford to repay. In other words, consumers, when applying for credit — such as a home loan — need to disclose all of their credit obligations. Any new credit facility granted would be based neither on gross nor on net income alone, but on the applicant’s ability to repay the debt”

This is as opposed to the previous financing requirements where typically, loans equal to 30% of applicants’ gross income were granted (i.e. did not take into account existing liabilities of the client). Under the new NCA, clients with a high income and a high debt value should only be granted relatively small loan facilities. Whereas clients with a low income but little debt, should be granted relatively large loan facilities.

Despite the changes, the banking industry believes the NCA is “nothing to fear” as reported in the cyberprop.com online report, where Absa home loans CEO Gavin Opperman is stated as saying: "Despite the increase in interest rates and the downward house price growth trends recently, it is accepted and supported by all sectors that residential property is and will remain a sound means of wealth creation.”

"As for the NCA, we view it in a positive light and believe that if all credit lenders adhere to the rules and regulations, it will lead to the upliftment of the property industry, and will ultimately promote and develop the entire economy."

This positive view is supported by futurist Guy Lundy, who in the same article said: “a massive increase in spending on infrastructure to redress the backlogs of the past as well as to prepare the country for 2010, would put some R400bn into the economy and create thousands of new jobs, which was bound to raise housing demand even further.”

Having spoken to a number of estate agents, in this regard, the general consensus seems to be that the property market is still relatively healthy, with some reporting that their markets in key areas with property values of over R2mil have continued to show strong demand. Furthermore, their opinions indicate that the NCA has had its greatest affect on those salaried buyers in the R1mil to R2mil market segments.

At we continue to beat the drum of the old adage: Location, Location, Location. The areas mentioned by the abovementioned agents are those within close proximity of good schools and / or with good future potential for growth. Furthermore, the continued development of the economy as highlighted by Guy Lundy above, has caused the rapidly expanding middle class to continue its push on the “under R1mil” property market segment, despite the NCA and the interest rate increases.

Foreign Property Ownership:

We would also like to update you on a pertinent piece of news regarding the foreign ownership of property. As reported on Property24, the issue “met with unexpected opposition from ANC MPs last week”. This resulted in the South African Property Owners Association calling for caution on the matter, as they have “for some time been advocating that foreign land ownership limitations would in all likelihood be detrimental to the economy.” As stated by SAPOA CEO Neil Gopal, "Foreign ownership of land in South Africa is in fact negligible. But this whole debate fosters uncertainty and caution on the part of international investors."

"These proposals affect all sectors of the property market – direct investment, listed property, as well as both residential and commercial property," says Gopal.

will continue to monitor this issue and report back to you.

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Thanks for taking the time to peruse this newsletter. Please feel free to forward it to friends and colleagues. Please give us your comments and feedback via email and any requests for further information that you feel should be included in future editions.

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Kind Regards
Developers & Quantity Surveyors CC