Jaco Rademeyer Estates

2012-01-17T15:55:00.000+02:00

Dear Reader

Please find attached our latest report on the results of the 4^th Quarter 2011 FNB Estate Agent Home Buying Survey

ESTATE AGENTS DON’T APPEAR TO SUGGEST A MARKET IN “EQUILIBRIUM” YET

Recently, there has been some media discussion about whether the current time is the time to buy property, on the back of some assertions that residential property market “equilibrium” has been reached. It is surely safe to say that the residential property market has become more of a “buyers” market since early-2008, with prices having declined by around -17% in real terms since February of that year (“real prices” refer to average house prices adjusted for consumer price inflation).

But it is challenging to ascertain when a market has reached equilibrium, the price level where demand matches supply, especially as equilibrium levels fluctuate over time. Reaching equilibrium would imply that demand has finally caught up with supply after about 4 years in which the market could be deemed to have been oversupplied, a state which caused the downward real price correction in the market. Reaching equilibrium would also imply no further real price decline to come, unless of course further economic deterioration in the near term caused the market equilibrium price level to decline further, because price levels required to reach market equilibrium, or (otherwise put) market balance, do change over time as economic conditions change.

We believe that indications emanating from the latest results of the FNB Estate Agent Survey suggest that the residential market still has some way to go before it reaches that “holy grail” where oversupplies disappear and the market can finally be said to be realistically priced and, yes, in equilibrium.

The first and foremost factor influencing our view is the fact that, according to the agents surveyed, the estimated average time that a home remains on the market before being sold rose for the 2nd successive quarter in the 4th quarter of 2011, from a previous 17 weeks and 2 days to 17 weeks and 6 days.

This would suggest that the imbalance between demand and supply has deteriorated further recently. The recent average time on the market remains far above the 2 month level, and even well-above 3 months, levels which we would deem necessary to reflect a market with a “healthy balance between supply and demand”. There has been a broad trend of increase (deterioration) in the average time on the market since early-2010, after something of an improvement in 2009 on the back of major interest rate cuts.

The second indicator of pricing realism, namely the estimated percentage of sellers being required to drop their asking price to make the sale, has also shown the resumption of a broadly rising trend from late-2010 through 2011, and currently hovers around 90% of total sellers. Whilst one would always expect a significant percentage of sellers to “open the bidding” on the high side, the current percentage would appear to be extremely high when looking back to the lower percentage of sellers dropping their asking prices in years prior to the 2008 recession. In addition, 2011 showed further increase in this percentage, which is not what one would expect to see in a market getting nearer to equilibrium and price realism. While an additional survey question, regarding the average estimated percentage drop in price by sellers being required to do so, has only been asked for 2 years, we have seen a mild increase in the average estimated price drop from -11% early in 2010 to -13% by the end of 2011.

Therefore, the sample of estate agents surveyed during the 4th quarter of 2011 would not appear to believe that the residential property is yet realistically price given the level of demand, or otherwise put, they appear to imply that the market is not yet in equilibrium or “balance between demand and supply”. Admittedly, the appropriate average time on the market is debatable, but we believe that above 17 weeks is inappropriately long. This, we believe, requires either further real house price decline, or alternatively residential demand needs to strengthen considerably to catch up with supply.

And at this stage, the agents aren’t pointing to a positive move in residential demand. A key question posed to estate agents in the survey is with regard to their perception of residential demand strength, done on a scale of 1 to 10 with 10 being the strongest possible level. After a mild strengthening in the demand rating in the 3rd quarter of 2011 to 5.87, the 4th quarter (normally a seasonally stronger quarter) saw a mild decline to 5.66. In year-on-year terms this represents -2.2% decline on the 4^th quarter of 2010. Agents have not perceived demand to have made any meaningful progress in terms of strengthening, following a significant surge from mid-2009 to mid-2010. This shouldn’t be surprising, given that since late-2009, there has been very little further interest rate reduction, and little support from a very mediocre economy.

In terms of expectations of demand in the near term, the 4th quarter agent survey returned a weak response, with a very significant drop in the percentage of agents expecting demand to increase, from 44% in the previous quarter to 17% in the 4th quarter. This was the lowest percentage of respondents expecting strengthening since the 2nd quarter of 2005.

When asking agents for the factors influencing their near term expectations, seasonal factors play the most important role in this deterioration by far, because at the time of the 4th quarter survey in November, they were looking at 2 months of quiet time ahead as the holiday season approached. However, there are certain other negative factors that have are significant, including the perceived “strict credit environment, “economic stress/general pessimism”, and still-unrealistic pricing by many sellers.

Also significant, is that only a few agents (7%) still see interest rate levels as still being a positive. The last rate cuts took place in 2010, and the stimulus from rate cuts has worn off.

In order to eliminate the strong influence of seasonal factors, we aggregate the results for near term expectations on a 4-quarter moving average basis, and the result is what we call the FNB Home Buying Confidence Indicator. The Indicator is on a scale of -1 to +1, with a -1 number assigned to a “weakening expectation” by an agent, a rating of zero to an “unchanged” expectation, and a +1 rating to a “strengthening” expectation. Here we see the 4th quarter Home Buying Confidence Indicator declining mildly on the previous quarter’s level, from 0.25 to 0.19.

The agents surveyed, therefore, appear to have become more pessimistic in their near term expectations, seasonal factors aside.

The Estate Agent Survey thus appears to support our opinion that further real house price (house prices adjusted for consumer price inflation) decline is required in the near term in order to shift the residential property market towards a balance between demand and supply or, otherwise put, equilibrium.

Therefore, at this stage, the residential property sector would be sensitive to any unwanted surprises in the form of an interest rate hike at this week’s Monetary Policy Committee (MPC) meeting of the Reserve Bank. Fortunately, at this stage such an event seems unlikely, with the expectation that CPI inflation is nearing its peak, after which it is expected to decline back into the target range of 3%-6% without requiring help from interest rates at this stage.

Kind Regards

John Loos

Household and Property Sector Strategist

2011-12-13T11:15:00.000+02:00

Liquidations in SA on the increase

13 Dec 2011

The number of liquidations reflected a year-on-year increase of 15.7 percent, from 344 in November 2010 to 398 in November 2011 says Statistics SA.

Data on statistics of liquidations and insolvencies revealed that the number of liquidations for the three months ended November 2011 increased by 1.2 percent year-on-year (y/y) from 1 078 to 1 091

The number of liquidations for the first eleven months of 2011 fell by 11.8 percent y/y from 3 667 to 3 236.

Stats SA says this decline was due to a 14.3 percent drop in voluntary liquidations (487 fewer liquidations)

During this period company liquidations fell by 16.5 percent (from 1 742 to 1 455), while close corporation liquidations fell by 7.5 percent (from 1 925 to 1 781).

The total number of insolvencies for the first ten months of 2011 decreased by 32.2 percent from 3 368 to 2 284 compared with the first ten months of 2010.

A y/y decrease of 17.0 percent from 323 to 268 was estimated for October 2011. – Denise Mhlanga

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2011-12-13T11:11:00.001+02:00

Estate Agency Affairs Board-Staggering payouts

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Test

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test

Dare to be Different

2011-04-15T09:38:00.005+02:00

Sectional title versus freehold

2011-03-14T13:55:00.000+02:00

Sectional title versus freehold

14 Dec 2010

Cluster or townhouse living has many appealing draw cards, with the greater sense of security and community that you don’t typically get with a free-standing house being the prime motivator.

Jaco Rademeyer writes a regular column for Property24. He is the owner and principal of Jaco Rademeyer Estates inPort Elizabeth, and is the NedBank Property Professional of the Year for 2010.

Accordingly, townhouse developments and complexes have grown dramatically in popularity in recent years, with many people more than happy to forgo a bit of space and privacy in exchange for safety and peace-of-mind.

However, there are two distinct types of townhouses: sectional title and freehold, and they are vastly different in the way the complex is run and where the responsibility lies.

With a freehold property you own the house the land it is built on, and each unit has its own erf number. Every owner is responsible for their own rates and taxes, insurance, maintenance, as well as water and electricity.

A freehold complex doesn’t have a body corporate, but a home owners’ association is usually established to look after maintenance of the roads, security and communal areas within the complex. A small levy is typically payable by all of the home owners for this upkeep.

The association also establishes a set of rules and regulations for the complex and the communal areas. Where there is no home owners’ association, the normal municipal laws and bylaws simply apply, as is the case with a free-standing home. As the name suggests, the owner has the freedom to change the unit as they wish.

It’s a very different scenario as far as a sectional title property is concerned. In this instance, you only own the house, and all outside areas are common property, even if an area is enclosed.

A body corporate establishes the rules for the complex as well as the levies that apply for the maintenance on the outside of the unit, common property, lawns and gardens, as well as water, taxes and insurance. This is based on a participation quota, using the size of the unit relative to the total surface area of the development.

In some cases separate water meters may be installed for individual accounts, but rates and electricity charges remain the owner’s responsibility.

An important aspect to consider here is that the owner will require permission from the body corporate if they intend making any changes that will affect the external structure of the building – such as adding a fireplace or erecting a garage/carport. So if you’re fiercely independent or expressively creative, sectional title may not be for you!

Building a new townhouse

When purchasing a freehold townhouse in a new development, the buyer will sign a deed of sale comprising a land agreement and a building contract – with the purchase price split up into a land amount and the building value.

The developer will utilise their own funds or a development bond for installing services. Once this is completed and the municipality has issued the required service certificate, the plot is transferred into the purchaser’s name and the developer is paid for the land.

The developer will then commence building the unit, and will draw funds at various stages of construction against the purchaser’s bond, with the final draw once the unit is finished. It’s important to remember that the buyer is liable for interim interest, calculated according to the monies paid to the developer (for the plot and building draws prior to completion). The bond is payable from the date of completion.

In the case of a sectional title development, the developer will utilise their own funds or a development bond for the services and the construction, with purchaser not liable for any costs during construction.

Transfer can only take place once the unit is complete, and the developer only receives money on transfer. The purchaser is normally obliged to take occupation when the unit is complete, although as transfer can take approximately two months to finalise, the purchaser will be liable for occupational rent until the date of transfer, at which point the bond becomes payable.

Buying an existing unit

Purchasing an existing freehold townhouse is a simpler affair, as the buyer will sign a single contract encompassing the land and buildings.

The same applies for a sectional title unit, except that the contract must explicitly state the specific details and numbers that apply to the deal, including the unit itself, as well as extras such as a garage, parking bay/carport or a storeroom – as these are often separated from the townhouse, or may have been added at a later stage.

SUMMARY

SECTIONAL TITLE	FREEHOLD
Ownership
Purchaser only owns the house. All outside areas are common property	Purchaser owns the house and land it is built on – has its own erf number
Rules
Established by body corporate – will require permission for any alterations	Established by home owners’ association, but limited in scope
Levies and costs
Levy to cover all maintenance on the outside of the unit and common property, lawns and gardens, security, insurance and water (unless individual water meter fitted)	Small home owners’ levy for the upkeep and maintenance of common areas and security, where applicable
Rates and electricity not included in the levy	Owner responsible for all rates and taxes, water, electricity, insurance and maintenance of the unit
Deed of Sale – new development
Purchaser signs one contract	Purchaser signs a land agreement and a building contract – two separate documents
Building a new unit
Developer utilises own funds or development bond for the services and construction	Developer utilises own funds or development bond for servicing the plots
No money required from purchaser during construction. Developer only paid on transfer	Once plot services and municipal service certificate issued, plot transferred into purchaser’s name, developer paid for land
Transfer takes place once the unit is complete. Purchaser obliged to take occupation on completion – occupational rent payable until date of transfer	Developer draws at various stages of construction against purchaser’s bond. Purchaser liable for interim interest on monies paid prior to completion
Bond payable from date of transfer	Bond payable from date of completion
Deed of Sale – existing unit
Purchaser signs one contract – but this must include the different numbers of the unit, garage, parking bay, storeroom, etc.	Purchaser signs one contract for land and buildings

Jaco Rademeyer is the owner and principal of Jaco Rademeyer Estates in Port Elizabeth, and is the NedBank Property Professional of the Year for 2010. He obtained an LLB from Stellenbosch University with a special focus on contract law, and is a multiple Institute of Estate Agents award winner. Jaco can be contacted on 041 367 1151, via email or visit his website.

‘Customer is king’ with new CPA

2011-02-28T23:20:00.000+02:00

The first of April 2011 will be a watershed date for consumer rights, as the highly anticipated, but repeatedly delayed, Consumer Protection Act (CPA) is scheduled to come into force.

Guest expert Jaco Rademeyer is the owner and principal of Jaco Rademeyer Estatesin Port Elizabeth, and is the Nedbank Property Professional of the Year for 2010. He obtained an LLB from StellenboschUniversity with a special focus on contract law, and is a multiple Institute of Estate Agents award winner.

It was initially published in the Government Gazette on 29 April 2009, with the focus on protecting consumers against exploitation and unfair marketing practices, and to empower them to make informed purchasing decisions.

However, unless you’re a legal expert, or have an inherent affinity with legal matters and the complicated jargon associated with this field, the hundreds of pages contained in the Act will be of little value or interest to Mr and Mrs Average. Yet it has important implications for every South African, whichever side of the fence you’re on.

Let’s get the basics out they way. Firstly, the Act refers to suppliers, goods and consumers. A supplier is “a person who markets any goods or services” in their “ordinary course of business”. In the property context, this applies to the likes of estate agents, property developers, attorneys, banks, as well as investors letting property on a continuous basis, or those who buy, renovate and sell houses as a business.

Goods, in this case, are identified as “a legal interest in land or any other immovable property”, or related service.

And now it gets a bit more technical: a consumer is “a person to whom goods or services are marketed in the ordinary course of the supplier’s business”, and “who has entered into a transaction with the supplier”. It also includes a “user of those particular goods or a recipient or beneficiary of those particular services”, irrespective of whether they were party to the transaction or not.

Thus, in short, it covers every transaction between a supplier and consumer involving the supply of goods and/or services, the promotion of such goods and services and, naturally, the actual goods and services themselves.

It’s easy, then, to accurately deduce that property developers naturally fall under the Act, and are legally obligated to provide a final product – the erf, house, townhouse, sectional title or apartment for example – that meets all the specified requirements and quality standards, and accurately reflects the agreement signed with the purchaser. The marketing of the property also has to match the actual product, eliminating the ambiguity that often arises in advertising.

The consumer will then have recourse against the developer, by means of a Consumer Tribunal or court, should they wish to contest any of these issues.

As far as estate agents are concerned, it gets rather more complicated, as the agent is primarily facilitating the transaction between the buyer and seller, and isn’t actually the supplier of the goods – so do they fall under the CPA?

Of course they do, as the agent’s job is service-oriented, and involves marketing the goods (the immovable land or property) on behalf of, and on instruction by, the seller in the ordinary course of their business. Equally, it applies to an agent instructed by a buyer to find a property for him or her.

The Act entrenches the consumer’s right to fair and responsible marketing. This includes respecting the consumer’s rights to equality, privacy, choice, fair and honest dealing, reasonable terms and conditions (with the mandate agreement provided in plain and understandable language), fair value, quality and safety, while underlining the supplier’s responsibility, accountability and honesty.

Any reputable estate agent will typically fulfil these requirements as a matter of course, but it certainly poses hefty implications for those that don’t and are inclined to exaggerate specifications, features or property values, or may renege on a signed agreement.

By virtue of the Act, the agent must ensure that the mandate signed by the seller (or the rental agreement signed by an owner for that matter) encompasses all of these requirements, including the consumer’s right to a cooling-off period that allows them to cancel the agreement within five days.

What the CPA doesn’t cover in property transactions is the actual deed of sale between the seller and buyer, as this is a once-off transaction, and is not conducted in the stipulated “ordinary course of business” – a clause which is aimed at protecting the consumer’s relationship with a business entity.

This brings up an interesting question: does the CPA draw a bright red line through the much-debated “voetstoets” clause that eliminates the seller’s liability to defects that are not clearly visible or evident to the ordinary person? The simple answer is no, as far as a once-off property transaction between buyer and seller is concerned, as this is excluded from the Act.

The buyer still retains the right to contest the issue of latent defects, but the burden of proof is still on them to show that the seller knew of, or intentionally concealed the defect, which makes it an extremely difficult case to win.

Nevertheless, the CPA makes the makes it impossible for developers, estate agents, investors and other property-related entities to rely on the voetstoets clause to exclude their liability for defects.

In essence then, the Consumer Protection Act is an extremely valuable and important piece of legislation that protects consumers from abuse and exploitation. It ensures that every type of business, including those in the property industry, will be responsible and accountable for the services they render, and the products they supply.

Jaco Rademeyer is the owner and principal of Jaco Rademeyer Estates in Port Elizabeth, and is the NedBank Property Professional of the Year for 2010. He obtained an LLB from Stellenbosch University with a special focus on contract law, and is a multiple Institute of Estate Agents award winner. Jaco can be contacted on 041-367-1151, via email or visit the website

Matching people with the perfect property – the Jaco Rademeyer story

2011-02-24T11:50:00.000+02:00

When I phoned Jaco Rademeyer Estates to make an appointment to interview the man behind the name, Judy answered. My assignment, I told her, was to write a day-in-the-life piece on her jet-setter boss.

“Go-getter,” she corrected me and I cringed as I realised the connotations associated with the two nouns. Judy, his left and right-hand woman, duly obliged, but unceremoniously abbreviated the day-in-the-life idea to a mere interview.

A week later, I was sitting in Jaco’s luxury high-rise beachfront apartment overlooking the turquoise waters of Algoa Bay.

Upon my arrival, his muffled voice emanated from beyond the closed door. He opened and gestured me to enter, cellphone clutched between head and right shoulder.

That gave me a moment to survey the interior, which was a mixture of modern and old. Family photographs mingled with noticeably expensive, contemporary furnishings.

Dressed in an off-white linen suit and slops, he looked stylish yet casual. He would later tell me that you have to dress the part in this industry.

“You deal with people from both sides of the spectrum and you need to make a connection with each one,” he would later educate me. “It is important that the first-time home buyer feels as comfortable with you as the company executive.”

“Sorry, my phone is my office,” he apologises after terminating the call. “Coffee?” I accepted. “The thing (he points at the cellphone that now lay on the kitchen counter) starts ringing at seven and never stops until I make it,” he says with a painful expression. “I’ll put it on silent while we’re busy.”

Coffee in hand, we move to the lounge, which opens onto the fifth-floor balcony and an idyllic view of the beachfront and harbour.

Jaco, now 26, gave his first baby steps in the industry when he opened the doors of JRE, short for Jaco Rademeyer Estates, in mid-2004. “Those were the doors of my Chico,” he smiles, openly reliving those first days. “Today I call it the Chico Year. I had no office, no experience, no nothing. Only my Chico and a will to succeed.”

So he did, being named the Institute of Estate Agents’ Rookie of the Year in 2005 and Agent of the Year the following. Last year, at the Nedbank Property Professional Awards in Cape Town, he was the only agent from the Eastern Cape to be honoured among the country’s sixteen finest.

Although Jaco studied law (University of Stellenbosch), property has always been his first love. “I understood that it would stand me in good stead in my future career. The two fields are so intertwined, it’s scary.”

He specialised in contract law, completing his LLB in Belgium as an exchange student. “I articled under Harry Lampbrecht doing transfers until it came out of my ears. That was an important step in my development.

“The Chico Year,” he goes on, “is where it all started,” as his phone (now silent) lights up once again. He dismisses it with a glance. “I can recall an occasion when I begged my dad for his Mercedes to show a businessman around town. I instinctively knew people associated with success.

“I had to establish myself, but first I had to break down a brick wall of perception. I was young, not really an estate agent and not really a lawyer. I was often shown the door.

“To be honest, I was clueless. I had no agency experience, so I didn’t know what was expected of me. What I had, was a passion for property – especially the aesthetics. I see the potential in a place when others simply can’t.

“I am a matchmaker. I match people to their perfect properties and vice versa. You have to put yourself in the client’s shoes to try to understand what he wants, not what you want for him.

“Marketing is also key. It is a simple equation really: the better your marketing skills, the more stock, which equates to better matchmaking potential and therefore sales.

“And of course flair; that ability to express your personality in your job. People like that. That’s why they came to you in the first place. We’re the number one commodity in this business, our own personal brands, and people associate with a brand.”

Jaco believes investing in property is about common sense and a good dose of basic instinct. “There is a right price for any area, but you have to follow your gut too. For example, I paid way over market value for my business premises, so much so that the bank’s valuer warned me. It was my first property investment and probably the best one I’ll ever make.”

He believes the top agents will be separated from the mediocre ones this year. “It is definitely a more challenging market and you have to be more creative.”

His passions include entertaining and cooking. “I love watching cooking programmes and downloading the recipes. I simply have to try them, but I often make too much and my cleaning lady ends up taking most of it home. She hasn’t complained yet, so I suppose I have some talent,” he says, smiling at his own joke.

“I love having people around me, but therein lies my weakness. I suffer from approval addiction. Sometimes I will lie awake trying to figure out how I can help someone, even if I know I can’t.”

Jaco is adamant that his future lies in the Eastern Cape. “I’m looking at expanding my business interests, but I’ve lost my heart here.”

With the interview nearing completion, I ask how he starts his day. He points at my chair. “I move that onto the balcony and read the paper with a cup of coffee. The phone stays inside. That is the only me-time of my day.”

With that, he picks up the phone and shows me the screen – twenty-seven missed calls! My day-in-the-life story did not pan out the way I expected, but that gives me as good an idea as any.

Brand new JRE website

2011-02-16T22:11:00.002+02:00

We are now going live soon with the new site. We are all very excited about the feel of our new website.

Title

2010-12-09T08:46:00.000+02:00

Sitting in JRE office, testing out the blog...