Cape Waterfront Estates November 2011 Newsletter

It is no secret that global economic problems are starting to be felt in this country and South African property investors have become more hesitant. As a result residential property prices are remaining competitive with bond rates, the lowest since 1973, unlikely to change for the remainder 2011...

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Cape Waterfront Estates September 2010 Newsletter

After the fabulous coverage South Africa had by the media during the World Cup, this is exactly the right time to promote properties in our beautiful and diverse country.  Cape Town, specifically, has been showcased as one of the most exclusive coastal regions in which to own a home...

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Current Market Trends

Residential property prices show a moderate decline according to the latest results released by OOBA, South Africa's leading bond originator. The average house price decreased by 2% year-on-year to R838 645 from R855 729 a year earlier. Positive growth of 1.1% was recorded on a month-on-month basis in September.

According to OOBA, they expect the current trend of monthly nominal swings to continue for the remainder of the year. This volatility is being attributed primarily to the changing mix of buyer profiles and properties purchased relative to the base year in 2010.

Average purchase price increased amongst first time buyers, with year-on-year growth of 6% to R619 920 in September 2011 from R 584 890 a year earlier. This is attributed to the shifting economic demographics in SA, largely influenced by the emerging black middle class, combined with the low interest rate environment and the ongoing easing in lending conditions, especially in regard to deposit requirements.

OOBA’s statistics show that 52% of applications are from first time buyers, and 45% of applications are from black buyers. In September, the ratio of applications declined by one lender, but granted by another, was 22.5%. "This ratio still highlights the importance of using a bond originator in the home loan application process. A bond originator is able to submit the application to multiple lenders and homebuyers are therefore assured a higher probability of approval and on competitive terms."

Some key property insights:

Property Law Update
There have been new amendments to the Taxation Amendment Laws that now require that Companies orTrusts must be liquidated, wound up or deregistered within 18 months (or a limited further period as SARS may allow) if properties are transferred after the 30th September 2010.

Further amendments to the Taxation Laws allow taxpayers to transfer a primary residence from a Company,Close Corporation or Trust free from Transfer Duty, Capital Gains Tax and/or Secondary Tax on Companies(where applicable). As a result, many clients made use of the chance to restructure their financial portfolios and to release their homes from the costly red-tape burden of holding it in an entity or trust. It was not, however, necessary to deregister the entity.

The tax-friendly transfers are still available in the following circumstances:

• You (or you and your spouse) are the holder/s of all the shares in the Company that owns the residential home; or,
• You (or you and your spouse) are the holder/s of all the member’s interests in the Close Corporation that owns the residential home; or,
• You (or you and your spouse) financed the purchase of the residential property in a trust; and
• You (or you and your spouse) have always resided in the home and have used it for normal domestic purposes (and not merely as a holiday house) since 11 February 2009; and
• Your transfer ownership in the property into your name, or in both you and your spouse’s names jointly before 31 December 2012.

Consumer Protection Act

The new Consumer Protection Act (CPA) became effective on 25 October 2011. This law fundamentally changes the way business is done in South Africa. The law regulates the way businesses market their products and services and makes South African consumers among the most protected in the world.

Two important changes relating to Real Estate transactions are introduced with the CPA.

Firstly the Act introduces a bill of rights, granting consumers the right to cancel certain contracts within a “Cooling-off” period of five business days.

Secondly, the Act changes the way the voetstoots clause will be applied in Real Estate contracts.

Cooling-off period

In terms of the Act, a Purchaser that purchases a property as a result of direct marketing has the right to cancel the sale within five business days, the “cooling-off” period. This applies only to sales that result from direct marketing. The “cooling-off” period does not apply to sales that result from any other form of marketing such as show houses and conventional print advertising. Nor does it apply to any purchase made by a client that the agent is already working with. Transactions that arise from these forms of marketing do not fall within the ambit of the Consumer Protection Act.

“Voestoots” clause

Voetstoots is a term derived from Roman Dutch Law which means literally “as is”. Prior to the introduction of the Consumer Protection Act, all property was sold voetstoots. However, the new Act changes this.

From 25 October 2011, developers, speculators, and investors with property portfolios who sell property in their ordinary course of business, cannot exclude their liability for defects by way of a voetstoots clause. Sales contracts will now include a statement which covers the condition of the property and any defects noted.

However, an ordinary once-off seller, who does not sell property in the ordinary course of business, may continue to rely on the protection of the voetstoots clause for the simple reason that the sale of this property does not fall with the ambit of the Consumer Protection Act, as detailed above.

Feedback

We welcome feedback from you regarding our newsletter and are happy to answer any direct queries thatyou may have.

Please feel free to call us on 083 252 2755 (Margie) or 083 252 2485 (Clare).