The right way to tackle sectional title additions and alterations

An increasing percentage of home sales in South Africa are in sectional title schemes, and buyers of these properties need to be aware that they don’t have the same freedom with regard to additions and alterations as those who buy full title homes.

This is according to Andrew Schaefer, MD of national property Management Company Trafalgar, who says that the thing about sectional title schemes is that whatever one owner does is bound to have an effect on other owners – even if they just want to make changes within the walls of their own unit.

“Noise, mess, and security are all concerns for your fellow owners, even if you are just revamping a kitchen, renovating a bathroom or installing new flooring inside your unit. If electrical work or plumbing is involved, for instance, you may need to get a certificate of compliance in order not to invalidate the whole scheme’s insurance,” says Schaefer.

“And if the work is being done by a contractor, there could be a security risk with a group of non-residents and various delivery vehicles going in and out of the complex for several days, or a risk of damage to common property. This is why the Sectional Title Act stipulates that no alterations to units are permitted without the consent of the scheme’s trustees – and that they are allowed to limit the days and hours during which such work can take place, and may ask you to make special arrangements to ensure that the security of the complex is maintained.”

In addition, it is vital to ensure health and safety compliance on the part of any contractors working in the complex, so you will need to check that any contractor working on changes to your unit has the appropriate safety files, public liability insurance and any industry specific certification that may be required.

Following the correct procedure becomes even more important, Schaefer says, should you wish to extend the floor area of your section or make changes that would affect the exterior appearance of the whole scheme – and in fact, Section 24 of the Act states that you can’t do so without a special resolution of the body corporate.

However, before you even get to that, you should first consult the trustees to see if the scheme has rules regarding the materials and architectural style to be used if sections are extended, then find out what the local authority’s requirements and costs are for submitting building plans for your planned extension, he says.

Next you will need to get a quote from a land surveyor for drawing up a new sectional plan of the complex – which will need to be approved by the Surveyor General – and a quote from a conveyancing attorney to register the new plan at the Deeds Office. This will be necessary because any change to the size of your section will affect the participation quotas of the whole scheme.

Once you have all this information, Schaefer says you will be able to compile a proposal detailing your intended extension in terms of approved building plans and your agreement to carry the costs of drawing up and registering the new sectional plan, then try to secure the special resolution you will need to go ahead.

To obtain this, you can either approach all other owners in the scheme individually and get written permission from 75% of them in both number and value, or call for a general meeting and seek a vote of approval from 75% of owners or proxies present at the meeting, also in both number and value.

If you succeed, you can go ahead and get your building plans approved, build your extension and then call in the land surveyor to prepare the new draft sectional plan and get it approved by the surveyor general, says Schaefer.

One additional detail to watch out for is that if your extension has been built over an existing exclusive use area (EUA) that was registered on the previous sectional plan, that EUA will need to be cancelled and a new, smaller one ceded to you by the body corporate before the new sectional plan can be registered by the conveyancer.

“And while this may all seem unnecessarily complicated, it is really worth doing correctly, because if you don’t, your ability to sell your unit in the future may be severely hampered,” says Schaefer.

Source:  Property 24


Is WhatsApp changing real estate?

As new technologies and improved systems are perpetually introduced into our modern business environments, innovations in client communication is undoubtedly at the forefront of this rapid evolution. The real estate industry has experienced a flurry of new concepts and advancements in the past year especially with regards to agents having to incorporate real time communication tools into their daily practices.

We’re seeing an increased demand by clients to communicate with our agents and staff in real time which has resulted in a growing expectancy for instant feedback. This means that phone communication applications, such as WhatsApp, are fast becoming the primary communication tool for clients.

So too, these applications have become part and parcel of the marketing process as many sellers and landlords expect the  agent to harness their database to effectively market the clients property to an instantaneous audience, and rightly so. There are agencies in the UK who credit almost eighty percent of their deals now being finalised through WhatsApp and other social media communication platforms.

The integration and feeding of saved contacts and social media connections to a singular mobile device has propelled client service into the spotlight and the necessity for agents to be trained and educated on continuous feedback and prompt customer service.

Many of our agents are now introducing WhatsApp marketing plans into their mandate  strategies. There are without a doubt many advantages to these applications these applications. They are very user friendly when sending media such as videos, photographs and embedded links to inquiring clients, which make them perfect for real estate communication. The WhatsApp status for instance allows agents to market homes to a growing mobile database without contacting prospective buyers individually. This strategy is becoming very popular on multiple platforms as a subtle non-invasive arm of a real estate marketing plan.

With WhatsApp being owned by Facebook and Instagram it is no wonder this tool has the ability to cross pollinate communication and diversify it into a multi pronged communication force.

It certainly is exciting times and at Harcourts we embrace innovation, especially when it benefits our clients. Our marketing plans are always evolving to include new digital strategies to ensure our clients needs are met and that we are effective in implementing our strategies.

Statement by
Richard Gray
Harcourts Africa Chief Executive Officer

Freehold vs Sectional Title and Body Corporate vs HOA’s explained

A freehold property within an estate is not subject to the same ownership, regulations and rules as a sectional title. Let’s look at the differences:

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There is however a grey area; when a freehold property is part of an estate, and therefore no Body Corporate is required. In a case such as this, home owners are encouraged to form a Home Owners Association (HOA), which is a non-profit organisation.

See more: Parking in a sectional title

HOA’s have becoming increasingly more popular. Essentially they serve a community of individual properties that while may be exclusively owned by members, as in freehold circumstances, they share common infrastructure such as roads, security services, reception areas, recreational facilities etc.

Whilst this does sound similar to Sectional Title ownership, Andrew Smith, Director of Denoon Sampson Ndlovu Inc, a law firm specialising in conveyancing and property development, explains the role of HOA’s.

One normally finds a HOA has been created for a residential estate where the owners of the properties have a common goal of sharing the cost of security and costs of maintaining pavements and roads within an estate.

“Sometimes however, the goals of the HOA are a lot more specific. For example, the rules may cover regulating architectural styles, the control of paint colours for the exteriors, and the gardens may be required to only have indigenous plants. These goals are to create a generally harmonious feel within the estate and to maintain standards to ensure that the property investments retain their high value.”

Smith does agree that the needs of residents within an estate hosted by an HOA are similar to those of one with a Body Corporate under Sectional Title schemes but he emphasises that as there is no legislation to force the creation of HOA’s, developers of such estates, sometimes even the owners themselves, determine that an HOA will better serve their needs.

“A HOA will have a Constitution, or Articles of Association, which determine the structure of the entity: how meetings are run and how Rules are created,” says Smith. “These are much like the Rules of a Sectional Title Scheme but are slightly different.

“HOA Rules can be compared to Conduct Rules, and are agreed to by the members. These can be strict or lenient, depending on the needs of the community. The Rules tend to be a lot less stringent than those created for a Sectional Title scheme because the homes are generally further apart, and the owners are not jointly responsible for the maintenance of their homes. Instead they are only responsible only for the maintenance of their own home.”

As in any society or organisation rules exist to ensure stability, and in the case of contravention, fines apply, be those relative to Body Corporates or HOA’s. Smith explains however, that fines imposed by the trustees of an HOA are “a lot less frequent that one would have with a Sectional Title Scheme where residents live almost on top of one another.”

Where fines, and levies, are not paid, be those imposed by Body Corporate’s or HOA’s, appropriate court action may be imposed. It is therefore crucial to understand the Rules of the estate in which you live or intend to live. Best yet it is in each owner’s best interests to be appointed to these governing bodies for at least one term, to fully understand the impacts of estate Rules, the legislation behind them, and to represent that your vision for your investment is maintained to the highest possible standards.

This article was sourced from and written by Kerry Dimmer

Tax benefits of investing in buy-to-let property

There is an age-old saying that in life there are two things you can’t escape -death and taxes. While scientific development hasn’t yet found the secret to living forever, there are ways of investing your money so that your tax returns work in your favour.

Proper accounting records need to be kept in order to provide SARS with supporting documents for the deductions claimed. Furthermore, the rental income should be added to any other taxable income the owner may have received.

While taxes can’t be escaped entirely, the money owed to the South African Revenue Service (SARS) can be decreased through wise investment and managed expenditure. Buying a property to rent out is the type of investment that can generate income, grow capital and potentially decrease your dues paid to SARS, says Craig Hutchison, CEO Engel & Völkers Southern Africa.

The benefit of owning an investment property, whether it be in an individual capacity, as a company or in a trust, is that all expenses are deductible from the rental income before tax is calculated. These costs typically include property management fees, municipal rates, levies charged by bodies corporate, repairs and maintenance, insurance premiums and municipal service costs that are paid by the property owner.

Proper accounting records therefore need to be kept in order to provide SARS with supporting documents for the deductions claimed, if you’re required to do so. Furthermore, the rental income should be added to any other taxable income the owner may have received. Any amount paid to you in addition to the monthly rental is also subject to income tax. A refundable deposit paid by a tenant is not taxable, provided it is kept separately in a trust account and is not used by you. If it is forfeited by the tenant, says Hutchison, then it is taxable.

Investing in property in a good area where there is a high demand for rental homes will go a long way in making tax returns work in your favour, he says. “Whether investing in property for long-term leasing or if you’re wanting to let out a holiday flat short-term in a high tourist area, do your research and capitalise on something that fits your financial capacity.”

In terms of a residential property that is buy-to-let, the following expenses are deductible:
– Rental agent’s commission or fees for securing a tenant.

– Advertising costs of marketing the property.

– Levies, municipal rates, insurance fees, water and electricity.

– Interest paid on the home loan, if applicable.

– Cleaning costs, garden services and security.

– Repairs and maintenance costs (excluding improvements to the property, as this would be deducted from capital gains tax).

“As a landlord, deducting the non-capital expenses from your tax return will reduce your taxable income. However, before embarking on your landlord journey, it is advisable to chat to a professional real estate company, your accountant, a financial advisor or a tax specialist, so that you fully understand both the financial implications and tax benefits,” says Hutchison.

“The start of the new financial year is akin to spring – a time to clean up, make new plans, new investments and sharpen your financial acumen for the year ahead. It is also a good time to find that perfect buy-to-rent property.”

5 things you need to know about prepaid water

You already know that we live in a water-stressed country, receiving an annual rainfall of 492mm, while the rest of the earth receives 985mm.

With a prepaid water system consumers can track usage, load credit remotely, and decrease the possibility of bill shock due to leakages or incorrect monitoring.

This is according to Marcus Thulsidas, Director: Business Development, Utility Systems, who says in addition, the WWF (World Wide Fund for Nature) cautions that 98% of South Africa’s water has already been allocated to users, leaving little surplus water to cater for a growing population and increasing demand.

In this context, could it be that prepaid water – like prepaid electricity – is the answer to more sustainable water consumption and management?

“Well, we at Utility Systems believe it is,” says Thulsidas says, and there are five important things that South Africans need to know about installing prepaid water meters:

1. What is ‘prepaid water’?
Prepaid water means that the consumer purchases water credit in the form of a prepaid water token. When entered into the user interface unit (located in the consumer’s home), the token instructs the water management device to allow a certain amount of water through the meter before closing.

Consumers can track usage, load credit remotely, and decrease the possibility of bill shock due to leakages or incorrect monitoring.

A prepaid water meter can also be used to limit water flowing to a particular area. This helps municipalities and property owners to control the amount of water used at certain outputs and prevents wastage in low-income households that can’t afford to pay for excess use of this basic need.

They can make payment in smaller, frequent increments. This prevents their falling into debt, which can compound in a post-paid arrangement.

2. Who can access it?
This is completely dependent on the municipality. So, even if you’re feeling inspired to install a smart water management device to enable prepaid water, you may not be able to – based on where you live or work.

That being said, most municipalities are beginning to embrace prepaid water management technology, so it may just be a waiting game. To find out your eligibility for prepaid water, it’s wise to approach your municipality and ask.

If you have a garden cottage, however, you can add an additional meter and smart water management device to the building to ensure that your tenants don’t rack up huge bills in your name – and then refuse to pay, or leave.

3. How does it affect rental properties and bodies corporate?
The implications for rental properties and bodies corporate are significant.

Prepaid metering reduces admin to a minimum, while removing the risk and frustration of late or non-payment of water bills. This is why housing estates are swiftly moving to prepaid water, as they did with prepaid electricity.

Gone are the days of splitting the entire estate’s water bill by the number of units. Prepaid metering means that users pay for their consumption only.

4. What’s in it for municipalities?
Prepaid systems are cost-effective solutions to sustainable water management in that they have a low cost of acquisition and, by curbing water usage, capital recovery is possible within months.

The systems are also able to distribute water equally, based on free water quotas, water balancing and fluctuating demand.

Aside from their ability to alert municipalities to leaks, prepaid water meters also drastically reduce government’s admin costs. This is because municipalities don’t need to chase bad debts or budget for legal fees on unpaid accounts. Public sector cash flow is immediately improved.

Collecting data from prepaid meters is also more efficient than the manual collection required for post-paid meters. A radio link receiver can be fixed, vehicle-mounted, or carried by municipality personnel.

5. Is prepaid water cheaper?
No – this is a myth. Prepaid and post-paid water cost exactly the same. It is illegal to sell municipal water above the municipal tariff rate declared. That being said, prepaid water gives consumers the opportunity to monitor their consumption and react immediately to possible leaks.

“The bottom line? Even the simplest smart water management device can provide the tools to track and control water usage. Prepaid water meters are smart tools with the potential to revolutionise water conservation efforts and revenue management worldwide. But it’ll be a while before every South African household is able to benefit from this enormous potential,” says Thulsidas.

Good news for home loan approval rates in South Africa

Buying a new home continues to become more affordable as weakening housing demand results in ongoing negative real price growth (after inflation) in the residential property market.

For the first quarter of 2019 (Q1 19) statistics from home loan comparison service, ooba, show negligible year-on-year growth in the average purchase price of 1.6% from Q1 18 to Q1 19.

Growth in the average purchase price for first-time buyers was also minimal at 0.5% from Q1 18 to Q1 19. This means that house price appreciation remains below inflation, reflective of the current uncertain economic and political landscape, ooba said.

Rhys Dyer, CEO of ooba, said: “Over and above more affordable property prices, buyers in the current market are also benefitting from higher bank approval rates. Banks continue to display a robust credit appetite and are increasingly approving home loans with lower deposit and also increasingly with no deposit requirements.

“This is indicative of the banks’ confidence in the property market and in customers’ ability to repay loans.”

“Our home loan approval rate of 81.3% in the first quarter of 2019 was the highest on record for ooba since May 2007 and importantly, the approval rate on applications without a deposit (100% loans) has increased by almost 8% on Q1 2018,” Dyer  said.

The average deposit as a percentage of purchase price is down by 11.3% year-on-year compared to Q1 2018, from 16.0% of the purchase price to 14.2% of the purchase price in Q1 2019. Similarly, ooba’s statistics showed that deposits for first-time home buyers are down by 21.6% over the same period from 12.5% of the purchase price to 9.8% of the purchase price.

“More affordable property prices, coupled with reduced bank deposit requirements, higher approval rates and improved home loan pricing create a perfect opportunity for property buyers at present,” said Dyer.

Banks are competing for a bigger share of the home loans market by approving finance at historically low interest rates, ooba said.

The group’s statistics for Q1 2019 show that the average interest rate is 5 basis points cheaper year-on-year. The average rate that ooba achieved for its buyers in Q1 2019 was 0.11% above prime compared to 0.16% above prime in Q1 2018.


this article was originally published by Businesstech on 18th April 2019

to view the original article Click here

Harcourts South Africa growth defies market decline

Despite the industry experiencing a decline in year on year sales, March 2019 was Harcourts South Africa’s best month since Harcourts started in South Africa in 2009. Boasting 10% growth on the same month last year. In addition, Harcourts South Africa’s first quarter was up 11% on the same period in 2018.

What’s so impressive about this growth is that it is happening on a national level with positive results from all regions. Also, what needs to be taken into consideration is South Africa’s economy has been under pressure in the past 18 months with consumers having to face volatile market fluctuations caused by unpredictable cyclical trends. Harcourts South Africa growth shows that the property market will remain active even in a decline and that investing in property is still a primary long term investment path for most.

There are many reasons to explain Harcourts’ success locally. Being a part of the impressive International Harcourts group, with more than 900 offices globally supported by almost 6600 sales consultants, the extensive global support structure ensures greater regional market penetrations.

Harcourts takes a values-based approach to real estate and they are guided by a set of values that dictate how agents and offices approach the industry. It is intrinsic to their ongoing success as Harcourts people live their values. In an ever-evolving real estate environment, it is imperative that client priority service based attitudes are instilled in business strategies.

The market is certainly changing before our very eyes and we have to ensure we stay ahead of the game whilst maintaining a clear focus on service.

Harcourts has invested in the development of cutting edge systems, property consultants have the full range of marketing, research and technological tools available to them at all times. Working within a tightly-knit and highly-motivated team environment, the business, customer support and online services which they can draw upon are very impressive. This undoubtedly influences the success rate of our business and ensures clients reap the benefits.

Successfully buying and selling real estate is mostly about fulfilling people’s needs and aspirations. Harcourts agents are committed to building meaningful and genuine personal relationships with their clients.

Harcourts continues to take the local real estate market by storm and if our growth and success continue on this exciting growth curve there are certainly exciting times ahead.

Statement by
Richard Gray
Harcourts Africa Chief Executive Officer

South African rental growth experiences uptick for the first time in two years

The PayProp Rental Index has revealed that nationally, rental growth slowed to 4.14% in the last quarter of 2018, vs. 5.39% over the same period in 2017. Nevertheless, it was the first quarterly uptick in the rental growth rate in two years, and also the highest quarterly year-on-year growth for 2018.

At R7,610, the average national rent moved into a higher rental bracket in Q4, from the R5,000 – R7,500 category to the R7,500 – R10,000 category. The R5,000 – R7,500 bracket is still the most populous in South Africa, comprising approximately a third of all rentals.

“Whether Q4’s uptick in year-on-year growth is the start of a recovery remains to be seen,” says Johette Smuts, head of data and analytics at PayProp. “Most provinces saw lower rental growth and a deterioration in the average tenant’s financial situation from 2017 to 2018. Below-inflation income growth has also made it increasingly difficult to keep up with debt and other costs.”

Smuts says net income levels have been stagnating for some time, increasing by only 1.56% between Q4 2017 and Q4 2018. With rent and inflation increasing at higher rates, consumers are struggling to keep up. “As for tenants’ debt-to-income ratios, tenants paid R13,756 on monthly debt repayments in Q4 2017, vs. R15,031 in Q4 2018,” says Smuts. “This increase in turn affects affordability ratios. And as incomes have grown more slowly than rents, the slight increase we measured in the rent-to-income ratio was to be expected.”

In Gauteng, the average rent breached R8,000 for the first time in Q4 2018. This is 4.84% more than the year before – the third highest growth rate in the country for the quarter. While this rate was lower than the year before, it was the province’s first increase in quarterly growth in two years, which might signal the beginning of a recovering rental market in the province.

2018 yielded the lowest growth figures for the Western Cape since the launch of the Rental Index in 2012. At its lowest point of the year, growth in the Cape slowed to just 3.96% in Q4. Even so, the average Western Cape rent surpassed the R9,000 mark during the year, still making it the most expensive province to live in with an average price differential of nearly R1,000 compared to the second most expensive province.

“2018 was a tough economic year for South Africans, businesses and consumers alike, and it shows in the numbers,” says Smuts. “The year ahead brings new challenges, such as the general election, from which we might see fresh political uncertainty and which in turn could create continued economic uncertainty and volatility. Just how much that might affect rental prices remains to be seen.”

South Africans with lowest credit scores spend the most on rent

Nearly two out of every five tenants in South Africa are risky. On average, 14.2% of South African tenants are classified as minimum-risk according to their credit scores, while 37.2% are classified as high-risk. PayProp head of data and analytics, Johette Smuts says that according to the PayProp Rental Index from Q3 2018, this high-risk contingent of tenants spend about 33% of their net income on rent.

Smuts says that there is a widely accepted unwritten rule that a tenant shouldn’t pay more than 30% of their net income for rent. “While PayProp data shows that the average percentage of rent paid by tenants in the third quarter of 2018 was indeed 30%, we also see a correlation between a tenant’s risk level, determined by their credit score, and the percentage of net income that they spend on their rent.”

“Tenants with higher credit scores (and therefore a lower risk rating), spend less of their income on rent than high-risk and very high-risk tenants. Lower-risk tenants spend less than 30% of their income on rent, and tenants with the lowest risk spending only 24% of their income on rent – that is 20% less than the average tenant,” says Smuts.

Smuts says that the best advice she could offer prospective tenants in 2019 is to take heed on the properties they’re considering renting. “In the current climate, it would be wise to look for a home that calls for a lower rental, thereby making budget available to allocate to settling outstanding debt.”

Added to the pressure that consumers are feeling with rent, the average national debt-to-income ratio sits at around 44%, i.e. 44% of the average person’s net income is used to repay debt each month. With inflationary pressures continuing into 2019, the risk profile of tenants will be under more scrutiny in an effort to protect the interests of landlords, agencies and owners alike.



Predictions for SA’s residential property market in 2019

Due to the uncertainty pertaining to land reform policies, 2018 has not been a great year for the property market. However, there are those that think the worst is over and that once we have put the elections behind us, we will start to see things improving, both for the property market and the economy at large.

With the country having just emerged from a technical recession after the gross domestic product contracted for a second quarter in a row, indicators suggest another tough year ahead of us.

“The country’s rapidly increasing cost of living, predominantly a result of the increasing cost of fuel, has put severe pressure on consumer spending. Inflation is expected to be higher in 2019, and the possibility of interest rates increasing looms large. Both homeowners and tenants are going to be increasingly stretched to meet their monthly home loan or rental commitments.

“Despite this, there have been forecasts predicting a higher growth in 2019 than we’ve had during 2018.”

we are in a buyer’s market and most predict that this will continue through most of 2019.

“Those who qualify for finance or who are able to buy for cash will be in a good position to take advantage of the current conditions. Most of the property sales activity in the past year has been in the R300 000 to R1.5  million range. During the course of the coming year, I expect this to continue. Government is focused on developing our economy, at least in part through the development of entrepreneurs. If successful, we should see an increasing number of people able to enter the lower end of the property market.”

Lightstone’s Residential Property Indices (October 2018) indicate that the average house price increase for the 2018 period, across South Africa, has been 3.77%. The Western Cape performed best at a 9.9% increase and the Northern Cape showed the least growth with only 1.1%.

It is estimated that this low growth rate will continue, and in particular that “we will see more normalisation with the Western Cape, possibly showing a lower growth rate in the coming year, despite the relief from the drought”.

“From a rental perspective, I see our current conditions with high vacancies and low escalations across most of the country, fuelled by lower than normal demand, continue into 2019. Historically, we have seen rental demand increase during tough economic times, but this is not happening now. Our data partners, TPN, report that average tenancy periods have increased to 18 months and the average age of tenants is now 32, up from 24 in 2008.

Their data shows that fewer people are entering the rental market, and the majority of those that are, rent for less than R7 000 per month. The short- to medium-term opportunities for property investors and landlords therefore lies in properties that allow for multi-generational living and in properties that can be rented for R3 500 to R7 000 per month.

Exacerbating things on the rental front is the increasing delinquency rate of tenants who are applying for tenancies. Along with this comes decreasing rental recovery rates.

Landlords should screen and manage their tenants more carefully than ever. Good property management agents, for example, those with access to tenant payment behaviours and cost-effective rent guarantees, have an opportunity to add value to landlords – managing risk and correctly pricing properties will be of the utmost importance.

Economics aside, 2019 will bring continued change to the way buyers and sellers, tenants and landlords are able to transact.

Technology is being harnessed and the real estate industry is changing for the better. Long-held, traditional ways of doing business that frustrated clients are being challenged. This is bad news for those who are unwilling to embrace change and good news for the end-consumers.

This article was sources from Property 24 ands was first published on 17/01/19