If you are thinking of investing in property, you can’t go wrong with a home at the coast. Not only are the prices of properties located within 5km of the ocean experiencing faster growth, but the margin by which this exceeds non-coastal house price inflation has risen to an average of 3.1% for January to April 2022 – the highest coastal price premium since mid-2005, according to Lightstone property data. Also, you are assured of a good yield on your investment as properties in these areas are always sought after.
“As the pandemic made it more common for people to work remotely, we have seen a surge in semigration to areas traditionally considered holiday destinations. Coastal towns such as Hermanus in the Western Cape, St Francis Bay in the Eastern Cape and Ballito in KwaZulu-Natal have seen big interest from buyers wanting a better quality of life for their family,” says Carl Coetzee, CEO of BetterBond.
While house price growth in non-coastal areas continues to slow, the demand for coastal homes is reflected in this property category’s annual house price inflation of 8.0%, according to the Lightstone Residential Property Index for March. In comparison, inland properties saw a house price inflation of only 4.9%. “House price growth along the coast has been steadily increasing since August 2020. We see the impact of this demand in Nelson Mandela Bay, which has toppled the City of Cape Town as the top performing metro when it comes to annual house price growth.” At 8.9%, according to March data, this metro is well ahead of the City of Cape Town, home to the Atlantic Seaboard and a number of blue flag beaches, which reported a house price growth of 4.0% over the same period.
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In Ballito, TPN data shows that the average house price has increased from R3.8 million at the end of 2021 to R4.1 million currently, says Coetzee. In Hermanus, where the proliferation of new developments has seen sectional title property prices surge from R1.2 million in 2019 to the current R3.6 million – well above the R2.3 million average for a freehold property in the town. “Hermanus has long been a well-loved holiday spot, and has plenty to offer professionals and families. There are excellent schools, a range of property types including new developments and homes within estates, a wide array of leisure options, and world-class wine farms in the scenic Hemel and Aarde Valley. Also, it is just a short drive from Cape Town, which makes it easy to commute to the office when needed,” says Coetzee.
St Francis Bay, less than two hour’s drive from Gqeberha, is known for its pristine beaches, nature reserves and serene lifestyle. It also offers a range of property options, from high-end homes on the waterways to luxurious holiday cottages, says Megan Holden, from Just Property Lifestyle (St Francis Bay). Property price growth has been steady over the past five years, with the average market value of a freestanding home currently at R2.075 million, according to Lightstone property data. “Offering exceptional value for money and an enviable lifestyle, St Francis Bay is becoming increasingly popular with buyers relocating from Gauteng and other parts of the country,” says Holden.
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“The increased demand for sectional title properties in this sought-after area has also seen average property prices increase steadily to just over R2 million, according to current Lightstone data – slightly higher than full-title properties which average R2.07 million,” says Coetzee. Holden adds that more than a third of buyers are between the ages of 36 and 49, indicating that more families are moving into the area. The largest cohort of buyers, accounting for 42%, are in their fifties or older, as their lifestyle wants and affordability are most aligned.
Not only are these coastal towns appealing because of the desirable lifestyles they offer, they also provide exceptional rental yields. In St Francis Bay, where there is a strong demand for accessible rental properties, the average rental yield on freehold properties is above 8%, according to TPN data. Sectional title properties also have good yields of 8.5%. Ballito offers yields of above 7% for both sectional title and freehold properties.
“With changes in the way we live and work, popular holiday destinations are becoming sought-after locations for families and buyers looking for a better quality of life,” concludes Coetzee. “And, they make for sound investments as well.”
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To avoid causing any unnecessary stress when purchasing a home, it can be useful to understand the various costs you will incur above and beyond the asking price. As a rule of thumb, buyers should allow for between 8% and 10% of the purchase price to cover the additional costs, which will include bond registration fees, transfer duty, transfer costs, and other legal fees.
“When purchasing a property, there is often confusion regarding the distinction between transfer duty and transfer costs. Many buyers are also surprised by the bond registration costs that they incur,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
To help clear up the confusion, RE/MAX of Southern Africa clarifies what each of the costs are and how buyers can budget for each of them.
Transfer fees are paid to a transferring attorney, who is appointed by the seller to transfer ownership of the property to the buyer. These costs are payable by the buyer and will vary, depending on the property purchase price. It will also consist of the conveyancer’s fees, such as postage and petties, plus VAT. Usually, the attorneys will provide the buyer with a breakdown of their costs at the inception of a transaction in the form of a proforma account. To get an idea of what this might be, buyers can make use of BetterBond’s bond and transfer cost calculator.
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Transfer duty is a tax levied on the sale of a fixed property acquired by any person by way of a transaction or in any other way. These costs are payable by the buyer to the SA Revenue Service (SARS) when the property is transferred from the existing owner to the new owner. This will normally be done by a Conveyancer, who acts on your behalf. Transfer costs vary depending on the purchase price and can be calculated on BetterBond’s bond and transfer cost calculator.
It is important to note that transfer duty is not always applicable. For example, it is not charged on a property that costs less than R1 million. A newlywed spouse who is married in community of property will also automatically become the co-owner of their spouse’s property without paying the transfer duty. Similarly, if a property is awarded to a spouse in a divorce, transfer duty does not apply. Beneficiaries are also exempt from paying transfer duty on property they inherited from a deceased estate.
For those relying on the sale of their previous home to cover this expense, it should be noted that transfer duty must be paid no later than 6 months from the date of conclusion of the deed of sale. Usually, this is not worth worrying too much about as most homes take around 3 months to sell and another 3 months for the transfer to go through, all of which will fall within the stipulated 6-month period.
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To set up the bond on a property, buyers will also have to cover a few additional costs upfront. These include a bond registration cost, bond deeds office fees, post, petties FICA, and a Bank initiation fee. These costs can add up to a large amount, so it is advisable to use an online calculator to get an estimate of these costs before you go ahead with a purchase.
“Purchasing property is not a simple process; but, with a RE/MAX agent by your side, it can be. Real estate agents deal with these transactions daily and have the hard-earned experience and knowledge to guide you through every step so that you are never left confused at any point during the process of finding the perfect home,” Goslett concludes.
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Auctions represent an excellent opportunity to invest in quality properties at (often better than) market-related rates—provided that bidders have done their homework before raising their hand. That’s the word from Park Village Auctions’ Director Clive Lazarus, who offers expert tips for purchasing a house on auction
- Preparation is crucial to success
Buyers should take time to research the property and familiarise themselves with the different types of property auctions that will influence the sale’s conditions. For example, a liquidation sale versus a sheriff’s auction, otherwise known as a ‘sale in execution’. Buyers should have a firm budget before the auction. Gather information about the property, its location and nearby amenities, and consider the accessibility of the area. This will help you to determine a fair price and what you are willing to pay.
- Viewing is essential
Auction properties are sold voetstoots, meaning “as is”, advises Clive. He adds, “Inspect the property closely on viewing day, noting any repairs or modifications that you would need to make. Don’t be afraid to ask the auctioneer questions, either. Find out if any fixtures, fittings, or plants have been excluded and if there is currently a lease in place (which you should have sight of) which will have to be honoured.
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The buyer will purchase the house in its current condition, and the seller is under no legal obligation to repair any damages or faults unless otherwise stated in the Conditions of Sale.
- Obtain a copy of the Conditions of Sale
Beyond the “as is” clause, the Conditions of Sale will cover issues such as the confirmation period, outstanding rates and taxes, applicable VAT or transfer costs and commission. Clive says that it is imperative that the conditions be understood and encourages buyers to engage with the auctioneer should they have any queries.
- Understand your total costs
Buyers are to use the Conditions of Sale to tally up their total costs and secure the correct funds upfront. That being their finance, with VAT, transfer duties, and commission fees.
Clive explains: “The nature of the sale will dictate who is liable for paying outstanding rates and taxes (if any), and commission—which differs from auctioneer to auctioneer. It is also important to note that the commission typically excludes VAT. All of these costs must be carefully calculated before applying for finance.
“You must be able to follow through on the transaction if you make the highest bid. Once the hammer goes down, the deal is concluded. You are liable for the agreed price, failing which you will be required to pay damages.”
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- Reap the rewards
“Informed buyers are poised to take advantage of the benefits offered by auction properties,” says Clive. He elaborates, “Between voluntary and distressed sales, various houses are available to suit a buyer’s needs. From the ‘foot-in-the-door’ property to superlative estate homes, apartments and even mansions ready for the taking.
“Auction sales are swift and transparent. When buyers have done their homework, they can acquire quality homes at a better value than a conventional sale through agents –because there are no lengthy negotiations, and bidders can ‘name their price’.
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Property provides a secure, liquid asset for money launderers to make use of in their schemes and allows them to clean their illicitly gained funds through the purchase of a stable asset by providing them with a potentially high yielding investment to provide ongoing benefits, for example by securing legitimate funds through monthly rental payments.
Various techniques are used by property-related money launderers such as the over or under value of property prices when compared to market-related pricing, cancelling property transactions prematurely, or paying rent in advance, and then requesting a refund, or purchasing properties using complex company or trust structures to conceal the identity of the launderer.
Estate agents, being predominantly involved in selling, buying and renting properties on behalf of owners and purchasers, are generally seen as the first point of contact in a property transaction and therefore it is vital that potentially illicitly gained funds are identified at this stage.
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Several risk factors should be considered by estate agents when dealing with their clients. Where considerable deposits are paid for the purchase of properties or high-value property is being purchased, more stringent measures should be implemented to ascertain the source of funds for the transaction and also whether the amount appears to be within the apparent standing or economic profile of the client and their stated income and that the transaction makes economic or business sense.
Estate agents should also bear in mind higher risk relationships with Domestic Prominent Influential Persons (DPIPs) or Foreign Prominent Public Officials (FPPOs) and incorporate this risk factor into their risk rating schemes. DPIPs and FPPOs are considered higher risk due to the status derived from their bureaucratic power and their ability to leverage departments for their resources. In addition, other risk factors include clients who are from countries that are regarded as being at higher risk for target by money launderers identified by the FATF as having AML/CFT weaknesses, countries subject to a travel ban or countries regarded as tax havens.
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In terms of terrorist financing risk, estate agencies that enter into business relationships with non-profit and non-governmental organisations should ensure that the related properties and funds used are within the overarching ambit of that organisations principles and purpose. Knowledge and utilisation of screening of clients against the United Nations Targeted Financial Sanctions Lists could mitigate these terrorist financing risks and better enable estate agents to make decisions regarding entering into transactions with sanctioned individuals or entities.
There’s more to Financial Intelligence Centre Act (FICA) compliance than document collection and verification. To be fully compliant, Estate Agents should comply with all compliance obligations set out by the FIC. Download the DocFox FICA handbook for Estate Agents for more information.
Source: Marc Roper, Compliance Officer at DocFox Africa
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Swindon Property has signed an associate agreement with Nigerian-based property service firm, Troloppe, as part of its expansion plans into Sub-Saharan Africa. The newly rebranded, Swindon Nigeria, will provide buying, selling, letting and client advisory services for the region’s commercial real estate sector.
“We welcome the opportunity to work with Leye Taiwo, Head of Swindon Nigeria, and Directors Jonathan Millard and Tunde Adebutu, along with their very capable team,” says Geoff Kruger, Business Development and Client Advisory for Sub-Saharan Africa.
“We have enjoyed working with Leye and his company over the last year, the association agreement cements what we believe to be the start of a very long and prosperous relationship as we look to grow our footprint throughout Sub-Saharan Africa,” says Andrew Dewey, MD of Swindon.
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“By partnering with Troloppe we can combine their in-depth knowledge of local markets, their local skills and resources with Swindon’s industry-leading real estate advisory, property management platform and real estate solutions-driven experience. Through Swindon’s associates, Savills. Inc access to global best practice, clients, and over 600 professional offices world-wide, our product helps both landlords and businesses to meet the demand for creative solutions that fit the changing needs of today’s business and workplace,” explains Kruger. “Local partnerships are an important component of sustainable business in Africa and with the introduction of Swindon Nigeria we’re able to demonstrate how global occupiers and investors can benefit from the power of two market leaders providing unmatched accessibility to best-in-class advisory and a seamless tenant representation experience in Nigeria.”
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The expansion initiative positions Swindon and Savills as viable competitors against other global service providers all vying for an African footprint and creates a formidable brokerage and advisory firm regionally.
“The aim is to open 10 new regional offices outside of South Africa by the end of 2023 and to create the biggest professional network of commercial property advisors in Africa. We are looking to partner with others who demonstrate similar aspirations, philosophy, company culture and successful track record to deliver sustainable long-term results,” concludes Kruger.
Swindon is a leading commercial and industrial real estate firm and the commercial associate for international real estate advisor, Savills, for sub-Saharan Africa, serving multi-nationals, local market leaders, and small businesses with the international-standard real estate advisory services they need to grow.
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