In this note, we continue with the 4th quarter 2021 results of our FNB Commercial Property Broker Survey, which surveys a sample of commercial property brokers in the 6 major metros of South Africa, i.e., City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, eThekwini, City of Cape Town and Nelson Mandela Bay.Focusing on the key drivers of movement and sales activity in owner-serviced properties, the survey results show financial pressure to still be by far the biggest single driver. Nevertheless, the latest quarterly reading pointed to a slow continuation of the declining trend, a sign that financial pressure is gradually alleviating as the economy slowly recovers from the deep lockdown-driven recession of 2020.
We ask respondents for their perception of the major drivers of “movement and sales activity” in the Owner-Serviced Property segment. They estimate the percentage of movement and sales that they believe would take place for a particular reason. The total percentage of all the reasons can add up to more than 100%, because businesses can be selling or relocating for more than one reason. It isn’t an exact science, therefore, but gives a broad picture, and what comes out of it yet again is that by far the highest percentage of owner occupiers are still perceived to be selling or relocating influenced by financial constraints/pressures, i.e., 51.15% in the 4th quarter 2021 survey. This is only slightly down from the previous 54.3%, but more noticeably down from the post-hard lockdown peak of 65.3% reached in the final quarter of 2020.
The level of financial pressure-related selling thus continues its improving (downward) trend.
•Levels of upgrade-related selling also point to an improving financial environment
Also possibly reflecting financial constraints, sales in order to relocate to “bigger and better premises” remain lower than pre-lockdown 2019 levels at 16.2%, the pre-lockdown 1st quarter of 2020 having recorded an 18.4% estimate. However, this motive too has shown some improvement from the previous quarter’s 13.0%. This percentage has been significantly lower since the start of hard lockdowns in the 2nd quarter of 2020.
It had admittedly already declined in prominence as economic and financial times toughened prior to COVID-19 lockdown, but then declined far more noticeably in the 2nd quarter of 2020, to an 8.2% low, as lockdown caused the recession to go far deeper. The most recent percentage of 16.2% thus resembles a considerable improvement from the lockdown period, but perhaps still a more constrained financial environment compared to pre-lockdown days.
•Relocating to properties closer to the market starts to increase in priority
A further key reason for selling, which may reflect both current financial pressures on businesses as well as risk aversion due to uncertainty regarding the economic future, is the estimated percentage of sellers selling to move closer to their market. This percentage rose for the 1st time in 4 quarters, to record 23.9% in the 4th quarter 2021 survey, up from the prior quarter’s 20%.
The level remains low, however, when compared to the 36.3% recorded at the beginning of 2019.
Relatively low estimates regarding this motive for selling in 2021 suggested a “wait and see” approach by an increased portion of aspirant sellers, compared to prior years. While it may often make sense to incur the cost of relocation closer to one’s market, in weak economic times less relocating and more “staying put” for the time being is the likely outcome. However, the latest survey’s increase may just point to the start of a more confident approach by owner occupiers in this regard.
•Coastal metros appear to “outperform” Gauteng metros on average in terms of (lower) financial pressure-related selling.
Examining where, by region, the greatest level of financial pressure-related selling or relocation is perceived to be, Gauteng appears on average to have higher (worse) readings due largely to Tshwane region. Tshwane was the highest in the 4th quarter 2021 survey at 78.5% of sellers, while Greater Johannesburg was a significantly lower 52%.
Of the 3 coastal metros, the highest (worst) percentage was recorded by Cape Town, i.e., 47%, eThekwini 38.3%, and Nelson Mandela Bay the lowest percentage of 28%.
Conclusion – Financial pressure continues to ease, but remains “elevated” compared to pre-lockdown levels
The 4th quarter 2021 FNB Property Broker Survey points to financial pressure amongst property owner-occupiers remaining higher than pre-lockdown times, but it did point to the continuation of a recent improving trend. The improvement comes on the back of an economy slowly “normalizing” its activity as lockdowns have been gradually eased.
However, the fact that the survey still points to financial pressure levels being higher than pre-lockdown levels is reflective of an economy that is still not quite 100% “normalized” following lockdown. A portion of the production capability of the economy shut down permanently during the severe recession of 2020, and replacement for that capacity takes a while to return. So, as at 2021, Real GDP (Gross Domestic Product) was not yet back to 2019 levels, implying a still-tough environment for many businesses.
It’s tax season – and for many consumers, the time of year when they hope for a refund from the SA Revenue Service that will give their budgets a Summer boost. “And getting money back from SARS is always a cause for celebration,” says Gerhard Kotzé, MD of the RealNet estate agency group, “so it is really tempting to spend it on “spoiling’ yourself or your family with a great outing, a holiday or maybe some new ‘bling’.
But for homeowners, it makes more sense to invest any tax refund in your home and leverage further savings, even if this doesn’t seem very exciting right now.“He says that the first thing homeowners should consider doing with a tax refund is to use it to lower the capital portion of their home loan because this could help them save thousands of rands in interest charges over the life of the loan – especially if they make a habit of doing it every year.
If you had a 20-year home loan of R1m at 7% interest, for example, just one extra lump sum payment of R2400 this year would cut the loan term by a month and save you almost R7600 worth of interest.As a homeowner you may, however, want to spend your tax windfall to help fund something more immediately enjoyable. In this case, says Kotzé, good choices include:
* A second bathroom to make life easier now and lift the value of your home when it is time to sell;
* A new coat of paint that will keep your future maintenance costs down;
* Improvements to your security system that will lower your short-term insurance premiums; and
* Roof insulation to help keep your electricity bills down.
*He says that rising municipal service charges may also prompt homeowners to use any tax refund this year to help make some other changes relating to electricity and water consumption. These could include:
*Switching to long-lasting and low-power LED lighting and bulbs wherever possible;
*Installing tap and shower aerators and low-flow toilets;
*Replacing an old power-guzzling fridge or washing machine with an energy star rated appliance that uses much less electricity; and
*Installing a water storage tank to save all the rainwater that runs off the roof and cut their consumption of municipal water.
“Or if you feel you really should ‘splurge’ on something new, why not consider a solar geyser or a few photo-voltaic panels so that you can start converting your home to run on free energy?”
Ever since Covid-19 put everyone in SA into a hard lockdown at home, there has been a steady increase in the number of people rethinking their housing choices and deciding to make changes as fast as they can. And one of the biggest trends to emerge has been the migration away from big cities to smaller towns along the coast or in more rural settings.
However, says Gerhard Kotzé, MD of the RealNet estate agency group, there are many factors to consider before you just make the leap from city to country living, starting with the real costs of relocating. “One of the biggest drivers of the current movement away from the big cities is the desire for more living space and more opportunity to take part in family outdoor activities – and the prospect of buying both these things for much less in the countryside.
“This applies particularly to those who have children and found out during lockdown that their homes were too small to accommodate everyone’s needs (home office spaces, home-schooling spaces, home gyms) when they were all at home together.”
And it is true, he says, that home prices are often considerably lower in smaller towns, which gives buyers the opportunity to purchase a bigger property for the same money and often, the chance to get closer to nature too. “We also see quite a number of people now moving from the suburbs to country or coastal lifestyle estates that offer a range of sports facilities and outdoor pursuits.
“But it is very important to include several other items in your calculations so that you can determine the real cost of the new lifestyle you envisage. These include one-time expenses such as the legal and transfer costs that apply when you buy a new home, the costs of selling your old home, the costs of moving all your belongings, and the costs of any renovations or upgrades to your new home.
“You also need to plan for ongoing maintenance, just as with your current home, and if you are planning to live in a really remote area, you probably need to increase your transport and vehicle maintenance budget. Then if you are moving to a country estate or gated complex, you will need to include the monthly levy.”
Other strong motivations for packing up and heading for smaller towns, Kotzé says, include a growing desire among many families to live closer to certain friends or relatives who make up their extended support system and, among younger homeowners and tenants especially, the closure of many of the shops, restaurants, and workplaces that used to make city-centre living fun as well as cost-effective.
“Many young people just don’t see the point anymore of paying higher rents or home prices for a tiny space in the inner city when they are now working remotely anyway and can probably pay much less for more space somewhere else. That trend has been boosted by the current very low interest rates, which are also making it cheaper for many young remote workers to buy their own home instead of renting, especially if they move out of town.”
To make this plan work, though, their preferred location does need to have really good internet and cell phone connectivity, so this is the second most important thing for remote workers to check while planning an “escape” from the city, he says.
Other vital considerations include:
*Basic amenities. Many small towns in SA have erratic water and power supplies, so you may need to buy a generator, water storage tanks and some solar power panels if you want to live comfortably. You should also check the state of the access roads and decide if you will need a more rugged vehicle.
*Shops, schools and medical services. You might not want to live in a town with a huge shopping mall, but it’s not much fun to have to drive 50km to the next town every time you need bread and milk or medical attention, so it’s important to ensure that there is a local outlet for basic supplies – or better still, a local farmers’ market where you can buy fresh bread and produce – and a local doctor. If your children will be attending school, it should preferably also not be a long daily bus ride away.
Imagine living within a stone’s throw of your ageing parents, and your adult children and grandchildren? Now imagine all their needs, and yours, are taken care of across 15 hectares of land adjacent to the iconic Allesverloren Wine Estate.
Peace & security under African skies Noble Resorts imagined it, designed it and is creating it, phase by phase, in the Riebeek West region of the Western Cape; hugged by mountains, big sky and a sense of real serenity. It’s called Allesverloren Village, and it has already made its mark in the luxury properties arena in South Africa.
Developer and CEO of Noble Resorts Herman Pretorius say his company’s vision was to re-invent multi-generational living in a way that responds to every age group’s needs and desires.
“A business centre, a concierge service and even a well-stocked vinoteque puts a whole new spin on work from home as well as entertaining family and guests In our quest to provide a secure, health-conscious lifestyle from first-home to retirement, Noble Resorts looked at every possible way we could encourage living on your own terms,” says Pretoruis. “From the resort-style pool and clubhouse to the mountain bike and walking trails and the 24- hour medical care, Allesverloren Village really is a home for all seasons”
If at First, you Succeed…
With a remarkable 25 units at a value of R86-million sold in Allesverloren Village’s first ten days on the market, buyers clearly want luxury and comfort running quietly through their daily lives, while still being within an easy drive to the world-class Mother City, Cape Town. “We are thrilled with the initial success of Allesverloren Village and excited to move into Phase Two, which will offer the same spaciousness and premium finishes that investors can expect throughout the development.
“An added bonus to ownership is that, as part of the Noble Resorts group, Allesverloren Village will give residents an exclusive opportunity to live and experience our sister developments, Harbour Bay Village or Robberg Bay Village,” Pretorius notes.
Facilitated by the Noble Resorts management team, this home swap programme allows residents to stay at these resorts for up to three months at a time in a Home Exchange programme that gives residents all the services and comfort of home while on holiday. “Harbour Bay Village is currently under construction and Robberg Bay is launching in 2022,” says Pretorius. “Noble Resorts is creating a new standard
The Security of Stress-less Living
From magnificent studio apartments to luxury villas, every investor is buying into a priceless lifestyle, where tranquil daily walks are interspersed with a vibrant social community when the mood strikes for Even the stress of doctor’s visits is mitigated by compassionate, onsite medical care through Allesverloren Village’s team of expert medical professionals seeing to clinical requirements combined with their personal needs.
A luxury spa coupled with a wellness programme for residents encourages integrative beauty and healthiness, provides another opportunity for stress reduction and time spent in mindful relaxation.
“The Noble Wellness programme brings together healers and wellness experts, creating a holistic ecosystem for a healthier lifestyle,” Pretorius says. “From a full-service spa that you would expect at a five-star hotel, to daily exercise programmes and lifestyle masterclasses, our wellness approach for your best life is uncomplicated and easily accessible.” As more South Africans actively seek a more peaceful and secure way of life, Allesverloren Village is the perfect option for those who want to create a magical life under our exquisite African skies.
Pam Golding reports robust property sales across SA for the end of 2020 to the present date. Below is a report compiled by the property company.
Pretoria leads property sales
Pam Golding’s Pretoria region experienced its best December (2020) to date, with high activity in the R2 million to R5 million price band. As is the case in sought-after areas around the country, well-priced homes continue to sell within a relatively short period of time.
In Cape Town, we also had a busy trading month in December – with sales on the Atlantic Seaboard well exceeding expectations. This included the sale of a five-bedroom, five-bathroom bungalow in a prime location on Clifton’s Fourth Beach, which achieved a sales price of R37 million.
Based on sales on the Atlantic Seaboard in recent months and especially December, we are likely to see consistent sales for well-priced properties brought to market by motivated sellers. While the mid to lower end of the market attracts the greatest number of general enquiries, quality leads are generated by correctly priced property, regardless of price, especially at the top end of the market. This indicates a change in trends as usually the top end enjoyed a fair degree of flexibility in terms of pricing in respect of the unique attributes of the particular property – such as aspect, views, and iconic features. However, this segment of the market is now as price sensitive as any other.
Activity in December and in January to date has also been brisk in Cape Town’s Southern Suburbs, Southern Peninsula, West Coast and Hout Bay, with all price bands and areas in demand, including notable, consistent sales concluded in upmarket Constantia. In the heart of the Boland Winelands, since September (2020) we’ve seen a renewed semigration trend with families relocating from Gauteng seeking homes to purchase as well as a huge demand for rental properties. From the start of 2021 we are also receiving a flurry of serious enquiries for top-end homes in Paarl estates and in Franschhoek.
The George area on the Garden Route is also experiencing a continuation of the trend towards security estates, but noticeably locations with a sense of space such as Gondwana Game Reserve, coastal estates like Pinnacle Point, Springerbaai and the sought-after golf estates Fancourt and Kingswood Golf Estate, or the Kraaibosch and Welgelegen estates with their scenic, expansive views. Fancourt in particular is generating interest in the limited remaining vacant stands in the various precincts of different architectural styles. In Fancourt’s Noem Noem, several vacant stands have recently been snapped up at prices above and below R2 million.
Heightened activity – including buoyant sales in the top end of the market above R3 million, which includes a cash sale for R6 million in Summerstrand prior to being listed – is also reported by Pam Golding Properties Port Elizabeth, where low stock levels along with low-interest rates are resulting in multiple offers as buyers compete for properties, especially those below R2 million.
Meanwhile, in Johannesburg South, popular price bands are from R650 000 to R3 million, with homes in freehold and gated complexes or gated estates most in-demand in the price band from R4.2 million to R6 million and as long as correctly priced. Suburbs close to schools are the most resilient, such as the New South suburbs of Glenvista, Mulbarton, Aspen, Brackendowns, Brackenhurst, and Lenasia. Notably, in Johannesburg South, we are seeing larger deposits than usual and cash purchases, with banks remaining willing to extend mortgage finance.
In Port Shepstone on the KwaZulu-Natal South Coast, Pam Golding Properties sold a home for the full asking price of R800 000 before the listing even went live, with funds paid in cash within a week of signing the offer to purchase. This successfully concluded transaction resulted in a second unit in the same complex being acquired by the same buyer, also for cash, within a couple of days.
Foreign residency and citizenship by investment (RCBI) programmes have become increasingly popular in South Africa in recent years, as people look for a second residency or citizenship for personal and business reasons. But few people and advisers are aware of the full range of lifestyle, business, investment and tax benefits to be gained when the programmes are utilised correctly.
The ‘citizenship by investment’ industry started in 1984, when the Caribbean nation of St Kitts & Nevis launched its programme. But it only really started gaining traction with the introduction of the first European citizenship programme, in Cyprus, in 2011. Today, a host of countries offer residency and citizenship by investment, including Portugal, Mauritius, Malta and Gibraltar.
Tim Mertens, Chairman of Sovereign Trust SA, says Portugal and Mauritius are emerging as two of the most popular destinations for South Africans not only looking for a so-called ‘Plan B’, but also looking to benefit from greater tax efficiency, investment and business opportunities, improved lifestyles, education options and greater freedom of movement.
“There is a common misconception that individuals invest in RCBI programmes with the sole intention of enabling their families to emigrate. Whilst this is a requirement of certain programmes – the UK and US, for example – in most instances, this is not the case. Most people who invest in government-authorised RCBI programmes do so to benefit from the flexibility and freedom they provide and to receive additional benefits that are not currently available to them,” said Mertens.
Portugal is popular with many South Africans looking for a path to European Union residency – and ultimately, citizenship – for themselves and their families. Portuguese residency unlocks visa-free mobility across the entire European Schengen area, and offers an excellent quality of life with relatively low tax burdens and investment barriers. While there are several routes to get Portuguese residency, real estate investment remains one of the easiest, with a minimum investment of €350,000.
Mauritius is wooing a growing number of local investors through its relatively close proximity to South Africa, attractive tax regime and laid-back lifestyle. Occupation and residence permits are freely available to foreigners wishing to work, invest, live or retire in Mauritius.
Part of the attraction of Mauritius for foreign investors has always been its simple taxation system: company, personal income, capital gains and dividend incomes are all taxed at a rate of 15%, with further tax concessions available. Mauritian tax residents are taxed on Mauritius-sourced income only, and there is no capital gains tax, no property tax and no inheritance tax. In addition, there are no foreign exchange controls.
South Africans are among the leading foreign buyers of property on the island, says Mertens. Setting up a business there is quick and easy, and there’s already a sizeable community of South African expats, making it familiar and easily accessible.
“The most important thing is not to make life-changing decisions based on a friend’s recommendation. You have to take advice from the experts, who can unpack the various country and investment options available to you based on your specific needs. That way, you can end up unlocking a range of benefits you didn’t know were even possible,” said Mertens.