Faster-selling houses a sign of a booming property market, says Leadhome
“South Africa’s property market came roaring back to pre-Covid levels in 2021 and this momentum will continue into 2022, with the fourth wave not likely to have any impact on the current upward trajectory.” Says Marcél du Toit, CEO of fixed-fee estate agency Leadhome Properties.
This bullish sentiment was reflected in a dramatic decrease in the average number of days taken to sell a home across the country’s major centres between 2020 and 2021. According to Leadhome data, properties in Pretoria took an average of 44 days to sell in 2021, down from 131 days in 2020. Similar trends were seen in Durban (49 days, down from 119), Johannesburg West (54 days, down from 86 in 2020) and Bedfordview/Edenvale, where properties sold almost a month faster than in 2020 (59, down from 81).
In Cape Town, which has benefited from a surge of ‘semigration’ from Gauteng to the coast in recent months, average days to sell dropped from 105 days to 77, while in Johannesburg North, properties currently take an average of 86 days to sell, compared to 121 days a year ago.
“This indicates that despite headwinds such as load shedding, petrol price increases and entering a cycle of interest rates increases, the property market is in ‘an extremely positive place’, with sales in October alone up 50% on the previous year”, says Du Toit.
“We saw a big bang in June of 2020 when the market reopened, followed by a long and steady growth period, and then a dramatic acceleration in October and November with an equally strong December. Now, activity in the big metros is pretty much back to pre-Covid levels, and banks are still lending aggressively, with average bonds in October 2021 at 0,2% below prime,” says Du Toit.
The average offer value countrywide is currently in the R1.5 million range, showing a slight decrease over the second half of 2021. However, the market is seeing renewed confidence in property as a long-term investment and a vehicle to not only build wealth, but improve wellbeing, with many people still working from home, and a growing number working hybrid.
“South Africans are seeing the value in buying property again. They’re feeling more secure in their jobs and their incomes, and as business has become more sustainable, it’s removed the ‘fear factor’ from investing. We’re confident that despite the fourth wave, the first quarter of 2022 will be an exceptionally busy period on the property market, as always,” says Du Toit.
10 Things Rental Agents Should Ask Their Current or Prospective Rental Payment Provider
There are many payment applications and software providers claiming to do all it takes to manage rental payments, but rental payment processing is not for the unprepared.
Payment service providers are governed by strict legislative rules and regulatory frameworks, covering issues such as corporate governance, the management of trust accounts and the protection of personal information.
And while there are various providers that might comply with the applicable laws and regulations, there are further questions that you as a rental agent should ask your payment provider or prospective provider:
1. Does their payment platform make your annual audit easier? Audits can be stressful and time-consuming for rental agents – and a lengthy audit process can get in the way of their regular tasks. A payment processing system that provides complete and well-organized data makes audits quicker and easier, but not all platforms do so. Ask your provider how, specifically, their system helps during audit season.
2. In the normal run of business, professional money handling is just as important. Can your provider’s system pay all landlords, all suppliers and the agency from fully reconciled client accounts within minutes? Or will your clients be kept waiting for their money while you struggle to reconcile large numbers of transactions spread out throughout the month?
3. Who owns their payment processing system While some popular platforms are independently owned, others are operated by property managers and estate agents, or by people with close ties to specific agencies. Ask yourself if you could trust a rival agent to manage your rental payment processing.
4. Can their system tell you where your clients’ money is now, or where it has been at all times since coming into the system? The system should offer an automated audit log that informs you of every transaction on the platform and lets you see who made it – and that record should be saved permanently and automatically in such a way that it cannot be changed or deleted
5. What measures do they take to keep customer data safe? A provider should offer bank-level security, including state-of-the-art encryption, and keep backups in multiple secure locations. Data loss – or worse, data theft – can result in huge losses to clients and destroy an agency’s reputation.
6. Is training and technical support readily available, for free, for the lifetime of the contract? How does the onboarding process work? Will a real person be available to help you while you migrate to the new system? With a service as vital as payment processing, you should always be able to get timely help from a dedicated expert via telephone or e-mail.
7. How clearly are the payment platform’s trust accounts separate from one another? Some payment services providers cut corners by pushing incoming payments to a single settlement account, but this creates a risk of paying one landlord with another landlord’s money – or even of using tenants’ security deposits to pay for repairs during the lease. Payment providers can prevent this by keeping trust funds separate at all times – ask your provider if they do.
8. Are your trust accounts reconciled to the cent, daily? Does your service provider have a dedicated team of professionals who handle this? Regular reconciliation of payments ensures that accounts are more accurate and that landlords and contractors receive their payments more quickly.
9. Does your provider charge extra for functionality that should come as standard? Some payment services platforms restrict vital platform features to premium users. You should also check that there is no limit to the number of landlords or properties that you can manage on the system – or risk an expensive surprise down the road.
10. What is your provider’s track record in the residential rental payments space? Ask your provider for their credentials – and ask yourself if you can afford to gamble on an untested system.
Don’t settle for less
Asking the right questions will ensure that agents find the best possible payment processing partner to work with. As with any financial partner, it’s vital to understand all the possible pressure points before signing on the dotted line.
While aggressively-priced payment processing systems may look tempting, particularly in uncertain economic times, they may only be able to reduce their prices by cutting corners – and with so many legal requirements to meet when it comes to payment processing, there are some corners that shouldn’t be cut.
Why Landlords Need Agents in Today’s Uncertain Economic Climate
Why landlords need agents in today’s uncertain economic climate The past 18 months have forced South Africans to relook their budgets and question every expense. The economic strain of the pandemic means everyone is looking to save where they can. For many property owners, this may mean questioning the necessity of using a residential rental agent – not just to source tenants to occupy their properties but to manage the relationship, stay on top of arrears and ultimately protect their investment.
The South African real estate industry has managed the pandemic-forced transition to remote working with relative ease. In the PayProp State of the Rental Industry 2020 survey, 92.5% of respondents indicated that they increased the use of technology in their business as a result. This is a clear indication of agencies’ belief that those who embrace technology in their everyday activities are best placed to ride out any storm. There are four broad reasons for landlords to employ the services of a professional real estate agent focused on rentals:
1. Good tenants are in short supply It’s no surprise that COVID-19 wreaked havoc on tenant placements and payments, and landlords have rediscovered the value of hanging on to good tenants whenever possible. An experienced rental agent will not only help you with upfront identification of a good tenant, but they will also manage the relationship, and advise what a reasonable increase on rent should be in this climate. Landlords can’t expect ten or even five percent increases anymore – it is for the most part just not realistic. A good rental agent will know what is acceptable in their local area and can provide the reality check needed to help manage expectations.
However, when it comes to the two income streams of property ownership – capital appreciation and rental income – growth is cyclical. Just because landlords aren’t experiencing the increases they might be used to, it doesn’t necessarily mean that it won’t be the case in the years to come. Rental owners need to stay the course for the mid to long term because the tide will turn eventually.
2. Arrears remain on watch South African private landlords experienced the shock of increasing tenant arrears during the pandemic and had to navigate the financial implications of postponed or lost rental income. Keeping the lines of communication open with tenants is critical to catching any reduction of this important revenue stream before it happens. A good rental agent will be experienced in identifying reliable tenants and diligent in following up and handling arrears. The process requires an agent who understands payment reminders, letters of demand and other factors involved.
3. Regulatory factors play a role Due to the onerous regulations governing the industry, renting a property in South Africa can be a complicated process without the assistance of a qualified rental estate agent. The Rental Housing Act regulates the behaviour of landlords, their agents, and tenants, and will be succeeded by the Rental Housing Amendment Act in the future. Rental agents know these laws and can take care of all aspects of rentals in a lawful manner.
4. Financial scrutiny is more important than ever In the current climate, agents that employ professional payment platforms like PayProp are best suited to managing the finances of rental properties. These platforms enable agents to reconcile payments to the right properties as they come in, and landlords, contractors, and the agent are paid without delay from fully balanced trust accounts – in the correct order, with funds ringfenced for the exclusive use they were intended for.
Property is an asset class, and with all asset classes, there are certain inherent risks. Bad tenants, frequent late payments, a vacant property or damage to your property – these are all risks that can unduly affect property owners’ livelihood and return on investment. For most landlords, having someone in the property is better than it standing vacant, but that is still not ideal for their risk profile. A professional rental agent can help to smooth the process and protect the landlord’s investment.
The importance of next-level trust fund separation for residential rental agents
The importance of next-level trust fund separation for residential rental agents No residential rental agent needs to be reminded of the unbreakable golden rule – trust funds must be kept separate from business funds, to ensure landlord and tenant funds are only ever used for the purpose they were meant for.
The basic principle is that all agents must have a trust account separate from their business account, into which tenant and landlord funds should be paid. The overwhelming majority of agents comply with this rule.
In addition, they must keep an accounting record, which ideally (but not always) includes a system of reconciliation – to match rent payments to the tenants they were received from, and to the landlords and other beneficiaries whom the funds will be paid to.
Some property management systems even go so far as automating the settlement of these amounts, albeit in a roundabout way – by pulling funds from a trust account, putting them into a settlement account, and then pushing all payments out.
But a trust fund isn’t like water in a bucket
It all sounds fairly simple and effective, and it complies with Section 32 of the Estate Agency Affairs Act. But according to Jan Davel, CEO of PayProp – SA’s leading industry payment platform – it is not enough.
“Using this approach is like treating your trust account like a bucket of water. All tenant funds flow into the bucket, and each month funds are scooped out and distributed,” Davel says. “The trouble with that is you don’t know what money belongs to what property. You could be paying property A’s expenses with B’s money.Also, what if a debit order fails? You think you have the money, and you pay, but without knowing which property it belongs to or if it was earmarked for repairs, you’d be taking a grave risk.”
Worse, you could give in to and pay the landlord or supplier who is making the most noise – hoping that when the right tenant eventually pays, the imbalance will sort itself out.exceptions create a trust account that is almost impossible to reconcile down to each property,” explains Davel.
And that goes double for funds on retainer
Retaining some of the landlord’s money (with their permission) to cover approved property expenses is a healthy practice and helps when there is a problem with the property. But when no funds are available, an agent cannot just use some of the other money in the bucket.
“The damage deposit belongs to the tenant. It is not the agent or the landlord’s money,” says Davel. “Using it to pay for repairs, even by accident, can ruin an agent’s relationship with the tenant and landlord – especially when the deposit money is needed at the end of the lease to pay for damage to the property or to refund the tenant.”
The case for next-level separation of trust funds
Davel says using PayProp ensures there is proper separation of funds. “Imagine that within your PayProp trust account bucket, there is a little bucket for every property, into and from which only funds belonging to that property are paid. Each little = bucket is further subdivided, to keep funds for the landlord, the tenant, third parties, and all the different purposes relevant to those beneficiaries,” he says.
Next, there is the matter of the funds actually being there. “Through our platform’s unique integration with the banking system, we can guarantee that beneficiaries are only paid once funds are actually received and cleared, that a property’s expenses are only paid with money meant for that property, and that any money retained is separately ‘tagged’, stored and accounted for. We also ensure that outgoing payments do not exceed the amount received in respect of a particular property, and we ensure that each agent’s trust account is reconciled to the last cent daily.”
Davel says all accounting, banking, and property management tasks related to these funds are automated for PayProp powered agents, leaving no room for human error, while an unalterable audit trail remains on the platform forever, for every user and every action they take. This allows the agency to track (and prove, if necessary) who has done what on the trust account from the moment a user logs in.
“Unfortunately, many estate agencies struggle to achieve detailed segregation of funds. As a result, their business principals and clients are exposed to a significant risk of misuse of funds – often in error. The efficient use of PropTech can solve this problem while helping with agency compliance.” Jan Davel, CEO, PayProp SA”
Everyone knows the world of work has changed radically. What does this mean for the office of 2022? Employees’ expectations have shifted. Now, offices are evolving into multifunctional spaces that lure people back with promises of communal hot spots (real human connection!); chill zones; and a focus on ideation and creation.
One Cape Town CBD company that is taking this to heart is Boxwood Property Fund where two inviting, energising communal spaces have been created in the once-staid Picbel Parkade building. Now renamed The Felix, the spaces sport funky giant murals of a tiger and panda bear, plenty of spots for a lekker braai, plug points for laptops, an indoor garden, open-air meeting area and a boxing gym with champion boxer Sting … It doesn’t sound like ‘ye olde’ traditional office, does it?
Boxwood Property Fund CEO and chairperson of the Cape Town Central City Improvement District (CCID), Rob Kane, says the recreational venues were designed with the workplace of the future in mind. “We are moving away from what a typical office looks and feels like, and what kind of facilities it might have offered to something that is designed more with workers’ needs in mind.”
Meeting Workers’ Evolving Expectations
With all the shifts the pandemic accelerated, much has been documented on what workers want right now. The prevailing themes? Flexibility, a diverse team, and outcomes-not-hours-based KPIs. People are now prioritising lifestyle and family-time more than ever before. Hybrid seems to be the name of the current game, with workers balancing office time with work-from-home arrangements. This should see more people returning to the office – albeit a different kind of office than before.
Tasso Evangelinos, CEO of the CCID, says, “We’re excited to see landlords interpreting trends and creating work spaces that encourage people to return to their CBD offices – even if it is part-time – as our stakeholders rely on office workers. These regulars are the lifeblood of the city centre. Their patronage and presence bring vibrancy and income to our CBD businesses, across all sectors.”
How will the office look next year? Here are some trends forecasts:
Downsized offices but ‘upsized’ ecosystems? A KPMG survey found 69% of CEOs are planning to downsize their office spaces. Offices will be reimagined as places to come together to brainstorm and socialise. In essence, they’ll be stations for innovation, and meaningful conversation.While offices may ‘shrink’, many companies are planning to widen their work ecosystems to include satellite houses, cafes and coworking spots. This is the hub and spoke approach, with a central office hub, surrounded by satellite workstations.
Others are redesigning the traditional office to be a one-stop-shop where people can stay, work and play.Starbucks, for example, is making its headquarters feel more like an informal ‘coffee shop’ (appropriate) to foster fewer siloes and more cooperation.
Built with (multi) purpose in mind: Hybrid doesn’t just refer to a way of working. Offices are now hybrid spaces themselves, often boasting green places, communal coffee shops, retail stores and more. The Box is the perfect example of this. Also owned by Boxwood Property Fund, the revamped, renamed Atterbury House now includes ‘hot desks’ in private office arrangements in ‘The Box Set’, along with a landscaped public environment and a food and beverage co-op called Salt. This has 11 food pods, live music and workstations with fast WiFi. Everything a hustler needs to succeed.
Revitalising surrounding areas: The revamping of traditional offices could have positive ripple effects for local neighbourhoods. For example, Kane is chatting to other CBD building owners about creating lively public urban art spaces across the precinct. The goal of enticing office workers back may have exciting upshots for everyone.
AI everything: The office of 2022 is likely to continue to prioritise AI and automation. McKinsey’s global survey of 800 senior executives saw two-thirds of polled professionals say they’re stepping up their automation spend. In 2020, e-commerce share grew at two to five times the rate prior to the pandemic. That trend is likely to continue. And, with hybrid arrangements still happening, next year’s offices will undoubtedly include plenty of conferencing facilities for those endless Zoom calls. Some nifty drone delivery zones could also be quite useful…
Human-to-human: 2022’s offices will need to be places for real connection. Ipsos’ study on the impact of Work from Home found productivity and morale may be suffering. In fact, 55% of employees said their teams aren’t collaborating as well in WFH arrangements. So, the focus next year will be on building flexible spaces that encourage informal interaction. A braai in the middle of the office, green spaces for midday yoga, creativity capsules for daydreaming, coffee shops for caffeine-fuelled collaboration, a boxing ring to let off steam… These could all be run-of-the-mill in the multifunctional spaces of tomorrow.
Evangelinos says there is already an uptick in foot traffic and business dealings in the CBD: “We’re seeing more and more people return to the city centre, which has been wonderful for our stakeholders – small businesses especially. The return of office workers has positive ramifications for the whole area. They bring energy and income to the Central City. We’re hoping the reimagined office of 2022 will have a positive knock-on effect, with hybrid buildings creating attractive spaces for people to stay, work and play. These should have international appeal for ‘digital nomads’ as well.”
South Africa has limited water resources so even at the best of times, we should all be thinking about ways to save water, with the added benefit of reducing our municipal water charges,” says Berry Everitt, CEO of the Chas Everitt International property group.
“Having everyone at home during the lockdown has really brought this into focus – and also made us realise that it’s relatively easy for homeowners to do, just by making a few small alterations and easy behaviour changes.”
Here are a few ideas for you and your family to try:
If you have a leaky tap, replace the washer immediately. A tap leaking at the rate of one drop per second will waste around 10 000L of water every year.
Fit bathroom and kitchen taps with inexpensive aerators or flow restrictors. A showerhead fitted with a flow restrictor will use only about 7L of water per minute compared to 20L a minute for an old-style showerhead.
If you have an old-style toilet put a 2L plastic bottle filled with water into the cistern to reduce the amount of water used with each flush. The new-style toilets with flat cisterns only use about 3 to 6L per flush.
Try to restrict the time that your shower water actually runs to less than three minutes. The wet-wash-rinse method is most efficient. Use a bucket to save any water you run while you wait for the shower to warm up.
If you have small children and prefer to bath them in a tub, put them all in together, and find ways to re-use the water afterward.
In the kitchen, start by keeping cold drinking water in the fridge rather than running a tap until the water gets cool, and thaw frozen food in the fridge or microwave instead of under running water.
Don’t rinse hand-washed dishes under a running tap. Use a basin of clean water or if you have a dual sink, fill one side with soapy water and the other with rinsing water.
Wash your fresh fruit and veggies in a laundry basin, not under running water. Then re-use the water in the garden.
Don’t use water-hungry kitchen-sink disposal units. Rather try composting which is an environmentally friendly alternative.
Don’t run a dishwasher until you have a full load and similarly, try always to wait until you’ve got a full load before you use the washing machine. If you do a half load, adjust the water level accordingly. See if you can channel the greywater from the rinse cycle to be re-used in your garden.
If you’re fortunate enough to have a borehole on your property, that can really help reduce your use of municipal water. The water will need to be tested if you’re going to drink it or wash in it, but you can certainly use it to water the garden, preferably through an irrigation system to make it most efficient.
Consider increasing your access to “free” water by installing rainwater harvesting tanks to catch the runoff from your roof and then connecting these to the parts of your home that use the most water, like the bathrooms and the laundry. On average, a roof area of just 100 square meter will generate around 75 000L of runoff a year, which would be quite a saving for the average household.