Brazil Property Prices on the Rise

Against all expectations, against good sense, Brazil’s housing sector continues to boom!  House prices in São Paulo rose by 18.8% during the year to July 2012, according to the FIPE ZAP Index of Dwelling Price Offers (up 12.9% when adjusted for inflation). The price increase was even greater at Rio de Janeiro, up 19.8% (13.9% in real terms) during the same period.

From January 2008 to July 2012, average house prices in São Paulo and Rio de Janeiro rose by 144.1% (91.7% in real terms), and by 178.2% (118.4% in real terms), respectively.

Property sales for the first half of 2012 were up 2.6% to 11,900 units, according to the Sindicato da Habitação (Secovi-SP). In contrast, sales values were BRL 6 billion (US$ 2.95 billion), down by 1.5% during the same period.

Two major international sporting events are helping to arouse foreign interest in Brazil - the hosting of the 2014 Soccer World Cup, and the 2016 Olympics.  But although house price rises have been strong, economic growth is noticeably slowing.

Brazil’s property market is overvalued by around 50%, claims Capital Economics, who have produced a whole raft of reasons why disaster hangs over the Brazilian property market.   Yet an expanding mortgage market is making finance easier to than ever to access.

Should you keep a home loan open?

If your home loan is paid up or even in credit, you may still be liable for a monthly service fee. The fee will be determined by when you entered into your home loan agreement or last amended it.

If your home loan agreement was entered into before the National Credit Act (NCA) came into effect, and no material changes have been made to your original agreement, the Usury Act maximum monthly fee of R5 (before VAT) applies. If it was after June 1, 2007, or if your original agreement was amended after the introduction of the NCA, you can be charged up to R50 (before VAT) a month.

First National Bank (FNB) client Mr BC complained to the bank that he is being charged a monthly service fee of R5.70 on a home loan account that has been in credit for the past 10 years.

Praven Subbramoney, head of product and marketing at FNB, says the bank is within its rights to charge a monthly administration or service fee on all its accounts.

"There is no mention in our documents, or in the regulations, of a rule to suspend fees when accounts are paid up or [in] any other instances. While we may have waived the fee in the past, we have re-evaluated our situation due to the economics of the product and, unfortunately, can no longer afford to do so," Subbramoney says.

The only way you can get out of paying the monthly service fee is by cancelling your mortgage bond, which will cost you about R2 500.

Subbramoney says many customers don't know that there's a cost to cancelling a mortgage bond. "This cost is paid [by the client] to an attorney to cancel the bond at the Deeds Office when the bond has been settled."

As soon as a bond reaches maturity (that is, when the full term of the loan period is reached), it has to be cancelled - and this service comes at a cost.

All the banks have their own "panels" of conveyancing attorneys to whom they give work.
Subbramoney says FNB Home Loans has negotiated with its panel of attorneys to discount bond cancellation fees to R1 400 for FNB clients. This includes the Deeds Office cancellation levy of R80.

Although it may cost you to keep a home loan account open - and you don't earn interest on a positive balance in a paid-up home loan account - the benefits of keeping your account open are that you have access to relatively cheap credit (in case of emergency) and you save yourself the cost of registering a new mortgage bond should you want access to a loan again.

Subbramoney says if you want to earn interest on a positive balance, you should open an investment or savings account. Clients are not encouraged to leave positive balances in their mortgage accounts "due to past experience with fraud and money laundering on these accounts", he says.

Clients at Absa and Nedbank are not charged a monthly service fee on home loans that have been paid up, but conditions apply.

At Absa, provided your account does not have a positive balance, you won't be charged a monthly service fee, Arrie Rautenbach, head of retail markets at Absa, says.

At Nedbank, you need to ask for your home loan account to be made "dormant", Charles de Winnaar, the bank's acting head of sales and customer management, says.

A monthly service fee will be charged where a home loan account has a zero or positive balance and the client has not asked for the account to be made dormant, De Winnaar says.

Like FNB, Standard Bank levies a monthly service fee on home loans that have been settled, because such accounts are still "active", Steven Barker, head of home loans at Standard Bank, says.

Barker defines "active" home loan accounts as those that are kept open for homeowners' insurance and customer convenience.

Even when the account reflects a nil balance, the bank is required by law to provide annual statements and notifications of rate changes, and must cover the cost of keeping the title deed. All these costs must be recovered, Barker says.

The "true cost" of running a mortgage bond is, on average, more than R100 a month, FNB's Subbramoney says. He says the bank incurs costs for managing home loans in the following ways:

• Capital costs: banks must keep capital to cover any available balances. This means the bank incurs a cost for any prepaid funds or credit that is available to you.
• Monitoring for fraud and money laundering.
• Monitoring of credit management and account conduct.
• Collecting debt from customers who don't pay.
• Ensuring safe custody of the bond and deed documentation.
• Day-to-day customer services and correspondence.
• Computer system and staff.

Similarly, the initiation fees on home loans don't cover the actual cost of bond origination, Subbramoney says.

"The actual origination cost to the bank is in the region of three times the fee recovered," he says.

The NCA restricts money lenders to an initiation fee of no more than R5 700 (R5 000 plus VAT).
Subbramoney says the advent of Basel III (a global regulatory standard on bank capital ade-quacy and market liquidity risk) will add to liquidity charges, affecting the interest part of the mortgage business.

"The reality is that if the banks don't find a healthy balance on the mortgage portfolio that is economically viable, they may need to rethink mortgage lending in totality," he says.

If you have a home loan of less than R500 000 that was in force before June 1, 2007, when the National Credit Act (NCA) became fully effective, you should be paying no more than R5 a month to your bank or credit provider in administration or service charges.

The Usury Act, which governed home loans before the NCA became effective, set a cap of R5 (excluding VAT) for monthly service fees on home loans of R500 000 or less.

The Act was repealed and replaced by the NCA, which provides for a maximum monthly service fee of R50 (excluding VAT) on home loans.

However, a credit provider is not entitled to charge an administration fee in excess of the maximum set under the Usury Act on home loans granted before the NCA replaced the Usury Act.

This is in terms of a judgment handed down by the Supreme Court of Appeal at the end of last month, in the matter between the National Credit Regulator (NCR) and Standard Bank.

Standard Bank contended that the limit imposed on administration fees under the Usury Act did not "survive the transition to the NCA" as far as pre-existing home loans were concerned.

The regulator disputed this, and the Supreme Court of Appeal ruled in its favour, declaring that Standard Bank "is not entitled to charge an administration fee on housing loans that existed at the time the NCA came into operation in excess of the fee provided for in ... the Usury Act unless and until that fee is amended under the NCA".

If you took out a home loan before June 1, 2007, check your bank statements to ensure you haven't been overcharged for administration. If you find that you have, you can take it up with your bank or the NCR.

Steven Barker, head of home loans at Standard Bank, says all affected customers will have their monthly service fees amended back to R5 (before VAT) from January 1, 2013. Charges in excess of the Usury Act maximum will be fully refunded.

For more property investment advise contact www.eestates.co +eestates propertyinvestments 

What's the difference between a rental agreement and a lease?

The biggest difference is the period of occupancy. A written rental agreement provides for a tenancy of a short period (often 30 days). The tenancy is automatically renewed at the end of this period unless the tenant or landlord ends it by giving written notice, typically 60 days. For these month-to-month rentals, the landlord can change the terms of the agreement with proper written notice, subject to any rent control laws. 

This notice is usually 60 days, but can be shorter in some states if the rent is paid weekly or bi-weekly, or if the landlord and tenant agree.

A written lease, on the other hand, gives a tenant the right to occupy a rental unit for a set term -- most often for six months or a year but sometimes longer -- if the tenant pays the rent and complies with other lease provisions. Unlike a rental agreement, when a lease expires it does not usually automatically renew itself. A tenant who stays on with the landlord's consent will generally be considered a month-to-month tenant, subject to the rental terms (such as a no pets clause) that were in the lease.

In addition, with a fixed-term lease, the landlord cannot raise the rent or change other terms of the tenancy during the lease, unless the changes are specifically provided for in the lease, or the tenant agrees.

Top Ten Reasons to Invest in South African Property

Property investment offers relative stability
Property shortage in South Africa
Property cycles in South Africa
Stable in comparison to an unstable world
High rentals rate
Top holiday destination
Favourable exchange rate
No tax on property purchase
Tax breaks on property development
High growth potential

South Africa is the economic hub of the African continent and has one of the most beautiful and diverse natural landscapes in the world.  The combination of the two make it an excellent location for property investment.

SAHometraders has come up with 10 reasons why you should consider investing in the South African property market:
1. Property investment offers relative stability

Investing in the stock market can often bring forth great returns, but it is also very unstable and there is always a possibility that you will lose a lot of your capital.  Experts advise that you balance your investment portfolio by choosing a relatively stable option and in South Africa, the property market is just one of these options.
2. Property shortage in South Africa

The country’s turbulent political past has left South Africa with a shortage of good housing and the government has made solving the problem a high priority.  This focus on housing will result in a long-term structural growth potential within the South African property market, with people migrating to better neighbourhoods and more expensive homes set to continue for a long time to come.
3. Property cycles in South Africa

Many people dream of having their own property and the added sense of security and comfort of a continuously growing asset that goes with it.  When young people leave school and first enter the working world, they enter the property cycle through renting a flat then buying one, selling it off and then buying a small house or townhouse.  Over the years, they will become more financially secure and then will be able to invest in their dream property, which they are likely to sell once they reach retirement in order to move back into a smaller house or townhouse.  The high demand for property in South Africa means that an astute investor benefits throughout the property cycle, as any investment is bound to provide high returns.
4. Stable vs unstable world

With the effects of 9/11 echoing throughout the globe, everyone has now become aware of how extremist attacks can have a profoundly negative effect on the economies and stock markets of the countries affected.  Terrorism is a decidedly global problem, but when it comes to South Africa, experts are of the opinion that the country remains one of the least affected by extremist activities.  This balanced position is proving the catalyst for property investment interest from abroad.  The increase in foreign investment is certainly stimulating an already active economy.
5. High property rentals rate

A series of interest rate hikes and escalating inflation has caused an escalation in the number of people choosing to rent rather than buy property in South Africa.  This means that the buy-to-let market is becoming an increasingly popular property investment option around the country, particularly in the bigger cities.  Renting a property out will also help you to pay off your bond, while the value of the home steadily increases.
6. Top holiday destination in the world

The fact that holidaymakers put South Africa near the top of the list when it comes to prime holiday destinations means that the country is home to a picturesque landscape, both diverse and naturally beautiful.  There is a location to suit any taste, from azure blue sea and sandy white beaches, to lush green winelands set in the mountains, extensive nature reserves and game parks with an abundance of wildlife that boasts the sought after Big Five and hundreds of bird species, as well as the ultimate whale watching and shark diving experiences.  With so many visitors flocking to South African shores to take advantage of the excellent climate and endless natural beauty, who wouldn’t want to make this country their home?
7. Favourable exchange rate

If you are earning pounds, dollars or euros then you are leap years ahead of locals when it comes to the affordability of property in South Africa.  More and more foreigners are seeing South Africa as the ideal property investment location, particularly in light of the favourable exchange rate, as well as the fact that the economy is the second strongest on the African continent.  Even if you’re a local and don’t earn foreign currency, the fact that South Africa has such a strong economy means that you are guaranteed to yield excellent long term returns on your investment.
8. No tax on property purchases

The good news is that there is no VAT payable on property purchases in South Africa.  However, the seller is generally liable for agent’s fees that incur a percentage of VAT.  There is also no stamp duty on property purchases in this country, which means that buyers are sure to enjoy the added benefits.  Another drawcard for the country as a prime investment location is the fact that there is no inheritance tax on property.
9. Tax breaks on property development

Real estate developers are given tax breaks of up to 20%, while another 20% tax break on rental is available for renovation projects.  Consequently, the commercial property market in South Africa is currently outperforming markets in many Western countries.  Even with the global economy experiencing difficulties, the commercial property development market in South Africa is booming.
10. High growth potential

It has already been said that the shortage of housing in South Africa and the government’s high priority to alleviate this problem means that the country has a high growth potential.  The growth is also due to the development of a strong middle class, which is providing an increase in the demand for homes.  In terms of facts and figures, the housing market in the Western Cape is showing a steady growth of 13.9%, while other metropolitan areas are growing at an annual rate of 15.6%.  As we all know, a steadily increasing demand translates into high returns on a long term investment basis.

 E Estates - Cape Town Property

Cape Town is spectacularly situated at the northern end of the Cape Peninsula and at the foot of the world famous Table Mountain. The eclectic mix of cultures provides for an unusual array of tourist activities, vibrant entertainment haunts, diverse dining experiences and a fascinating way of life.

Cape Town has become the dream residence location for many people in South Africa and from around the globe due its highly sophisticated infrastructure, economic property prices, low cost of living, amazing lifestyle and incredible investment returns.

The scenic beauty of Cape Town and the surrounding areas has also led to Cape Town becoming one of the top tourist destinations in the world. The film industry has also recently discovered Cape Town and numerous films are now made in the city, taking advantage of the excellent climate and stunning natural setting.

Cape Town properties have been experiencing a boom for a number of years and the Atlantic Seaboard is especially popular with overseas and upcountry buyers. The Atlantic Ocean views and pristine white beaches of suburbs such as Clifton, Camps Bay, Bantry Bay and Sea Point make these sought-after suburbs.

E Estates can assist you with all types of residential property for sale and rental including houses, apartments, cluster developments, land and guesthouses in and around Cape Town.

Buying off Plan a safe bet?

Buying off the plan is undoubtedly a leap of faith and the dangers are twofold.

First you have to believe that the property you can only see on a plan will eventuate exactly as specified within a certain time. If, like most of us, you do not find it easy to envisage exactly what you will get, it's probably worth getting help from an expert. Even if there is a display suite it may not be truly representative of the finished product.

 Other precautions you should take include:

• Only buy from developers with a good reputation and whose work you can see.
• Make sure every detail is specified in the contract, including fixtures and fittings — for example, not just a stainless steel oven, but a particular brand and model.

The second major pitfall relates to price. It's difficult to establish whether the asking price is fair when there are no benchmarks. "Buy tomorrow's real estate at today's prices" is the spiel of the marketers. That assumes property prices always rise, which of course is not the case. For example, if you bought a unit off the plan three years ago in Cape Town's Camps Bay and are settling on it now, it is likely to be worth less than you are paying.

With investments be very suspicious of rental guarantees, which can be used to set artificially high prices. For example, if gross rental returns are 10 percent in an area and the vendor guarantees a $400 a week rental, that would price a property at $208,000. But say that market rent is really $350 a week, meaning it's only worth $182,000. If you fall for this you would pay 12.5 percent above market. The vendor only has to pay $5000 to guarantee the extra rental for two years and score an extra $26,000, or $21,000 net. Need some advise? contact Eestates today 

The Best House in Cape Town - Sold

Indian booze billionaire buys himself many rooms with a view. Indian liquor baron and Formula One team owner has splashed out R60-million for a Cape Town mansion in which Hollywood star Nicolas Cage once slept on embroidered pillows.

The flamboyant 54-year-old chairman of United Breweries Group and Kingfisher Airlines - named after United Breweries's trademark Kingfisher beer - has an estimated fortune of $1.45-billion and was ranked the 44th richest person in India by Forbes.com in September.
The billionaire owns the Formula One team, Force India, and Indian Premier League cricket team, Royal Challengers Bangalore, coached by South African Ray Jennings. His South African assets include the Mabula Game Lodge and the ultra-luxurious Imbali Safari Lodge in the Kruger National Park, as well as a swanky Cape Town hotel. His taste for fast cars, yachts, race horses, jets, game lodges and general opulence is well documented.
And now, his latest luxury pad is a four-storey villa with a glass elevator and porcelain tiles imported from Italy at R2500/m². The mansion, which was advertised by local estate agents as "the best house in Cape Town", is perched on Nettleton Road and has sweeping views of Clifton beach.
The road boasts some of the most expensive real estate in South Africa. IT businessman Leo Baxter is demolishing a mansion he bought there for R32-million two years ago. Homes in the road have sold for R30 to R40 million this year. Mallya's new house was initially on the market for R80-million but its former owner, British screenwriter and film producer Mike Jefferies, settled for R60-million.
Denise Dogon, chief executive of the Dogon Group estate agency, which brokered the deal, declined to comment. "I really cannot comment on the buyer due to client confidentiality." She said R60-million was a record price for the Atlantic seaboard area.The mansion - which boasts a sauna, walk-in safe, gym, and garage space for four cars - has hosted movie stars, singers and royalty.
Prince Carl Philip of Sweden - the dashing son of King Carl Gustaf and Queen Silvia - stayed there during the 2010 Fifa World Cup, hosting lavish parties on its patio, which flanks a 25m-long infinity pool.
Singer George Michael lived there last year while preparing material for a new album and, six years ago, Cage and his third wife, former sushi waitress, Alice Kim, stayed there for nine weeks while he filmed Lord of War.
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