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.
Brought to you by Eestates

What is Buy-to-Let?

Investors who are looking for a good return on their investments still believe that property is the place to put your money. One way of doing so is to through a process called “Buy-to-Let.”

What is Buy-to-Let?
The name is actually very descriptive – you buy a property as an investment, not to occupy yourself but clearly with the intention of renting it out. If you do not have sufficient money available to fund the transaction you can obtain a home loan from any of a number of banks or other mortgage financiers. Almost all the banks have developed a specific home loan product for the purpose of buy-to-let transactions.

Is this a good time to invest in buy-to-let property?
There are a number of reasons why we feel that now is an excellent time to enter this market:

1. The stringent lending requirements brought about by the National Credit Act and current economic conditions have made it difficult for many to qualify for a home loan. The demand for good rental properties should remain high for a long time.

2. Investors can find real bargains at the moment – many people are desperate to sell their properties during the recession and the banks have an increased number of properties in possession.

3. The interest rate is in a downward spiral making it easier to buy for investment.

The process of borrowing money to invest in buy to let property
When one needs to borrow money for the purpose of investing the funds in an income-generating asset it is referred to as gearing. Gearing is expressed as a ratio. If you are buying a property for R1 000 000 and you only require a loan for R500 000 your gearing will be 50%.

Under the current economic conditions no bank is offering 100% loans and the requirements for buy-to-let are even stricter. You will therefore need a deposit as well as meeting the other qualifying criteria.

What are the qualifying criteria for obtaining a buy-to-let home loan?

The banks do not have uniform products so this is merely a guideline. You can get specific details directly from the bank of your choice, or even better, shop around and compare what is available in the market.

1. The amount you will qualify for will depend on your personal credit profile. Similar to applying for any other loan the bank will look at your credit record, your ability to pay back the loan, your overall indebtedness, job stability and other personal circumstances. Joint income may be used to establish the maximum amount of finance. There will be a minimum joint gross income to qualify for this type of loan, probably in the vicinity of R30 000 per month.

2. You can include a percentage of the potential rental income you expect as part of your income – usually not the full amount. The percentage the bank will take into account will differ from bank to bank. It is also looked at in relation to the size of the deposit or the gearing. As an example – one bank will allow 40% of the rental income to be included if you have a 10% deposit to put down. Another bank is prepared to consider 100% of the rental income, so there are big differences between banks.

3. When you apply for the loan you will need a copy of the offer to purchase, proof of income, three months’ bank statements, proof of residential address and your identity document. If you plan to buy the property jointly or in the name of a company or trust all the relevant documents will be required.

Drawbacks to Buying Land

 

 Finding skilled craftsman willing to travel might be difficult. Some might not show up as promised and may want higher wages to compensate for the distance. Transporting building materials and paying for delivery will likely cost more over building a home in the city.

Although modern conveniences are available, they aren't always reliable in the middle of nowhere, which is why many home owners in the country use generators as a back up when utilities fail. Going into town for groceries and other shopping needs generally requires planning and long trips. If it snows, and the roads aren't promptly plowed, you could be snowed in for days.

Renting Before Buying Land

If you are unfamiliar with an area, it might be a good idea to rent a home first before buying the land and beginning construction. As a new resident, you can get to know the community first hand and hear stories from local owners that you won't hear if you pull up in an SUV with a fat wallet in your pocket asking about MLS listings.
Resale value is often softer in the country than the city. That's because the pool of potential buyers is smaller. If demand is low and supply is high, home prices will be more negotiable. As a tenant, you can try to time the real estate market and be ready to buy that parcel of land when it first becomes available.

Factors to Consider Before Buying Land

• Zoning Requirements Check with local authorities (city, county and state) to determine zoning ordinances and whether you can build the type of home you want before committing to buying the land. A community within 20 minutes of Sacramento city limits, for example, does not permit construction of any structure on parcels smaller than 20 acres. Ask about future zoning, whether there are plans to put in shopping centers or airports, or to change nearby land uses that could also devalue your land.
  
• Smells and Sounds Realize that you might be trading exhaust fumes from city buses for the lovely odors produced by pig farms. Some farm animals such as geese and donkeys produce squawks and brays that travel for miles. Horses along country roads drop steaming piles of waste. It's not like anybody carries along a plastic bag and picks up after their horses.
  
• Natural Hazards Obtain a natural hazard disclosure and look for soil problems. Some parts of El Dorado County near the Sierra, for example, have naturally occurring asbestos in the rocks and soil. A disclosure will tell you if the land is a protected habitat, which would prohibit building. Is the area a known fire hazard? Is the fire department supported solely by volunteers? Many owners in the country maintain private ponds for fire emergencies.
  
• Elevation If the land is located near hills, how likely is the land to move? Some slab foundations can crack if the land is unstable. Find out if your parcel lies within the path of a potential landslide. For construction near bodies of water, you might want to consider building a raised foundation and make sure to buy flood insurance. If the land was once a swamp, ask neighbors about the condition of their foundations.
  
• Easements If access to your land is provided by driving across an adjoining parcel, you should obtain an easement and make sure it is recorded. Find out who maintains the roads and what your prorata share might cost for upkeep. What rights do neighbors have to cross your land? Are the boundaries clearly marked? Obtain title insurance, which will disclose easements and restrictive covenants or conditions. You might want to order a survey of the land.
  
• Utilities Water is important. Not all water is potable. Sometimes water rights don't "run with the land," which would mean you could not dig a well. Find out the depth of your water table and determine the difficulty of digging. Is the ground mostly rock? It can be costly to bring electricity, telephone or cable services to the property if they are not already established nearby. Will you need to install a propane tank? Consider a generator for back-up during power outages. If you cannot hook up to a sewer, what will it cost to install a septic system?
  
• Appraisal It's common to pay cash for land. If you're not planning to finance the land purchase through a conventional lender, which will require a lender appraisal, then obtain your own appraisal to determine an appropriate price before making an offer. Comparable sales are sometimes difficult to find when buying land.
  
  This property advise blog is brought to you  by E Estates 

Buying a Commercial Property

Think carefully about whether purchasing commercial premises is the logical next step for your business - take time to weigh up the pros and cons.

• Advantages:
• You are free from worries about rental increases
• If the property increases in value, your business benefits from capital gains
• You may be able to fix monthly payments, to give yourself security over your outgoings
• Interest payments on commercial mortgages are tax deductible
• You may be able to sub-let a portion of the property, to lessen your mortgage payments (so long as your lender agrees)
• Your mortgage repayments are likely to be similar to rental on a similar property
• You can re-mortgage to raise finance
• You gain operational flexibility, because you can design the premises to suit your business, or to rebuild and extend as your business expands.
• Disadvantages:
• You will need to provide a deposit of between 20% and 30% of the value of the property in advance
• You will have to finance the upkeep and maintenance of the property
• If the property loses value, it will impact on your business capital
• Depending on interest rate movements, your mortgage payments could increase
• You have less flexibility to cope with changes in circumstances - to take on more or less space, or to move to a different location - than if you are renting
• Buying premises ties up cash flow which could be invested in new employees, or plant
• You will make property ownership a central part of your business, exposing yourself to an unpredictable market. This could leave you with a large and unproductive asset, which still incurs costs.

• what kind of premises

• Depending on the kind of business you run, choose your premises to fit your specific criteria. Decide how much room you need per employee, and whether you need additional space for meetings or interviews. Do you need parking space for visitors or customers? Do you need extensive storage space? Consider taking more than one premises, with a less expensive location for archive records, for example.
  Consider modern buildings with good natural light and security systems built in.
  Also consider that if you are, for example, a manufacturing company, you may need permission to conduct your business.
  

• location, location, location

• Look for a location which best suits your business needs.
  
  • If you are a retailer, you may need to be close to your customers or suppliers, with good visibility
  • If you use high tech communications, you could choose a more remote location, saving money
  • If you produce goods, transport links may be a crucial factor
  Consider the commuting needs of your staff. Can your employees travel easily to your premises? You will have to pay more for premises in a city centre, but your choice of potential employees will be greater.
  City centre locations often suffer from higher crime levels, more noise and pollution and higher parking charges. Out of town locations offer better parking options and are typically cleaner with modern buildings, but may have fewer amenities such as shops and restaurants nearby.
  

• refining your search

• When tracking down the ideal commercial property for your business, you'll need to do some research to find the ideal spot to set up shop. Try reading property industry journals such as Estates Gazette and Estates Times - they publish regular surveys of different areas and industry sectors. Make contact with local businesses and organisations, such as Chambers of Commerce or Business Link, to ask advice on where to buy. If you have personal contacts that have business premises in your area, call them to ask whether they know of oppEortunities.
  Do you want a house, a flat, a maisonette, a bungalow or a cottage?
  

• financing the purchase

• Unless you have a large amount of spare cash, you are likely to need a commercial mortgage to finance the acquisition. Bear in mind that you will need to commit to a minimum mortgage term of around 15 years, and will have to provide details of your business accounts and cash flow projections to the lender.
  Typically, commercial mortgages require a substantial deposit - perhaps between 20% and 30%. The property will be at risk if you are unable to keep up mortgage payments.

This advise is brought to you by E Estates