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Live where you love, not to impress

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In any town there are less and more attractive suburbs and areas to live in.

In Bloemfontein, I think you would agree that Woodlands is a more upmarket area than say Ehrlich Park.

Prices of land and properties in these areas will reflect the level of demand.

People are all different and buy for different reasons.

Some buy for prestige, some for convenience, some for the necessity of a place to stay.

But does it pay to buy in these expensive areas?

Well, it all depends on what you are looking for.

When building a home the cost of building is essentially the same wherever you built, allowing for difficult sites such as hillsides. 

What differs is the cost of the ground.

A piece of ground in Ehrlich Park is much cheaper than the same-sized piece of ground in Woodlands.

When buying a home you usually buy with your heart not your pocket.

While if you are buying for an investment you would buy with your head.

By that I mean you are willing to spend more on your own home than you would on one to rent out – after all you want to enjoy where you stay.

Owning property in top-end areas will cost you the same for water and electricity, but will cost you a lot more for rates and taxes.

You might get a little more rental for the same house in a better area but nowhere near enough to justify buying an investment property in an expensive area.

From an increase in value basis, while upmarket areas go up in value in rand terms more quickly than ordinary residential areas, you usually find that the percentage increase is much the same.

For example, a R3 million home in Woodlands might go up to R3.3 million this year but your home in Bayswater might go up from R2 million to R2.2 million too.

So, do suburbs or areas change in value outside the standard rate?

Sure they do if there is a reason to do so.

Currently, the very expensive R4 million homes are in real distress.

Many of their owners have crippling bonds and have lost their income, but there is no demand for homes at that price.

So, prices are dropping rapidly and these homes are very negotiable.

On the other hand, affordable homes under R1 million are in strong demand and their prices are actually rising.

Changes in circumstances also changes the price of property in a particular suburb.

Willows, for example, is not likely to increase in value at the normal rate because it is used generally for students at the Central University of Technology (CUT).

The majority of CUT students tend to come from homes without a lot of spare cash.

So rentals in the area – and thus prices – are stuck because there is little potential for growth.

However, Bayswater has seen growth in prices because properties are on large pieces of land, have biggish houses and are conveniently located close to schools and shops.

All the new developments at Wild Olive, Somerton and others north of the city have been done at new prices and have made existing homes seem a bargain by comparison.

So, what size of property do you actually need?

If you have mummy, daddy and two children you need three bedrooms.

Whether it costs R1.5 million or R5 million you still need three bedrooms only.

The choice is yours.

I would rather live in a home and area that I feel comfortable in and not have the burden of a super large bond, trying to impress people.

I can do far more nice things for myself with the money that I save.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

Property

Bigger can be best

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MAJOR UPGRADE NEEDED . . . Many of the original sectional title schemes were existing buildings that were converted

I want to be very brief in this article so that those interested may have more time to think about my discussion point.

We have previously discussed shortcomings with the Sectional Titles Schemes Management Act (STSMA), which are many.

I want to focus on just two of them today.

The STSMA was signed into law and became effective on October 7, 2016.

Ideally, the STSMA was introduced in order to provide for the establishment of bodies corporate to manage and regulate sections and common property in sectional title schemes.

Its main purpose is to apply rules applicable to such schemes – establish a sectional title schemes management advisory council and to provide for any related matters.

The two biggest problems have been, firstly, the age of buildings that were converted to sectional title schemes and the size of many of the early schemes.

Buildings have a practical lifespan.

Many of the original sectional title schemes were existing buildings that were converted.

Some of these buildings are now approaching 80 years and need major upgrading – particularly piping and wiring – and modernisation and owners just don’t or have not made provision for these upgrades, especially in less affluent areas.

The second problem is that these schemes have a small number of units and are uneconomical for a managing agent to administer.

The reality is that the larger the scheme, the easier it can be managed.

I wonder if it would be worthwhile to have two schemes combining for admin purposes.

Food for thought . . .

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia. You can contact him via email: mike@platinumglobal.co.za

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Property

Fix and protect your building from rain damage now

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FIX ROOF LEAKS . . . Protect your building from rain damage

Last year saw some very good rains but this year has been exceptionally wet.

At regular times more than 50mm of rain was received in a single day.

We have just had some rains in Bloemfontein and the surrounding areas which have left the ground thoroughly soaked with open water lying around.

Lawns remain verdant green!

If your building was going to have any roof leak problems, I would suggest that it be fixed by now, though it is possible that there could still be damp problems.

Of course, the rainy season is well behind us now but we could still experience occasional rains during the rainy season.

I would really recommend that now is the right time to do a full building inspection.

Many of you will know of my dread of overgrown trees.

Well, this year they have grown like weeds – my pecan nut tree in the garden has grown its branches by nearly two metres this year!

Trustees could do well to investigate the entire property for overgrown trees that need to be trimmed and to make sure that none are leaning against buildings or walls.

Trees in gardens belonging to individual units should be attended to by those owners – after all they planted these trees or left them to grow.

It might be a good idea to have one contractor remove/trim the problem trees and share the cost if owners don’t have the time to do it for themselves.

But do it they must.

The cost of removing whole trees can be expensive but trimming must be seen as maintenance.

Also, check for damp in walls caused by overgrown flower beds – the best way is to ask owners and tenants to report any serious damp problems.

It’s also advisable to buy a set of drain rods and clear your drains, especially stormwater drains that can easily be blocked with soil or sand.

Check for water leaks as these could have been hidden by the wet conditions that we have experienced.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.

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Property

Banks now hesitant to lend to property buyers

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BOND RISK . . . It has now become near impossible from a cost and time point of view for banks to sell a property in execution

Banks make most of their money when they lend to customers and charge interest.

That is essentially how they get money to run their businesses and generate profit.

In other words, no lending, no profit.

When a bank lends you money to buy property, it allows you to purchase a property that otherwise you would never have the money to buy.

It is the best investment you will ever make.

Over time, property values rise and you get the benefit, as banks don’t participate in your profit.

It used to be that banks lent 70-80 percent of the price of the property and you had to find the cash for the balance.

You also had to find the bond and transfer costs.

That means the banks risk was about 75percent.

So, if you defaulted and the banks sold the property as their security on the bond.

If they achieved 75 percent or more of the current market price of the property, they would get their money back.

But times have changed.

The Consumer Protection Act (CPA) and a whole raft of other “consumer-based” legislation have changed the situation.

While the CPA was introduced in a bid to “promote a fair, accessible and sustainable marketplace for consumer products and services and for that purpose to establish national norms and standards relating to consumer protection, to provide for improved standards of consumer information, to prohibit certain unfair marketing and business practices, to promote responsible consumer behaviour”, among others, it has brought with it some challenges.

It has now become near impossible from a cost and time point of view for banks to sell a property in execution – ie when a client fails to service their bond.

Just getting a magistrate to agree to the sale, despite the lender being years in arrears, is a nightmare and the costs involved are horrendous.

Further, bonds are mainly 100 percent nowadays, so banks are unlikely to recover the outstanding bond and interest.

Arrear levies and rates need to be paid by the buyer so the price achieved is often half of the real value of the property.

If it was my money, the last place that I would lend it would be as a 100 percent loan for somebody to buy a home.

Times need to change.

  • Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia. You can contact him via email: mike@platinumglobal.co.za

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