Property Views - March 2005

Residential Property Growth
According to the latest ABSA House Price Index, year-on-year growth of 29.6% was recorded in house prices in January 2005. The revised growth for December came to 32.2%. During 2004, average nominal growth of 32.2% in house prices was recorded, compared with 21.5% in 2003.

Based on a low and stable interest rate environment combined with a strong rand we are expecting the growth in house prices to slow down with expected growth rates of between 15% to 20% for the next 12 months.

Sectional Title
What is Sectional Title? In her book, Demystifying Sectional Title, Marina Constas defines Sectional Title as a form of ownership where a number of people simultaneously own the piece of land on which a building or buildings are built, while each one of these people individually owns a townhouse or flat in the building.

When buying a property in a sectional title complex there are certain elements that the buyer needs to ascertain before signing. One of the most important issues is the financial health of the body corporate. It is advisable to get the Balance Sheet and Income Statement from the body corporate to check on the following: reserves, outstanding levies, debt levels and the budget for the following period. By buying into a well maintained complex with sound financials, the buyer can save on potential future costs and headaches.

Investor Column The rental yields continue to be on the softer side especially in the more expensive areas like Sandton and Fourways. Currently rental yields in these areas vary between 6% and 7%. Reasons for this are low and stable interest rates which cause a migration from tenants to home buyers on the demand side, and larger investor portfolios on the supply side. Rental yields in the West Rand and Midrand areas are currently between 7% and 8%.

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