Protecting Your Home
Top tips for choosing the right security company. Crime is a pressing concern in South Africa, and securing your home adequately is crucial. A robust security system, backed up by reliable response and maintenance teams, is a strong deterrent against criminal activity. It reduces the likelihood of break-ins, theft, and violent crime, giving you greater peace of mind in the face of the following alarming crime statistics: Housebreaking – a burglary that takes place when residents are away from home – is the most common crime experienced by households in South Africa, according to Stats SA. An estimated 1.6 million housebreaking incidents occurred during 2022/23. Home robbery – or home invasion – is regarded as a violent crime, as it takes place when people are in the house. This is the second most common crime experienced by South African households. An estimated 238,000 incidents occurred in 2022/23, according to Stats SA. An estimated 1,520,000 incidents of theft of personal property occurred in 2022/23. Many security companies offer a variety of services, so it can be daunting to choose a suitable company that meets your needs. This decision is not just about finding a service provider – it’s about ensuring your family is safe, and protecting your most valuable assets. It’s essential to make an informed choice, weighing costs against system and service quality. Assess your security needs Before approaching any security company, start by evaluating your home’s security requirements. Consider factors such as: Location: Areas with higher crime rates usually need more robust security solutions. Property size and layout: Larger properties may require more extensive coverage, including additional perimeter security. Existing security measures: Assess whether current measures, such as alarm systems or electric fencing, need upgrading or augmenting. Research security companies Once you have a clear understanding of your needs, start researching security companies. Keep these points in mind: Reputation: Look for companies with a proven track record in your area. Online reviews, testimonials, and word-of-mouth recommendations from friends and neighbours are invaluable. Accreditation: Ensure that the company is registered with the Private Security Industry Regulatory Authority (PSiRA). Range of services: Compare services, including armed response, monitoring, and tech integration (such as CCTV and smart home systems). Understand the costs Security is an investment, but balancing cost with value is crucial. Ask for detailed quotes from several companies, including the following: Installation costs: Some companies charge upfront for equipment and set-up. Others offer ‘free’ security installations when you sign a contract for their monitoring or armed response services, with costs incurred later for equipment, monthly fees, and penalties for early contract termination. Monthly fees: Costs for monitoring and armed response vary. Clarify what these fees cover, and check for discounts. Some companies offer reduced fees for senior citizens, and if you are a body corporate member, you can negotiate a discount for the residential complex. Additional charges: Be aware of charges for excessive false alarms, and extra services such as maintenance. Evaluate technology and equipment AI is enhancing the efficiency, accuracy, and responsiveness of home security systems. It enables smart integration with other home devices, supports facial recognition – distinguishing between family members (and pets) and potential intruders – and incorporates automated responses such as locking doors, triggering alarms, and alerting authorities when a threat is detected. When choosing such a system, enquire about: Equipment quality: High-quality cameras, motion sensors, smart doorbells, and locks are generally more reliable and durable in the long term. Ease of use: The interface should be user-friendly and easy to manage. Data privacy: Ensure that the system has robust data encryption and privacy policies. Accuracy: Look for reliable threat detection and low false alarm rates. Integration: Confirm compatibility with existing smart home devices. Updates: The system should allow software updates for improved functionality. Review contracts carefully Security contracts often come with various terms and conditions. Before signing, pay attention to: Contract length: Some companies lock you into long-term contracts with penalties for early termination. Service level agreements: These outline the response time, maintenance schedules, and other critical services. Ensure that they meet your expectations. Cancellation policy: Understand the terms for contract cancellation or changes, to avoid unexpected costs. Build a strong relationship Choosing the right company is just the beginning. Managing the relationship well helps ensure that you get the best service from your security provider. Be sure to: Communicate regularly: Stay in touch with the company, and read their updates on security trends and potential threats in your area. Conduct system maintenance: Ensure that your security system is maintained and tested regularly to avoid failures during emergencies. Report issues timeously: Provide feedback on the service received, and report any issues immediately. Follow up on such feedback and reports in writing. Check customer support Reliable support is essential for troubleshooting and updates. The following is recommended: Backup power: Ensure that the company provides power solutions to keep your home secure during load shedding or power outages. Advances and upgrades: Security needs evolve, so stay informed about new technologies and potential upgrades. Records and reporting: Keep records of all incidents and service shortcomings, and contact your security company’s support team with specific details of any concerns. Arrange a meeting with a representative to discuss your dissatisfaction directly, and suggest improvements. Escalation: If your issue remains unresolved, escalate the problem to management or a regulatory body like PSiRA. If problems persist, consider other security companies. Your family’s safety is too important to take chances. Do your homework, and choose an appropriate system for your needs, so that you can enjoy your home without constant worry. Written By Sarah Nicholson Sarah Nicholson is an operations manager. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
How the New Expropriation Act Shapes Land Acquisition in South Africa
President Cyril Ramaphosa recently signed the Expropriation Act into law, replacing a 50-year-old statute and providing a clearer framework for expropriating property in South Africa. This Act, which aligns with Section 25 of the Constitution, outlines how the government can acquire land for public purposes, with an emphasis on fair compensation for property owners. While the Act has sparked concerns about the possibility of expropriation without compensation, it includes important provisions aimed at ensuring fairness for property owners while enabling the government to address public needs. A Clearer Framework The Expropriation Act introduces a more structured process for land acquisition, applying consistently across national, provincial, and local governments. The aim is to ensure that expropriation is carried out transparently and only for legitimate public purposes. This clear framework helps mitigate concerns about arbitrary actions by the state. Public Interest and Compensation Expropriation can only take place when it serves a public interest. The Act stresses that land cannot be taken for personal or private gain. Additionally, it ensures that property owners will receive just compensation. The government must negotiate with property owners to settle on a fair amount, and compensation will reflect the value of the land. Negotiation and Mediation Before proceeding with expropriation, the government is required to attempt negotiations with the landowner to reach an agreement on reasonable terms. This focus on negotiation means expropriation should only happen as a last resort. If disputes arise, the Act allows for mediation, and if necessary, the issue can be taken to court for resolution, ensuring that property owners have the opportunity to challenge decisions. Temporary Use of Property In cases where land is urgently needed, the Act allows the government to temporarily use the land for up to 12 months. This provision gives the state the flexibility to meet immediate public needs while also protecting property owners’ rights in the short term. Improved Consultation and Transparency The Expropriation Act improves upon its predecessor by requiring consultation with all affected parties, including bondholders. It also sets out a clear process for making offers and counteroffers. These steps are meant to reduce the potential for abuse and ensure the process is transparent and fair. The Expropriation Act introduces a more transparent and fair approach to land acquisition in South Africa. While the possibility of expropriation without compensation has generated concern, the Act includes important safeguards to protect property owners. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Subdivision and Consolidation of Land
Do you have a big piece of land that is becoming expensive and labour-intensive to maintain? Or perhaps you have two adjacent properties you’d like to combine into a larger erf? Subdividing or consolidating could be the ideal solution for you. Subdivision of your property has many benefits for you as the owner. Subdividing can increase your property’s value by creating smaller plots for sale. Alternatively, you could develop the smaller plots and sell or rent them to generate an income. Subdivision may assist with your estate planning, as each of your children could benefit from inheriting a smaller plot of their own. If your land is zoned for commercial use, you could subdivide and build commercial spaces, thereby also gaining an extra income. If you notice a rapid population growth in your area, subdivision of your land could assist with urban densification. Your land could be large enough to be divided into smaller pieces of land to be developed. This is known as township development. While there are benefits to subdivision, there are also drawbacks. The process is a lengthy and expensive exercise. Professional experts, such as a land surveyor, town planner, and an attorney who specialises in conveyancing, are appointed to assist the property owner. Approval from the municipality must be obtained for the subdivision. The municipality may impose conditions regarding the infrastructure and services associated with the property, which the applicant must address in order to obtain the municipality’s certificate of approval. Subdivision applications need to comply with the Spatial Planning and Land Use Management Act 16 of 2013 as well, whether for conventional or agricultural property. Once the application for subdivision is approved, the owner may apply, in terms of Section 43(1) of the Deeds Registries Act 47 of 1937, to the local Deeds Office for separate title deeds for each portion, which is known as a Certificate of Registered Title Deed. You are then in a position to sell a portion, obtain a mortgage loan for each portion or lease each portion. Consolidation is the joining of two or more pieces of land. To consolidate pieces of land, they must share a common boundary line and must be owned by the same owners. The pieces of land must be in the same registration division and the same province. There are benefits to consolidating pieces of land, namely, where the owner of the pieces of land wishes to construct a house over both pieces of the land, allows for the efficient planning and construction of roads, irrigation, and other infrastructure, which a larger portion of land may be accomplish, it can help protect farmland from urban sprawl and other development pressures. The consolidation of pieces of land must comply with the Spatial Planning and Land Use Management Act 16 of 2013. Similar to subdivision, land consolidation is a costly process that also requires the expertise of professional bodies. The owner may apply to the local Deeds Office for a Certificate of Consolidated Title Deed for the newly formed property, which replaces the Title Deeds held for the two or more pieces of land that have been consolidated. Section 40 of the Deeds Registries Act 47 of 1937, with specific reference to section 40(1)(a) to (f), sets out the requirements for the consolidation of properties. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Sale of immovable property from a deceased estate
When an executor has been appointed by the Master through the issuance of Letters of Executorship, their primary duty is to finalise the administration of the estate as soon as possible. This includes taking control of the deceased estate assets, selling them if necessary to pay all estate liabilities, administration costs and estate duty (if any) and distributing the residue amongst heirs and legatees in terms of the provisions of the will or Intestate Succession Act. This article outlines the legal process involved in selling an immovable property from the deceased estate. In terms of Section 13(1) of the Administration of Estates Act (Estate Act), a person may not sign an agreement if they have not been issued with Letters of Executorship. The granting of Letters of Executorship is a crucial requirement as an agreement of sale will only be valid if signed by an executor who has been appointed by virtue of Letters of Executorship. The appointed executor will be authorised to market the property, sign the offer to purchase and sign all other transfer documents on behalf of the estate. Additionally, Section 42(2) of the Estate Act stipulates that an executor who desires to effect a transfer of any immovable property in pursuance of a sale shall lodge with the registration officer, in addition to any such other deed or documents, a certificate by the Master that no objection to such transfer exists. In practice, to apply for this certificate the following documents need to be lodged: An Application for Endorsement (JM33_42) completed and signed by an executor. Power of Attorney to Pass Transfer signed by an executor and bearing conveyancer’s certificate. Once approved, the Master will not issue a separate certificate but will instead place a stamp/endorsement on the Power of Attorney to confirm no objection to the sale. Written consent from all heirs confirming that they have no objections to the sale of the immovable property. If any of the heirs is a minor, consent must be provided by their trustees. A certified copy of the deed of sale. A certified copy of the title deed. Section 49 of the Estate Act is one other important section to consider when selling a property from a deceased estate. It states that If any executor or his spouse, parent, child, partner, employer or employee, or agent purchases any property in the estate which he has been appointed to liquidate and distribute, the purchase shall, subject to the terms of the law (if any) of the deceased and in the case of the executor who is the surviving spouse of the deceased, to the provisions of Section 38, be void unless it has been consented to and is confirmed by the Master of the court, or curator, purchases any properties which he has been appointed to administer, the purchase be void unless it has been consented to or is confirmed by the Master of the court. This section does not prevent an executor from purchasing property from the deceased estate, but it requires approval from the Master to ensure transparency and prevent conflict of interest. In conclusion, the executor plays a pivotal role in managing the estate’s assets, including the sale of property, but must adhere to the necessary legal requirements outlined in the Administration of Estates Act. The process involves obtaining the necessary Letters of Executorship, obtaining consent from heirs, and receiving approval from the Master of the High Court. By adhering to the steps as prescribed by the law, the executor ensures that the sale is conducted fairly, transparently, and in accordance with the law. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Understanding estate massing in community of property marriages
In community of property marriages, spouses often combine their estates, or mass their estates, to ensure that certain assets go to specific beneficiaries. This is done while still ensuring the surviving spouse’s welfare and protecting assets from being misused after the first spouse passes away. This article will explain the necessary conditions for this estate combining process. Section 37 of the Administration of Estates Act (“the Act”) defines massing as when two or more people combine their entire joint estate or a specific part of it. They do this by leaving the combined estate to chosen heirs in a mutual will. The surviving spouse benefits from this joint estate, provided they accept it. However, there’s a presumption against massing which can be challenged. To avoid confusion, the will must clearly state the intention to combine estates and override this presumption. Requirements The following requirements must be met for massing to occur: There must be two or more persons as parties to the mutual will. The parties must make a mutual will (a mutual will is a joint will in which two or more testators have mutually benefitted one another in the same document). The parties must mass the whole or part of their separate estate assets into a consolidated unit, and this unit must be disposed of in the mutual will. The mutual will must grant the survivor a limited right in respect of any property which has been massed. The disposition of the massed estate must take place sometime after the death of the first dying. The survivor must adiate (accept) on the death of the first dying. Limited interest for the survivor The mutual will must create a limited interest in favour of the survivor over the assets disposed of by the deceased and survivor in their will. The limited interest can be created by granting inter alia a usufruct, fiduciary interest, or income beneficiary under a trust. Should the mutual will not contain the limited interest, massing will not occur. Adiation and repudiation The survivor is under no obligation to accept the terms of the mutual will. The survivor may elect to either adiate or repudiate the mutual will. Adiation means that the survivor has accepted the terms of the will as willing to abide by those terms. Repudiation means that the survivor has rejected the terms of the mutual will, and the effect is that the survivor will retain their own assets but will not be entitled to any benefit from the deceased estate. However, repudiation does not restrict the survivor’s right to claim for maintenance from the deceased’s estate. Should the survivor exercise their right to either adiate or repudiate, the survivor cannot at a later stage revoke the election. A will needs to be drawn up clearly and concisely to reflect the true intention of a testator. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Five residential property trends no one saw coming
Experts have already predicted the top property trends of 2024, ranging from the impact of looming interest rate cuts to co-buying, solar power financing, sectional title demand and the resurgence of first-time homebuyers. However, several emerging (and sometimes overlooked) trends are set to come into play, creating notable shifts in the landscape. The top five trends for 2024 have been touched on time and time again, but ooba Home Loans’ data has also pinpointed overlooked shifts in trends that will have an impact on the market throughout this year. These are as follows: Average house prices begin to rise albeit slowly Following an all-time high in 2020 and 2021 when interest rates dropped to a historical low of 7% and nominal property price growth increased to 9.37%, the average house price in South Africa has begun to flat line over the past two years, coinciding with interest rate increases since the pandemic. However, the market has started to turn. According to the latest data from ooba Home Loans, January 2024 saw record-high purchase prices recorded across both first and second time homebuying segments. The overall purchase price paid rose to an all-time high of R1.49 million in January 2024 (+7.6% above year-earlier levels), while the average price paid by first-time buyers rose by a more modest +4.1% year-on-year, reaching a new high of R1.18 million. Perhaps the most confident statistic to come out of this would have to be the Western Cape, where the average purchase price breached a whopping R2 million for the first time. This is followed by the Eastern Cape, recording an average purchase price of R1.57 million (up by 13% year-on-year). Further strengthening this argument, the recorded activity amongst estate agencies has strengthened, albeit modestly. While the total number of sales last year was lower than the sales recorded in 2022, sales activity in the final quarter of 2023 was stronger (+0.9%) than in the previous quarter and just 0.4% below year-earlier levels (the smallest annual decline in two and a half years). Demand for holiday homes soars in the Eastern Cape The Eastern Cape overtook the Western Cape in 2020 as the region with the highest volume of applications for holiday home purchases a title that the province has retained in the years since. This can be attributed to the recent trend of an increased number of foreign buyers purchasing second homes in the Western Cape, particularly along the Atlantic Seaboard and Garden Route which in turn has resulted in higher prices and reduced stock in these areas, leading locals with some extra money and a desire for a coastal home to look elsewhere. ooba Home Loans data indicates that these buyers have turned to the Eastern Cape, which offers a similar climate and natural beauty at a more affordable price point. Holiday home applications in the region now stand at 1.7%, the highest level in recent years. Free State emerges as a haven for first-time buyers The Free State is the only region in South Africa where the average purchase price paid by first time homebuyers is below R1 million, according to ooba Home Loans’ latest data. In response, young buyers are taking advantage of the deals on offer in this region, with first-time homebuyers accounting for 62.9% of all home loan applications in the Free State in January 2024 the highest percentage of any region. First-time buyers are extremely price conscious, and this is evidenced by the comparatively lower volume of first-time homebuyer applications in the Western Cape (35.8%) where the average purchase price is the highest in the country, both for first-time (R1.58 million) and repeat (R2.01 million) buyers. Limpopo: A strong contender While the Western Cape continues to record the average highest first-time buyer price in the country, significant year-on-year increases in the average first-time homebuyer purchase price in Limpopo and Mpumalanga saw these two regions register the second- and third-highest average purchase prices in January 2024. Limpopo’s property price performance is so strong that in the last two months, the average first-time homebuyer purchase price in Limpopo exceeded the average purchase price overall in the region, at R1.39 million and R1.36 million respectively. Buy-to-let properties continue to climb Growing demand for investment properties continues despite the subdued investor sentiment that has plagued South Africa in recent years. One of the key drivers of the boom is undoubtedly the Western Cape, and it is predicted that in 2024 in excess of 30% of ooba Home Loan’s applications from this region will be from investors. However, there are signs of increased investment demand elsewhere such as the Eastern Cape and Free State. This could be attributed to a young, growing population taking advantage of low house prices, and student housing presenting a good investment opportunity. With all of this considered, we expect 2024 to be a positive and exciting year for the residential property sector. WRITTEN BY RHYS DYER Rhys Dyer is a property specialist. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Property advice in an election year
Buy now, sell later. This year, almost half of the world’s inhabitants will head to the polls to elect their new governments, including eight of the world’s 10 most populous countries. In South Africa, we can expect our own election to put the property market into a temporary holding pattern, dragging on the subtle buyer’s market we have been experiencing. However, while owners are advised to wait until the end of the year to consider selling their property, buyers are cautioned against getting caught up in election fears and missing out on real estate bargains. The impact of sentiment All market behaviours are driven by sentiment. South Africans face uncertainty around the outcome of the election and the likelihood that, for the first time in its history, the country will be led by a coalition government at the national level. This creates negative sentiment that is also being fuelled by the heightened and increasingly populist rhetoric of competing political parties—and persistent factors, like the delay in interest rate cuts and a declining rand, only add to the doubt. While we were all hoping for a downturn in the rate cycle at SARB’s May or July meeting, it is now doubtful that anything will happen before September. The MPC remains hawkish and seems unlikely to move interest rates downwards before the US Federal Reserve has lowered its policy rate. That’s expected well after the election, and these compounded concerns are pushing people to take a wait-and-see approach—including in the buying and selling of property. A first for South Africa All countries with a proportional representation electoral system eventually face a coalition government scenario. The likelihood of a national governing coalition is therefore a sign that our political system is maturing. This will be South Africa’s first coalition government at a national level, and the norms associated with such a structure have never been firmly established among the political class or the voting population. While national coalitions are a sign of progress and maturity, it is likely to lead to a lot of short- to medium-term noise that is likely to have a continuing and unpredictable impact on sentiment in all markets, including the property market. Countries like Belgium with older proportional representation systems have developed the advanced bureaucracy necessary to almost run the country on autopilot, even without a government. South Africa, however, still needs to find its footing in any coalition pacts and develop the necessary protocols among participants intent on promoting their own interests. This means that things will probably be noisy and messy for some time after the election, as parties attempt to nail down the terms of their respective alliances. At the moment, the nearest we have to some agreement is the Multiparty Charter whose only purpose is to counter a national coalition between the ANC and EFF. What to expect from property Currently, it’s still a buyer’s market for property, and it definitely won’t turn into a seller’s market until after the election and a rate cut. Until then, we can expect that property price growth will remain low. However, once the election outcome is known, and provided we have avoided worst-case scenarios, and the rate cut is at hand, we can expect pent-up demand for property to spill into the market and significantly increase demand. In addition, weak economic growth means that sellers who can afford to wait should indeed wait until spring or summer to see if they can fetch a good price for their property relative to the market. Winter is historically not a great time for selling homes anyway. Despite the general mood brought on by politics and the interest rate cycle, the market in the Western Cape remains buoyant—and there are signs of buyers returning in earnest to areas like southern Gauteng and areas east of Pretoria. The smart money of property investors also remains in the market, signalling that opportunities exist. Along with low property price growth, this means that astute buyers can still pick up bargains while others hesitate. If you want to buy, buy now—and don’t be put off by sentiment-driven hesitance that currently prevails in the market election sentiment. In the South African property market, due to structural factors, what goes down must eventually come up. WRITTEN BY RENIER KRIEK Renier Kriek is a property specialist. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes. Powered by SucceedGroup
Reduce the pain of downscaling: Investing in a holiday home as a retiree
The decision to move out of a large residence in favour of a smaller or less expensive property, also known as down-scaling, is often viewed as a last resort in the face of mounting financial pressure. However, for many retirees, the decision to downscale is driven by the prospect of greater freedom. As one gets older, the responsibilities of maintaining a large freehold home and undertaking activities such as garden and pool maintenance, cleaning, and repairs, can become overwhelming. Still, many older individuals feel a natural emotional connection to their homes. After all, they’ve seen their children grow up in it, and they’re unwilling to lose these memories entirely. Thus, some retirees with cash to spare are opting for a ‘best of both worlds’ approach. This involves purchasing a smaller primary residence in a life rights estate or sectional title complex and converting their former home to a secondary residence or holiday home. The coast beckons As to the kind of retirement properties this demographic is purchasing, Light-stone data shows that the Western Cape is the only major region where properties in estates (55%) are more popular among retirees than freehold and sectional title homes. It’s no secret as to why estates are so popular among discerning retirees they offer safety, lifestyle, and a built-in community of like-minded individuals to ensure that new residents feel comfort-table and supported in their new life stage. Downscaling with the intention of making budget available for a holiday home is also proving to be a popular trend among South Africa’s retirees and the majority of them are heading to the coast. This is especially prevalent among those who own an inland property and are in search of more leisure activities. Data from ooba Home Loans shows that for all bonds granted between June 2021 and June 2022, 0.41%, 0.18%, and 1.04% were for holiday properties in the Western Cape, Kwa-Zulu Natal, and the Eastern Cape respectively. A home close to home Generally, retirees are purchasing holiday homes that are easily accessible. Those wishing to go down this path are encouraged to choose a holiday home within comfortable driving distance from their new retirement unit, to ensure that they are able to enjoy it regularly. In the Western Cape, for example, popular holiday destinations such as Langebaan, Hermanus, and Betty’s Bay are all less than two hours outside of Cape Town. Lightstone data shows that 57% of individuals who own two properties prefer to own these in the same province. Pros and cons of investing in a holiday home Of course, holiday home ownership as a retiree has its pros and cons, and there are a number of important considerations to keep in mind before embarking on this journey. Pros: Keeping a special family home intact: For those who are converting their prior primary residence into a holiday home, this decision allows retirees to return to the place that holds happy memories, and create new ones. Less day-to-day maintenance: Making a large home your secondary residence means that there will be less daily wear and tear on the home that will need to be addressed, especially if the house is occupied only a few times a year. Additional income: Should you wish to rent out your holiday home, this is a great way to earn passive income as a retiree. It’s important to remember that renting out your home comes with various day-to-day responsibilities such as regular cleaning and guest check-ins. It is therefore recommended that you hire reliable staff to manage these tasks, as they can become burdensome. A value-building investment: A well-located and maintained holiday home will only appreciate in value as the years go on, giving you a lucrative asset to leave behind for your loved ones. Cons: Additional security concerns: Crime is a reality in South Africa, and if a property is vacant for a large period of time, criminals may take note. Be sure to invest in a good security system and regular monitoring from a local private security company. Additional expenses: If the bond on your former family home is not paid off, or if you have purchased and financed a new holiday home, you will have to factor in monthly repayments that will be subject to interest rate increases. Additional responsibilities: Depending on the size, location, and whether or not you are renting it out, taking on the responsibility of a holiday home may reduce some of the ‘lock-up-and-go’ lifestyles sought out by retirees. Conclusion Retirees who are considering investing in a holiday home are urged to take into account the additional responsibilities that this will entail and, if possible, to find help in sharing the load. Be sure to speak to family members. If they wish to enjoy the benefits of a holiday home, perhaps they are also willing to help manage it. Your ‘Golden Years’ are meant to be a time of relaxation and pleasure and your seaside cottage should facilitate beach walks and sunrise meditations, not additional stress and financial pressure. WRITTEN BY GUS VAN DER SPEK Gus van der Spek is the owner of Cape Town-based retirement development Wytham Estate. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Dream Holiday or Nightmare! An overview of the Property Time-Sharing Control Act and the Vacational Ownership / Time-Share industry.
Part 1 This article broadly looks at property time-share and the legislation regulating it. The problems and complaints by consumers trapped in the empty and misleading promises advertised to them by the time-share industry are also addressed. In part one, the article gives a broad outline of what the Property Time-Sharing Control Act entails and specific definitions that describe the various elements of the industry. Part two will look at the National Consumer Commission Report of 2018 and its recommendations as well as the legal consequences of contracting into a time-share agreement and the recourse available to consumers who, because of misrepresentation want to cancel their agreements. Property time-sharing became very popular in South Africa in the 1980s and later, the use of the point-system as an alternative to Time-Sharing schemes which offered fixed accommodation for a specific time during the year. The point-system gave members more flexibility in their choice of holiday accommodation. The need to create legislation to regulate the industry and protect the consumer arose and the legislature enacted the Property Time-Sharing Control Act in 1983. (“the Act”) [1] The purpose of this Act was to regulate the alienation of time-sharing interest within a property time-sharing scheme by regulating the contents of advertising and formalities pertaining to the contracts. What constitutes a “time-sharing interest”? It is the right (incorporeal) to/ or interest in the exclusive use or occupation of accommodation during a determined or determinable period(s) during any year.[2] The occupancy rights must be recurrent (yearly) to qualify as a time-sharing interest. The definition of “accommodation” in the Act is wide enough to cover apartments, free-standing houses, caravans, tents and even private nature reserves, therefore buildings and land need not be of a permanent structure to qualify as accommodation. This definition does however not cover boats and yachts. The definition of a “time-sharing scheme” in the Act refers to “any scheme or arrangement or undertaking in terms of which time-sharing interests are offered for alienation or are alienated and the use of such interest is regulated or controlled”. Alienation for the purpose of the Act refers to the selling of the Time-Shares. The legal basis of the scheme can be in terms of sectional titles, share blocks, memberships or clubs. A scheme involving the alienation of time-shares and the management of their use, therefore, qualifies as a property time-share scheme irrespective of their size and legal basis. The main objective of the Act was to maximise consumer protection in terms of disclosure requirements as to certain information when advertising a time-share interest. Newer legislation in terms of the National Credit Act (“NCA”)[3] and the Consumer Protection Act (“CPA”)[4] has direct implications for the application of the Act and the time-share industry as a whole. In 2018 the National Consumer Commission (“NCC) investigated the vacational ownership and time-industry after various consumer complaints were submitted to the Consumer Protection Tribunal. [5] The majority of the complaints received and raised during the enquiry related to the inability to cancel these so-called “life-long” contracts with clubs, the forfeiture of points on a cancellation or transfer/reselling of the interest, unavailability of accommodation, misrepresentation of what is actually being sold during the sales presentations and escalating membership fees which was advertised as non-escalating fees to potential buyers. The NCC made substantial recommendations on the matter, including the need for newer legislation that regulates the time-share industry in South Africa, in order to bring consumer protection in the timeshare/vacation ownership industry in South Africa on par with the rest of the world. [1] Property Time-Sharing Control Act 75 of 1983 [2] supra [3] National Credit Act 34 of 2005 [4] Consumer Protection Act 68 of 2008 [5] report on the inquiry commissioned in terms of section 88(3) of the consumer protection act, act 68 of 2008 into the Vacational ownership/ timeshare industry. https://www.thencc.gov.za/content/report-inquiry-commissioned-terms-section-883-consumer-protection-act-act-68-2008-vacational. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice.
Rate hikes: Are buyers over-reacting?
Historically, interest rate hikes have had a dampening effect on the South African residential property market, with homeowners reassessing their affordability in anticipation of higher monthly loan repayments. The resultant reduction in home loan applications immediately following an interest rate hike is a reaction from buyers who are hesitant to make a long-term commitment until rates stabilise and they can plan accordingly. However, increased buyer education and understanding the purpose of why interest rate hikes are implemented can be a helpful tool in alleviating the affordability concerns of would-be buyers. Why interest rate hikes are implemented The purpose of interest rate hikes is to curb inflation i.e., the higher price of goods and services. The South African Reserve Bank (SARB) chooses to implement a rate hike when inflation levels are high locally, as is the case at present, to ‘cool off’ the economy. To put this into context, the SARB has an inflation target range of between 3 and 6% and we are currently well above that with inflation at 7.6% in South Africa. High inflation increases the cost of living for consumers, and interest rate hikes are intended to slow down demand and spending, to reduce inflation again. Unfortunately, higher inflation also slows growth in the economy, and getting the balance correct is essential. When interest rates are high, the cost of repaying loans becomes more expensive, so consumers are less likely to take on additional debt. This reduces the demand for goods and services, which causes prices to fall. It is this reluctance to take on additional debt that has a knock-on effect in the financed economy, most significantly the home loan market. Looking at the ‘bigger picture’ Some would-be-buyers and first-time homebuyers have adopted a ‘wait and see’ approach out of concerns around affordability and repayments at a higher rate. This is a natural reaction but it’s important to put these rate hikes in context. The homebuying frenzy of 2020 and 2021 was the result of record-low interest rates introduced by the SARB to stimulate the economy during a global pandemic. The latest round of interest rate increases has merely returned the prime rate to pre-COVID levels, and should not be cause for panic. The revised interest rate is still well below the long-term average experienced over the past 25-years. Consumers should therefore look beyond the current interest rate cycle, and take note of the several ‘big picture’ factors that indicate that now is still a good time to invest in property. These include the banks’ competitiveness and approving loans on attractive terms, the fact that we are moving into a buyer’s market, and that property prices remain affordable in many parts of the country. Buying vs renting: Which is better in the long-term? It is however acknowledged that some consumers may take these factors into account, and still opt to rent rather than buy. Buying a home is a decades-long commitment and in these turbulent times, some may prefer the flexibility offered by renting or are in a life stage where renting simply makes more sense than buying. However, to the question of whether it is cheaper to rent rather than buy a home following an interest rate hike, the answer is ‘not necessarily’. Landlords will often increase their rental charge following a significant hike as they look to cover their own increased costs. This reinforces the importance of thinking long-term and opting to pay off your own bond rather than someone else’s. Renting may be more affordable monthly but over the course of a decade (or more), you may walk away having spent a similar amount on rent than you would have on loan re-payments, and with nothing to show for it. In contrast, the value of a property asset will only appreciate over time. The importance of shopping around for a home loan The most effective tool that prospective homebuyers have at their disposal to reduce the negative impact of interest rate hikes is by budgeting accordingly and cutting out unnecessary expenditure to ensure that they can afford to cover the additional monthly repayment costs. The second is using a bond originator before embarking on their homebuying journey. The banks are still actively competing for home loan business, and by using a bond originator to apply to multiple banks on your behalf, you are far more likely to get a better deal than if you’d applied to just one. A bond originator is also able to help negotiate a better rate and terms on your behalf when necessary. Our research shows that homebuyers who obtain multiple quotes will repay their home loan at an interest rate that is on average 1.03% (103 basis points) lower than those who obtained a single quote. This helps to reduce the affordability challenges brought on by rate hikes. This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)