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Property 24/10 - 209

12 June 2014

House price growth and inflation
Recent data from Absa shows that in May, nominal year-on-year (y/y) growth in the average value of homes in the middle segment of the market remained relatively stable and in line with average price growth of between 8 and 9 percent during the past nine months.

Writing in the report, Jacques du Toit, property analyst at Absa Home Loans, says the average nominal value of small homes was R837 200, medium-sized homes (R1 146 800) and large homes (R1 780 200).

He notes that headline consumer price inflation averaged 6 percent y/y in the first four months of the year, and is forecast to remain above this level in the rest of the year.

Meanwhile, Lightstone reports that South African house price inflation is 7.10 percent with Tshwane and Ekurhuleni and metros currently growing at more than 10 percent.
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Real estate internship programme
The 'One Learner - One Estate Agency' internship programme recently launched by the Department of Human Settlements and the EAAB (Estate Agency Affairs Board), aims to create an internship position at each of the estimated 10 000 estate agencies operating in South Africa.

The idea is to open up the sector for young people (the average age of an estate agent currently being 58), women and previously disadvantaged people. Applicants must be below 35 years of age.

This is according to EAAB chairperson, Professor Kwandiwe Kondlo, who says the programme will run over three years, ending in March 2017 and enabling school-leaving learners and tertiary students to become one of 10 000 new real estate agents.

The project will consist of a mandatory year-long internship during which the EAAB has committed to monitor and facilitate each internship position, thereby ensuring that each new entrant receives valuable theoretical as well as practical learning.
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Electrical compliance when selling
With a change in legislation in May 2009, it has since become compulsory for property sellers to be in possession of and provide the buyer with a valid Electrical Certificate of Compliance or ECOC. Essentially, the document certifies that all of the electrical work and any additional installations have been vetted and comply with the regulations stipulated by the South African National Standards.

Adrian Goslett, CEO of RE/MAX of Southern Africa, says before the current legislative change was made, ECOC documents never expired and could simply be transferred from one owner to another without limitation, provided no changes were made to the electrical installation. The seller could provide the new owner with the very same electrical certificate that was given to them when they purchased the property, regardless of the time period that had lapsed.
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Rent issues after a break-up
The less strict attitudes to pre-marital alliances adopted by many South Africans today are reflected in the leases that property rental agencies are now signing.

This is according to Bill Rawson, Chairman of the Rawson Property Group, who says it has been estimated that in the major urban areas, close to 25 percent of signatories to leases are for one or more couples who are not yet married, and who may have no intention of ever legalising their alliances.

Quite often, Rawson says the couples may agree to live in the same premises purely for convenience sake, but many are already in a more intimate relationship to which, at the time of the signing of the lease, they appear to be wholly committed. Regrettably, he says, all too often these "unlegalised bonds" are far from being permanent: within a few months the couple may have decided to split and these splits can be so inconvenient or even traumatic that one of the pair decides to leave.
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Evicting illegal occupants
People who illegally occupy a property are difficult to evict, with the process, all too often, taking months and causing great loss in earnings and time.

This is according to Michael Bauer, general manager of IHFM, who advises landlords, particularly those who manage their properties themselves, to be careful of whom they choose to occupy their premises or give keys to.

He draws attention to a recent case in the media which is being handled by Gunstons Attorneys, that has a complicated history. In this case, a borrower owed R1 million which his father had signed surety for, and put up a sectional title apartment as collateral.

Both the borrower and the father defaulted on the debt repayment and processes were set in motion to transfer the property to the lender, who wanted to sell the apartment. The problem was that the father’s furniture and other belongings were still in the apartment and this held up the sale.
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Tax on investment property?
A Property24 reader asks:
My wife and I have just sold our main property on the south coast of KZN, registered in both names, and will be moving into the official residence of a residential estate. I have another property registered in my name in the Eastern Cape currently used as a holiday home, but eventually it will be our retirement home. If my wife buys a property on the estate with the aim to receive a rental income while she is working as an educator at a private school, would that mean:

  1. That she will be paying tax on both incomes (jointly)?
  2. This property is situated in the residential estate managed by a body corporate. Can costs for example, levies, maintenance, etc be deducted from the rental income if she keeps some sort of an accounting system bearing in mind that the property will be registered in her name and not in a trust. I presume the books do not have to be audited due to the average income through rentals, being approx R60 000 per annum?

Johan Swart, tax manager at Legal & Tax, advises:

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