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168X235 HIRES EARLY BIRD.pdf 1 2/28/17 11:34 AM

www.reimag.co.za 1APRIL 2017 SA Real Estate Investor

EDITORIALPublisher Neale PetersenEditor Jean BrownSenior Designer Kurt DanielsDigital Strategist Keenan SchilderSales & Marketing Kaylynn SiderisDigital Marketer Sasha-Lee BurgessFinancial Manager Marisa George

CONTRIBUTORSAndrew Rissik, Ann Baker-Keulemans, Anton Van Teylingen, Donald Bett, Gina Meintjies, Jean Brown, Kate Thompson-Duwe, Kim Barty, Lew Geffen, Nicci Du Plessis, Raymond Hayes, RJ Palano, Simon Dippenaar, Samuel Seeff, Suren Naidoo, Warren Brusse, Wilson Magee, Zahn Hulme

ADVERTISINGRoy LateganEmail [email protected] Tel 021 761 3848 Cell 074 141 6660Fax 086 627 2400

SUBSCRIPTIONSMarisa George Tel 021 761 [email protected]

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PUBLISHERSREALE ACTIVATION (Pty) LTDTel 021 761 3848Fax 086 627 2400Email [email protected] Unit 11, No.4 , Perth Road, Maitland, Cape Town, 7405, South AfricaPostal PO Box 858, Howard Place, 7405Website www.reimag.co.za

4 Property Advice

6 Master Investor

10 Feature Article

TRENDING

16 Education Series

20 Home Loans

22 Market View

24 Balancing Act

26 Urban Apartments

RESIDENTIAL

52 SA Junk Status?

56 Tax Free Saving Accounts

58 Wealth Tips & Insights

60 My Story

WEALTH

30 Kumasi City Mall

32 Global Commercial Real Estate

34 Africa’s Urbanisation

36 Professional Designations

38 Case Study

COMMERCIAL

40 HMO’s

42 UK Business Expansion

44 Beyond Brexit

46 Global Real Estate Markets

48 U.S. Status Quo

50 Why Malta

OFFSHORE

FEATURE

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MUST READ ARTICLES

CONTENTS›››

PROPERTYBUYER SHOW

WESTERN CAPE

FIRST-TIME BUYERS PROPERTY INVESTORS

View property investment opportunities and learn investment strategies to build your property portfolio.

www.propertybuyershow.com

8 – 9 APRIL 2017CTICC, CAPE TOWN

property buyer show @propertyshowsa

Tickets avaliable


EDITORIAL VIEW

NEALE PETERSENFOUNDER & PUBLISHER

“Insanity: doing the same thing over and over again and expecting different results.” ALBERT EINSTEIN

Much like economies, investors tend to go through cycles of good times and bad. Sometimes they get stuck and end

up doing nothing at all. The reality is that not all properties are a good investment and not all investments suit every investor. Many investors get the wrong investments because they aren’t equipped with the right knowledge or they live in fear. This is why, at REIM, we constantly strive to source the right information to include between the pages of each edition so our readers can learn and grow.

One guy who has built up a highly successful portfolio over the years is property entrepreneur Pieter Feenstra. He has a grip on the market and is innovating in the student space. We interviewed him for our Master Investor prof ile piece and think you will have a lot to learn from him.

To improve your f inancial education and invest counter-cyclically compared to the masses, it’s probably a good idea to pay attention to what is going on in the world economy. Is the stock market growing, are real estate prices or interest rates going up or down, and what are the new economic policies being implemented? Governments are getting themselves into more and more debt: what impact does this have on your investments? More importantly what are the opportunities created from these decisions? Many investors have been investing offshore to circumvent new and pending legislation very successfully, as well as investing when the rand is low. Find out inside about the many successful opportunities in offshore cash f low properties, such as in the cash f lowing HMOs.

Keeping track of topline news, rather than heavily taking in and consuming daily news

(which is not that great right now), while monitoring property trends can help you improve your decision-making. South Africa has massive shifts in growth and declines and it is important to decide when to act or not. We think you should be earning passively but actively managing your activities and your strategies all the time ‒ to align them with the markets and make them shock proof to recessions and downturns in the market. This is what the savvy investor prepares for and why control of mindset and staying positive is critical to the successful investor’s armoury. Just ask Dr. Christo Wiese, who lost $453 million overnight in June 2016 when he invested into the United Kingdom just before the Brexit vote.

You also need to seek out and pay attention to what smart investors are saying and doing. Stop looking for easy, get-rich-quick property f lips and instead, learn from people who are investing with a long-term cash f low returns with automatic capital growth built in.

Network and work with those who are willing to put in the time and effort to contribute to your growth. The SA Property Network (SAPIN) is an awesome place to grow your knowledge, network, net worth and business. Make sure you become part of the Real Estate Investor property family today. Simply visit www.reimag.co.za, click on our Events Page and sign up for our next SAPIN event.

Successful investing!

Abandon Traditional Thinking and Grow Your Knowledge

PROPERTYBUYER SHOW

WESTERN CAPE

FIRST-TIME BUYERS PROPERTY INVESTORS

View property investment opportunities and learn investment strategies to build your property portfolio.

www.propertybuyershow.com

8 – 9 APRIL 2017CTICC, CAPE TOWN

property buyer show @propertyshowsa

Tickets avaliable

PROPERTY ADVICE A&Q A&Q

QWhy do I need an attorney when buying or selling a property? Isn’t it a straightforward process?

QShould you still invest in SA property?

This question often comes up when it’s too late. The sale of immovable property is one of the few legal agreements that must be in writing. Once an agreement has been signed, you are bound to the terms and no changes can be made without the cooperation of the other party. This is where things can go terribly wrong – e.g. the timing of the transfer might need to be linked to the sale of your property or monies fixed in medium-term investments, or you might need to take early occupation if circumstances change whilst the transfer is happening; this needs to be provided for in the agreement, together with rental payable. If you notice defects in the property, this must be recorded should you want the Seller to fix them - otherwise you’ll be deemed to have accepted these defects.

Another important consideration is the legal vehicle in which the property should be purchased, taking into account your personal circumstances. Is it better to register the property in a family Trust, a Company or in your personal name? A conversation with an attorney that explains the implications of each of these should be had.

It really is worthwhile to take the time to consult with an attorney BEFORE you sign any sale agreement – the benefits and peace of mind by far outweigh the initial cost.

South African property is almost always a good investment. While you may not earn stellar capital growth or rental returns, history has shown that the market has the propensity for excellent growth. If we look back over the last 20 years, we see that when the economy performed well, the property market outpaced by quite some margin. So much so, in fact, that during the early 2000s, South African price growth consistently ranked in the top twenty in the world.

Even now, the Cape has been ranked by a number of international barometers amongst the top twenty in the world - and this during a rather slow economic cycle. The provision, though, is to always do your homework and ensure you buy smart. That means paying no more than fair market value and putting your money into an area that you have researched.

NICCI DU PLESSISDU PLESSIS & CURRAN

SAMUEL SEEFFCHAIRMAN, SEEFF

BUSINESS I FAMILY I PROPERTY We look after your interests

Unit 12, Harfield Village Centre, 48 2nd Ave, Claremont, 7708Mobile: +27 (0)83 440 8979 Email: [email protected]

www.duplessiscurran.co.za

DIY DEBTFree yourself from debt slavery

• Behind on your bond payments?

• Is your house facing repossession from the banks?

• Have you received a summons for outstanding debt?

• Are you receiving calls from debt collectors?

• Need to get a grip on your income and expenses?

Learn how to manage your own debt effectivelyFREE DEBT ADVICE LINE SMS DIY DEBT to 083 417 7254 or Email to [email protected]

MANAGEMENT

MASTER INVESTOR

If it’s worthwhile doing, it’s worthwhile doing well. This quote is one that Pieter Feenstra often repeats to his young and dynamic team at the

Feenstra Group in South Africa. Another, more tongue-in-cheek one is: “Be careful when euphoria is everywhere – even turkeys can fly in a hurricane”.

As the Group’s Chairman, Feenstra has many years of experience in property development and management. His first property development project evolved out of his consulting work as a structural engineer, during which time he worked closely

with several property developers and developed a fascination for the industry. Feenstra explains that this lead him to eventually take the plunge and sell his consulting firm to focus exclusively on property.

The first of many development projects to comeAt the time, Feenstra had already done his BSc in Civil Engineering from the University of Pretoria and had an MBA from the University of Pretoria Business School (now called GIBS). His work for the City of

Key Drivers for Future DevelopmentsUrbanisation and EducationBY JEAN BROWN

6 www.reimag.co.zaAPRIL 2017 SA Real Estate Investor


PIETER FEENSTRA

Tshwane involved design and project management for a variety of civil engineering services and he’d cut his teeth as a director at a local construction company, where he managed several construction projects and was responsible for the business’ bottom line performance. In addition, Feenstra had also spent time as a consulting engineer for a multidisciplinary practice called WLPU Consulting Engineers.

Getting startedFeenstra decided to secure his first property development project before cutting all ties with his own consulting firm. “I negotiated control of a prime piece of land from a large Listed group. As I had very limited funds, experience and balance sheet, I decided to pull together a few partners to help me bring the deal together,” Feenstra explains. He describes the outcome as “a modest neighbourhood shopping centre of about 10 000m2”.

The Telkom yearsIn 2000, Feenstra was approached by Telkom to create a property division for its extensive property holdings in South Africa. At the time, Telkom had 6 000 ‒ 7 000 properties and another 10 000 technical properties scattered across many departments, business units and regions.

Feenstra describes the operation as a huge undertaking: “We were eventually responsible for the entire strategy of the portfolio, right through to all developments, major leases and maintenance ‒ it was really a massive operation to commercialise that whole business,” says Feenstra.

After leading and creating a business unit to transfer and control the entire property portfolio, the way was paved for Telkom Property to outsource their management and maintenance services to a company they formed called Total Facilities Management Company (TFMC) that eventually spanned six regional offices and employed more than 2000 staff.

“This process entailed the creation of an entirely new and robust organization, with new strategies, IT systems, hundreds of processes, budgets, service levels and the like, to service thousands of properties in some of the most technically advanced buildings in the country,” explains Feenstra. TFMC eventually became one of the largest Facilities Management organisations in the southern hemisphere, and still operates today, some 20 years later, under the name of Bidvest Facilities Management.

Feenstra Group: beginningsFeenstra explains that his role as a TFMC director put him in close contact with very large property initiatives and projects in the country. Once TFMC was “humming along nicely” and operationally stable, Feenstra decided to leave the company to pursue a career in property development.

Initially, his team consisted of himself and his secretary. The Group now has a number of sizeable contracts, managing a student & inner-city residential accommodation portfolio in excess of 5000 beds. The current pipeline development for the portfolio is 3000 beds.

The Feenstra Group also invests in and develops commercial properties, with a primary focus on office buildings, as well as properties for the educational sector. “Our combined portfolios now have around 5000 beds, which is satisfactory for us,” says Feenstra.

“Our current developments include a R1 billion head office for a listed company, packaging a R3 billion inner-city development, completing a R1 billion student accommodation in Australia and building our existing student accommodation and inner city portfolio to double its current size with nearly R2 billion of projects in the pipeline,” he adds.

On student accommodation:According to Feenstra, there are a lot of misconceptions around student accommodation shortages in South Africa. He maintains that reports that cite ‘huge shortages’ are all theoretical.

“I don’t think there are real or major shortages, because every student lives somewhere, either at home, in a commune, or a flat; they just might be living in in conditions that may not be conducive to their studying,” explains Feenstra.

1 The locality must be prime. 2 The property has to be of the highest quality.3 The income streams have to be top quality.4 You have to be very creative and innovative to deliver deep

value in the completed development. Run-of-the mill does not add value.

5 Test your value proposition by talking extensively to your market.

6 Manage and limit the development risks extensively.7 Be careful about the partners you choose: you can still do a

bad deal with the right partner, but you cannot do a good deal with the wrong one.

FEENSTRA’S TOP 7 PROPERTY INVESTMENT PRINCIPLES:


“It’s just very clear that you have to produce a value proposition that works for that student; it’s your product, the price at which you put it on the market and your position that will determine whether a student moves from where he is now to your development,” says Feenstra.

Feenstra’s formula for successDeveloping the right product, for the right market, in the right place and at the right time is what, according to Feenstra, creates a great property investment

“In my opinion, a great investment is created by developing a solution that will fulfill both current and future market needs on a sustainable basis,” says Feenstra. “You then need to create a quality and sustainable income stream from this development ‒ and have a few attractive, alternative exit options in place at the same time,” he adds.

The future of the Feenstra GroupThe Feenstra Group’s current focus, according to Feenstra, is to “continue identifying the best opportunities and market demands to solve, to develop sustainable and value-creating property developments as a solution”.

Within the current economic and political context in South Africa, Feenstra acknowledges that general opportunities are very limited and that property developers need to look at pockets of opportunity to invest in. He identifies urbanization and education as key drivers for the future.

Dont’t miss interview with PIETER FEENSTRA on REIMTVVisit REIM TV for more in depth real estate investment insights

MASTER INVESTOR

RESOURCES

Feenstra Group

Age: 62Current position: Chairman of the Feenstra Group Family: Married to Marcelle, with a son (Shaun) and a daughter (Nadine) Life mottos: 1.) God makes the impossible, possible 2.) Live in an attitude of gratitude

KEY STATS:

• Manage risk well• Don’t be over confident in a project – seek blind spots • Follow your intuition• Have only the best people in your team • Rely on the market – not only the spreadsheet

INSIGHTS GAINED & LESSONS LEARNED

www.feenstragroup.co.za TEL: 012 472 9200 | EMAIL: [email protected]


FEATURE ARTICLE

BY JEAN BROWNIt’s Not Just About Land

TheExpropriation Bill


The 2015 Expropriation Bill has received a lot of attention in the media lately, mostly thanks to the controversial push from Julius Malema (the leader of the Economic Freedom

Fighters (EFF)) to amend the South African Constitution to allow for expropriation of property without compensation. The African National Congress (ANC), appears to be divided on the issue, with some ANC parliamentary members in strong opposition to Malema’s request due to its unconstitutional nature. Concerning, however, is President Jacob Zuma’s backing of expropriation without compensation. Zuma has put out a strong call to “black parties” in Parliament to unite on the land issue to effectively form a two-thirds majority that can then legally take such decisions.

Unpacking the Expropriation BillThe actual purpose of the Expropriation Bill has become somewhat muddied in this process; a lot of misunderstanding still exists around the Bill, and, Zuma and the EFF aside, it is good to remain clear on what it intends to accomplish.

Expropriation of land is nothing new in SAIt’s important to note here that the expropriation issue is not a new one: the existing 1975 Expropriation Act also makes provision for the expropriation of land and other property for “public and certain other purposes; and to provide for matters connected therewith”.

According to Jeremy Cronin, the Deputy Minister of the Department of Public Works (DPW), this Act fails, however, in that it doesn’t “recognise most owners with unregistered rights in property, as is now required by the 1996 Constitution”. Most importantly, the current Act “provides no guidelines to expropriating authorities ‒ and therefore also to the courts ‒ on what is needed in the case of an expropriation to meet the test of administrative justice, (as required by the Promotion of Administrative Justice Act, PAJA),” says Cronin

The replacement Expropriation Bill makes provision for property to be expropriated “for public purpose or in the public interest, subject to just and equitable compensation; and to provide for matters connected herewith.” Here, according to the Constitution, public interest “includes the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources”.

• Expropriation does not take place arbitrarily and takes place only for a public purpose or in the public interest;

• Procedural norms and standards are set for organs of state and persons with powers to expropriate;

• Persons who are expropriated of unregistered rights in property are treated on a procedurally fair basis;

• A person whose right in property is expropriated is entitled to just and equitable compensation.

HOW DOES IT WORK?


It’s not just about landWhile many believe the Bill is strictly about land or immoveable property, Cronin maintains that this is not the case. Cronin is currently involved in leading ‒ from the government’s side ‒ the process of taking the Expropriation Bill through public consultation and the parliamentary process. He emphasises that, despite President Jacob Zuma’s repeated referral to the Bill as the Land Expropriation Bill, it is, in fact, a GENERAL expropriation bill that seeks to annul the 1975 Expropriation Act because of the Act’s unconstitutional nature.

Cronin highlights that the Bill seeks to provide for what Section 25 of the Constitution (i.e. the Property Clause) requires, namely “‘law of general application’ regarding expropriation”. Section 25 states that, in matters related to the expropriation of property, “property is not limited to land”.

According to Cronin, this means that the proposed Bill doesn’t rule out, nor explicitly allow for, the expropriation of other types of property, such as intellectual property.

It’s not just about farm land eitherHaving observed the so-called ‘land reform policies’ implemented in Zimbabwe under the leadership of Robert Mugabe, South Africans are understandably cautious about the concept of property expropriation, but still generally tend to think of it as being a rural or farmland issue.

Cronin sets the record straight: “The democratic state needs expropriating powers. It needs to be able to drive rural land reform, but also mixed income, medium density human settlements in well-located

areas…These powers are needed not just for rural land reform, but also to confront run-away market forces driving the ongoing dispossession of the great majority of workers and poor in our country.” He adds that, as the government proceeds with radical reforms, it does need to be governed by the principle of just and equitable compensation.

For the DPW, the land issue is now a predominantly urban question. Cronin cites a “systematic and mass-scale dispossession” occurring in poor black communities and areas like Woodstock, Bo-Kaap and the Cape Flats. He highlights that this is being done in the name of development by speculative property market activities, “aided and abetted by City officials” and that, due to the crisis of indebtedness of the working poor and lower middle class, the scale of home-repossessions by the banks is fast approaching “Apartheid-era Group Area removal proportions”.

To address and transform historical spatial planning in Cape Town specifically, UCT’s African Centre for Cities and the Dutch International New Town Institute have formed a long-term collaboration that seeks to develop 120 hectares of open land between Pinelands and Observatory. The mixed-use project, called the Two Rivers Urban Park (TRUP) project, aims to create over 11 000 units for affordable housing for students and people earning less than R2000 and R25 000 per month.

According to a recent IOL article, the aim here is to create a “diverse and yet socially inclusive” precinct in the city and “socially mixed, integrated and sustainable communities” where people can live safely, “work and play, and in particular…strive towards building a vibrant, safe, local resident community.”

ADDRESSING THE LEGACY OF APARTHEID SPECIAL PLANNING


RESOURCES

Daily Maverick, The Gauteng Department of Infrastructure Development, City Press, The Department of Public Works,

Simon Dippenaar & Associates, Webber Wentzel

What is South Africa takes the route of expropriation without compensation?According to Simon Dippenaar of Simon Dippenaar & Associates, redressing the historical imbalance of land ownership in the country by the indiscriminate expropriation of land, without compensation, is too simplistic a solution. “As with any legal question, the issue is far more complex and a much more sophisticated solution is required,” says Dippenaar.

He highlights the following questions that need to be considered:• What is the status of the current landowner? A

small private farmer is in a very different situation to a large commercial owner; a private owner with multiple holdings who rarely visits the site can be said to have less commitment to the land than a farmer making a living from it.

• Is the land derelict, or conversely used for luxury purposes that don’t benefit society, e.g., a private game lodge?

• What is the legitimacy of the claims being made? If the persons occupying the land have a plausible belief that they have a right to be there, the situation is radically different to an invasion of land by individuals or groups whose purpose is to disrupt the organised housing programme and place themselves at the front of the queue.

• What use will the private land be put to, e.g., land reform or general housing? If it is for land reform, there may be alternatives to expropriation, such as a joint venture or partnership

“Ultimately, expropriation of land without compensation will need to be subject to a rigorous Constitutional validation and, in my opinion, would fall foul of the Founding Provisions of the Constitution as they currently stand,” says Dippenaar.

The founding values to which he refers are: • Human dignity, the achievement of equality and

the advancement of human rights and freedoms;• Non-racialism and non-sexism;• All citizens being equally entitled to the rights,

privileges and benefits of citizenship; and equally subject to the duties and responsibilities of citizenship.

Dippenaar feels that these Provisions would have to be amended if a system of expropriation without compensation were to be introduced.

“In reality, it would be extremely difficult to design such a system in a way that would effectively balance all the various rights involved. Expropriation with suitable compensation would appear to be a more workable solution for all,” says Dippenaar.

1 South Africa’s current expropriation legislation, the Expropriation Act 1975, has been in force for over 30 years. It is a draconian piece of legislation which confers far too extensive powers on the authorities to expropriate. It was passed long before South Africa’s new Constitution was adopted.

2 The Expropriation Bill, 2015 (“the Bill”), in its latest form as approved by the National Assembly, is vastly superior legislation in all respects. It has been drafted in accordance with the Constitution, and, in particular, section 25, which deals with the right to property.

3 While some valid criticisms of the Bill have been raised by a number of parties, those criticisms, while in some instances worthy of consideration, do not negate the fact that the Bill significantly strengthens the rights of property owners. This is particularly so in relation to the process which must be followed by the authorities before they take a decision to expropriate.

4 The most important innovation is that the authorities must first attempt to reach agreement with the owner of the property for the purchase thereof on reasonable terms, before they expropriate. They must also investigate thoroughly and consult extensively before proceeding with the expropriation. It is therefore little wonder that some municipalities and other government departments have quietly expressed concerns about the potential impact of the new Bill.

5 This increased emphasis on process, and the protection given to property owners, should ensure that the Bill, if passed in its present form, does not deter potential investors in property.

6 With regard to compensation to be paid for expropriated properties, the Bill largely reiterates the approach adopted in section 25 of the Constitution, which requires the amount of compensation to be “just and equitable”. This essentially involves the determination of the market value of the property, adjusted by four factors: the current use, the history of the acquisition and use of the property, the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property, and the purpose of the expropriation. Courts will ultimately pay a crucial role in giving more flesh to the phrase “just and equitable”.

MICHAEL EVANS, PUBLIC LAW PARTNER AT WEBBER WENTZEL, HIGHLIGHTS THE

FOLLOWING SIX ASPECTS RELATED TO THE EXPROPRIATION BILL:

RESIDENTIAL

SHAUN RADEMEYERCEO OF BETTERLIFE HOME LOANS“We are concerned at the steep increase in the personal tax rate for those in the top income brackets, with the marginal rate for those earning over R1,5m a year being 45% now. This is going to reduce the appetite for large and luxury homes and it thus threatens to put a lid on price increases in the upper reaches of the residential market, which is where government will now be getting most of its transfer duty revenue.“

LEW GEFFENCHAIRMAN, LEW GEFFEN SOTHEBY’S“Minister Gordhan uttered the word ‘transformation’ more than 50 times in his 29-page Budget speech. He is not wrong that transformation is needed in South Africa, but not at the expense of the tax-payers on whose backs the economy is built. With an unemployment rate of more than 26% in the last quarter of 2016, businesses big and small need all the help they can get from the government right now...”

IAN OLIVIERAREA PRINCIPAL OF PAM GOLDING PROPERTIES“The recent sale of a luxury 750sqm home by Pam Golding Properties for R16 million has set a new record in Port Elizabeth’s property market… the previous record price for the area (across the market) stood at R10 million. The sale…underpins a growing trend for high net worth buyers to relocate to Port Elizabeth from other parts of the Eastern Cape on the back of the area’s growing economy...”

HOW REAL ESTATE THRIVES IN THE CLOUD


First Timer’s Guide to

Property Investment

EDUCATION SERIES PART TWO

8 Step Investment Road MapGetting StartedGetting Financially FitMaking a PlanFinding Your PropertyAcquiring Your Property

Closing the DealMoving In

Maximising Your Investment

BY JEAN BROWN

Step 3: Making a PlanBy now you should be well on your way to getting ready to buy your first property investment or home.

You’ve done a credit check to assess your financial fitness, put your finances in order by following a strict budget, or a debt management plan (if your credit score is less than favourable) and are actively building

up your savings for a healthy deposit on your upcoming property purchase. So, what’s next?

Remember to keep an eye out for these symbols in the articles to know when a piece of content is specific to a first-time homebuyer’s or investor’s journey:

First-Time Home-Buyer

First-Time Property Investor

Step three on the first-time Homebuyers and Property Investment Journey is to ‘Make a Plan’. This involves getting pre-qualified for a home loan.

The benefits of having a pre-qualification certificateWhile a pre-qualification certificate doesn’t guarantee that your bond will be approved by a lender, it does give you a good idea of the bond amount you can apply for, plus what the interest rate on that bond and the bond’s monthly instalment amount might be.

A property buyer’s negotiation power and deal closure ability is also vastly improved with a pre-qualification certificate in hand. Property sellers are more likely to enter in a property sale transaction with a prequalified home buyer than a buyer who only starts the home loan qualification process after the sale agreement has been signed.

New technology now automates the pre-qualification processThe traditional pre-qualification process has, up until now, been a manual one, completed through a bank or bond originator of choice. Documents required for a manual application include a completed and signed interview form and Power of Attorney letter, your latest payslip, a copy of your ID, a three-month bank statement, proof of your address and copies of your existing rental agreements.

Advances in digital technology are fast changing the property investment landscape, however, and you can now complete your pre-qualification application online. Platforms that offer online pre-qualification services include My Bond Fitness (MBF) and ooba (through a process co-developed with MBF).

MBF’s user-friendly portal allows prospective property buyers to create an online profile using their email address and password. All the information and documentation necessary for a pre-qualification can then be captured and uploaded online. This kicks off a free credit check, affordability check, and the generating of a free pre-qualification application certificate.

“Working with ooba enabled MBF to provide an online, home loan pre-qualification calculator that provides an accurate, paperless and speedy outcome for clients, based on the same affordability and credit ‘scorecard’ that is used for a normal (i.e. manual) ooba home loan application and prequalification,” says Meyer De Waal of MBF. “The entire process is now just fully automated,” he adds.

MBF StepsA key feature of the MBF platform is that it integrates with and aggregates information from a user’s personal bank account(s), using a secure log-in (to provide an accurate overview of their monthly income and expenses) and a budget calculation that is fully compliant with the National Credit Act and acceptable home loan lending practices.


Users are prompted to categorise their regular income, regular and fixed expenses, day-to-day expenses and existing rental or bond repayments for the previous 90 days. This helps them identify and categorize specific budget expense categories.

This information is then processed to develop a Personal Money Summary, which includes details about their credit score, monthly budget, and loan pre-qualification certificate ‒ all of which can be accessed at the click of a button via an interactive, online dashboard. These services are supported by ooba and evo, a subsidiary of ooba.

“The property buyer can then present their home loan prequalification certificate to a property seller or estate agent when they go to view a property,” says De Waal. “Once the sale agreement is signed by all the parties, the purchaser confirms the sale and provides a copy to the MBF mortgage originator and the final application to the lending institutions are submitted,” he adds.


Visit www.reimag.co.za to set up your MBF profile and obtain a fast and accurate home loan estimate within minutes.

1 Investing in property is not a get-rich-quick type investment, it is a long-term investment, and one that you you’ll have to see through potential ups and downs before seeing a real return on your investment.

2 Unless you are fortunate enough to have a large amount of capital to buy numerous properties at once, rather focus on one property at a time and only when you have enough surplus capital or income to then look at buying another investment property.

3 See each property that you buy as an investment, almost like another member of your family that will be with you for the long haul. The only way your investment properties can make you money is by keeping them. This means not selling, not even to raise capital to buy another property.

4 Do your homework when buying residential investment properties. Make sure you buy in the markets and areas that have the highest demand for rental properties, giving you the best rental rates. Don’t discount flats or townhouses – they can offer some of the best returns. And remember to make this purchase with your head and not your heart – you are not going to live in this property.

5 Focus on the income that your investment property can give you. By focusing on the income, you will be able to reach break-even faster on your investment than if you were focusing on capital growth. The more income you can collect each month from rentals, the more chance there is that you will have surplus monies to buy another investment property and thereby continue to grow your property portfolio.

6 Unless you are facing some sort of financial disaster – DO NOT SELL any of your investment properties. The costs of selling a property are high and you will lose profits.

7 Remember to include your own home as part of your investment portfolio, and try to avoid the need to keep up with the Jones’s. When your income increases, rather than looking to buy a bigger home, why not rather invest that money into another investment property and increase your future earnings?

FIRST TIME INVESTORS7 TIPS FROM PROPERTY INVESTORS

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RESOURCES

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FINANCING

RESOURCES

FNB

A home loan can be a sophisticated money management tool, if managed correctly. “A pre-paid home loan facility allows consumers

to transfer excess funds into their Home Loan, effectively saving on interest while being able to use the funds at no additional cost,” says Tommy Nel, head of credit at FNB Home Loans.

Let’s look at different ways this can benefit you, assuming you have a bond of R1 million which you have at prime (10.5%), your current repayments will be R9 984.

Daily capitalisation of interestInterest is calculated daily and capitalised to your home loan monthly. This means that any additional funds that are put into your home loan, even if it is for a day, will reduce the interest that you will be charged for that month.

“Say for example, you are paid on the 25th of the month, however, your various debt orders amounting to R20 000, including your bond, go off on the 1st. By placing the entire R20 000 into your home loan for the five days this money will work for you by saving interest on this amount of about R29 at your Home Loan rate of interest for that month,” says Nel.

By aligning their debit order dates to fall on their salary date, consumers can also achieve this benefit and ensure what is probably their most important asset is paid first. Having your debit order run on the date of your salary saves you interest in the long run and helps you protect your credit record by ensuring your financial commitments are all settled.

Making full use of your pre-paid funds“Prepaid funds allow you to access the power of compound interest by saving at your home loan rate

of interest and the longer you leave the funds in your home loan, the more you will unleash its potential,” says Nel.

This can help improve your financial resilience by helping you eliminate the need to use expensive unsecured debt when you are faced with unexpected expenses like your car letting you down or any other little surprises.

“You can also save to build up enough prepaid funds to allow yourself a payment holiday over those difficult holiday months such as December, January and April where there tends to be more month than moola,” says Nel.

Pay upfront costs“There are instances where paying certain costs in full, upfront for an entire year, such as in the case of insurance or school fees can help generate annualised return on such an ‘investment’ of in excess of 15%, depending on the exact terms of such offers,” says Nel. Using the facility linked to your Home Loan and regularly paying excess funds into your Home Loan can make this possible, whereas funding annual expenses from one’s monthly salary, is something that is probably out of the reach of the majority of South Africans.

For example, let’s assume your annual school fees are R24 000, and you receive a 10% discount if you pay the entire amount before the end of January. You can either pay R2000 a month, or you can pay R21 600 on the 31st of January, using funds you have saved in your Home Loan. The effective return on this would be in excess of 20%

BY SAM MASHELE

Use Your Home Loan to Its

Full Potential


MARKET VIEW

New LegislationBad News for Consumers and Property IndustryBY LEW GEFFEN

As the real estate industry enters Q2 of 2017, I can’t help but hear that old Chinese curse “may you live in interesting times” playing in

my head like a stuck record.Besides the Western Cape, which seems to be the

desired residential destination of the entire country at the moment, the market is completely flat and in some areas even moving into negative equity.

We’re unquestionably in a recessionary phase, but sellers are in denial and expect to achieve the same prices as when the market was still reasonably buoyant in 2015.

Two of the central drivers of the current industry and indeed broader community’s problems are the country’s dire economic situation and deteriorating public trust in government leadership.

In the 2017 Edelman Worldwide Barometer, that for the past 16 years has globally measured the general population’s trust in four key institutional areas — business, government, NGOs, and media — South Africa ranked first in its distrust of government. Only 15% of the population has confidence in the current political leadership.

Even more problematic for the property industry, consumers and foreign investment confidence are several proposed new land bills. The move appears to

be an attempt to win back voter confidence, but these new bills have implications for long-term economic growth and national food safety.

For land owners and the real estate industry, among the most important proposed legislative changes are the Property Practitioners Bill, 2016 (at the time of writing this column not yet gazetted for public comment), the Draft Regulation of Agricultural Land Holdings Bill, the Home Loan and Mortgage Disclosure Amendment Bill and of course the Expropriation Bill.

While we haven’t (as yet) seen the Property Practitioners Bill, we’re expecting a number of changes that are at best innocuous and at worst ominous for the industry. These include quotas, more regulatory functions that should be government-managed falling to the industry to enforce and ultimately more time-consuming transactions and higher property sale and purchase costs for consumers.

Among the legislative changes in the Agriculture Bill are total bans on non-citizens owning farms and that any foreigners who currently own agricultural land can’t sell their property on the free market; the Land Reform Ministry has first dibs. Only if the Ministry doesn’t want it, can a farm be sold through normal channels.


RESOURCES

Lew Geffen Sotheby’s International Realty

Perhaps more alarming is that in any district identified by the Ministry as a “Redistribution Area”, all farmers, regardless of citizenship, may only sell to black buyers and, if none are found, the Ministry will determine a value and buy the land. The farmer will have no negotiation leverage; if he doesn’t agree to the price his farm will be expropriated.

Then last month, we received the news from the ANC’s Economic Transformation head, Enoch Godongwana, that the party was looking at new taxes on unoccupied land or land bought for speculative purposes. The intention is to force owners to sell to the government so it can fast-track the land reform programme.

This while the “showpiece” Expropriation Bill has been sent back to Parliament because, in its current form, the president says, it does not meet Constitutional requirements.

The government has underlined its intention to fast-track economic transformation. This was reinforced in the president’s State of the Nation address in February, and the message driven home in the subsequent Budget Speech when the Finance Minister used the word “transformation” no fewer than 50 times.

Every right-minded South African knows there needs to be a more even balance of opportunity and

ownership in this country. To my mind, though, it appears to be short-sighted to remove the free market system and punitively legislate the very industries that, through taxation, keep the nation fed and financed.

The government’s core focus should be fixing the economy by encouraging international investment and offering incentives to local businesses to expand and create employment, getting a handle on crime and, perhaps most importantly of all, funnelling more funds into creating an excellent education system that produces youngsters ready for the business world.

Corporate South Africa is profit-driven and dedicated to economic growth. It doesn’t really care whether its stars are white, black or indeed purple, as long as they get the job done, and there’s no profit for anyone in a recession.

Writing reams of market-restrictive legislation is not productive. Government’s time would be better spent working with business to achieve what’s in the nation’s long-term best interests rather than hoping the “legislation fairy” will somehow magically fix everything. News flash – it won’t.

ARCHITECTURE

BY DONALD BETT

Insights from an Experienced Architect & Developer

A Balancing Act


Mike Deacon is an architect with 40 years’ experience in the commercial and residential property market. He has a good

understanding of the balancing act involved in being the developer while managing the professional team. He shares his experiences and insights below.

Different team members, different agendas In my experience, the developer and the professional team are driven by different interests. Consultants are focused on their own discipline, all the detail around it, and doing it well ‒ this in a world getting increasingly complicated. The result is a widening range of consultants with the focus of each one getting increasingly narrow. It’s been suggested they eventually know everything about nothing!

The developer, specifically, is driven by two factors: to make money and to create. The skilful balance between these two is key as to what eventually results. The profit side is easy to define: to make money. There are plenty of examples where this is almost the sole concern and bad buildings may result. Defining what it is to ‘create’ and the ability to do it successfully, on the other hand, is challenging. It’s essential that there’s a desire, emotional need, the wish, ability, and the intellect to create inherent quality, to leave behind something greater and more important than self and that adds to the environment.

Designing for market needsThere’s therefore an interesting area, a sort of ‘no man land’ between the developer and the wide array of professionals he works with, particularly the architect. The key to success is a shared vision and the developer’s ability to give the development a commercially viable form and to see it through. Being an ex-architect as well as the developer in a project helps me get a grasp of what is required on the design side when working with an architectural firm. I can give help on the vision, the scope, size and other spaces needed in a development.

During the design stage, consultations include an overarching understanding of what the end result

should be. What market we are targeting? A recent residential development I have just completed in Tokai, Cape Town, required some innovative designs to create a different type of living space. The concept that I had was to provide something entirely unique in the upper end residential security estate market. My primary role, however, is to manage the development from start to finish.

Managing the development processThere is very much an order in managing the development process. To start with, there must be a need in the market and then one must fully understand the norms of that market. Next is the identification of a site suited to a building that fulfils that need. It may be necessary to amend the property rights. This may require dealing with objectors who may be right but often are purely obstructive, NIMBY driven, because they understand little of Urban Planning.

The next step is to convey the vision to the architect, including the nature of what is needed. The team then work together to chisel out sketches of the appropriate building, involving the remaining professionals as and when their input is needed. Of fundamental importance are regular costings and viabilities. Two of our most recent developments required years of sourcing the right land. Then many more years getting planning permission, EIAs and other permissions.

The role of the Quantity Surveyor and the input he requires from the other professionals is now key. Discuss, change, mould, tweek, and amend until you have a product for which there is a need and can be sold for more than it costs to develop.

Once the product has been defined, the execution follows. Managing the programme is never a static process, as every step of the way throws up new design issues that need to be examined. Vital decisions have to be made in terms of the big picture. A detailed marketing programme needs to be formulated, with all the various elements in the mix addressed. A proper strategy must be implemented with critical timelines worked out.

Lastly, the enlistment of estate or property agents in the marketing of a development, be it commercial or residential, can be most helpful. However, if you come from a professional background, you tend to assume that they are steeped in the professional ethic of clients needs before own needs. Don’t be ‒ my experience is that they are often driven by their own need to, first and foremost, earn a commission. So, select your agents carefully!

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Equity Estates+

Managing the programme is never a static process, as every step of the way throws up new design issues that need to be examined.


INNER CITY INVESTMENTS

Urban ApartmentsBY KATE THOMPSON-DUWE

When purchasing property, a buyer’s mentality has historically been to get as many square metres as possible for their

spend, but this is no longer the case. Today, a fast-moving global trend is towards buying inner-city or urban property, which a lot of the time is on a smaller erf or within a development, but with a far higher rate of return in both resales and rentals.

Besides the bigger movement towards living in the city for convenience, many of today’s homeowners don’t want the hassle of maintenance and security issues that come with a freestanding home on a larger tract of land. Thus, the lock-up-’n-go nature of an urban apartment is far more attractive.

Along with these changes in global trends, the urban property buyer profile is evolving too, and now

Freestanding Homes? Vs


RESOURCES

Blok

includes various demographics, including the empty nesters: parents whose kids have moved out and, as such, are downsizing their properties and opting for the lock-up-’n-go lifestyle that an apartment offers. This is the generation that supported the previously held belief that “size matters” when choosing a property to buy, but find it hard to motivate why this is so when having to manage a two-acre (or more) home and all of the associated responsibility that holds.

Another large section of the buyer market is parents buying property for their children who are relocating to Cape Town or moving out of home to study.

Time.com previously reported that “17% of the parents of millennial children (defined as between the ages of 18-35) expect to help their children buy a home within the next five years. That’s an increase of over 30% compared to five years ago, when 13% of parents expected to provide home-buying assistance.” This may seem a burden for these parents, but should perhaps not be seen as such, and rather viewed as a great investment opportunity.

“Parents that can see property investment as a solid opportunity to create future wealth for their children, will understand the true benefit that it can offer. Not only can it provide their children with security and shelter (a short-term or immediate need), but it can also become a valuable asset in the future (long-term need). Many parents are looking to invest in property for their children who may be at university or college, or even put property into a fund when their kids are at a young age with their futures in mind,” says Lior van Embden, Sales and Marketing Manager for urban property developers, Blok, which has launched nine urban apartment developments in Cape Town.

This is one of the reasons for the rapid rise of the urban property developer. Just one look over the landscape of Cape Town’s Atlantic Seaboard and the number of building sites denoted by high-reaching cranes, will show how prolific urban property development is. When you consider that most, if not all of these sites are urban apartments, the demand is apparent.

The benefits for people looking to invest and move into this way of living include:

• Security: the more people in close proximity to your home, the more ‘eyes on the street’ and less risk of someone taking advantage, as the risk of them being seen is too high. Not to mention that most of these urban developments have concierge or security personnel working there.

• Convenience: close proximity to work, schools,

shops and restaurants means less travel time needed, and less money spent on travel.

• Social: it is hard not to get closer to one’s neighbours when sharing a building. This encourages a closer community and all the benefits that brings; socialisation, security and convenience.

• Financial: considering the level of demand for urban property, it is likely that the value of a well-built and well positioned urban home will increase significantly.

• Environmental: with more people moving into the city and closer to work, the decrease in single-driver cars and related emissions is dramatic. Not only is the rush-hour commute improved but, many people choose to forego driving completely and either walk or make use of public transport in their daily travels. Opting for alternative methods of transport also has an impact on well-being. A study by the University of East Anglia in the UK has revealed that commuters feel happier when traveling by public transportation, compared to driving. Plus, people find train or bus journeys more relaxing and have more chance to prepare for the day ahead, catch up with emails, take phone calls, or socialise with friends. The study also found that people who walked or cycled to work were more content than those who drove, which is in line with research linking exercise with improvements in mood.

Jacques van Embden, MD of Blok, says, “Our philosophy is that the neighbourhood is an extension of your home and we incorporate the concept of connected urban communities into all that we do. This includes the implementation of urban interventions such as the creation of green spaces for all to enjoy, and highlighting the people who are at the heart of the neighbourhoods in which Blok develops - from the barista at the corner coffee shop to the doctor down the road – in the communications curated for each development.”

If the statistic is correct that, by the year 2030, around three quarters of the world’s population will live in cities (see ‘Living in the Endless City ‒ The Urban Age Project by the London School of Economics and Deutche Bank’s Alfred Herrhausen Society), the demand for urban property is only going to increase, making the investment value even more apparent.

www.safma.co.za

SAFMA Annual Conference10–11 May 2017

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Speakers include:

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The role of FM in business continuity and sustainability

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Book your conference seat at www.safma.co.za or email [email protected]

• Brian Henry, Business Continuity Institute• Portia Tau Sekati, Property Sector Charter Council

• Mohsien Hassim, Property Management Trading Entity• Steven Molloy & Craig Henry, SABS Standards

Platinum Conference and Expo Sponsor:

VUYISWA MUTSHEKWANE CEO, SAIBPP“The commercial sector still remains frighteningly untransformed, with less than 10% being black-owned, managed and controlled. Currently less than 10% of the buildings occupied by government de-partments are black-owned, managed and controlled, resulting in 80% of government lease spend going to B-BBEE-compliant but untransformed companies.”

PHILIP HILLMANHEAD OF STUDENT HOUSING, JLL EMEA“There has been an unprecedented increase in the number of student enrolments across sub-Sa-haran Africa. In the period 2000 to 2014 period, the SSA tertiary gross enrolment ratio rose from 4,3% to 8,2%. This trend, when coupled with a growing tertiary-aged population, suggests that demand for purpose-built student housing should grow rapidly over the medium term.”

ORESTI PATRICIOSCEO OF ORNICO“Urban spaces are our future, and Johan-nesburg’s inner city is very much the heart and soul of what it means to be South Af-rican. One loses a sense of that pulse out in Sandton…There’s an energy, an enthusi-asm, and opportunity for massive innova-tion in the city that’s contagious.”

COMMERCIALCHOOSING A COMMERCIAL PROPERTY

FOR YOUR BUSINESS



RETAIL

RESOURCES

Atterbury Property Development

The new Kumasi City Mall in Ghana’s city of Kumasi will open on 20 April 2017. It is leading property developer and investor

Atterbury’s fourth successful retail development in Ghana. Atterbury’s first trio of prior successful developments in the country are all in Ghana’s capital, Accra: Accra Mall, Westhills Mall, and Achimota Mall.

The world-class 18,500sqm modern mall, with potential for a future 10,000sqm expansion, will give the city of Kumasi its first one-stop environment with shopping and entertainment under one roof when it opens next month.

Atterbury is developing the mall for its owners Delico Kumasi Limited, which is wholly-owned by Delico Property Development Limited. AttAfrica has been appointed asset manager at Kumasi City Mall and is responsible for its day-to-day running and operations.

Cobus van Heerden, of Atterbury Property Development, says: “We are optimistic about Ghana and Kumasi City Mall, notwithstanding the challenging economic context in West Africa and competition. With its new president, there is also renewed confidence and positive sentiment about Ghana. Kumasi City Mall is perfectly timed for this upsurge in confidence.”

Virtually fully let, Kumasi City Mall’s anchor tenants are Shoprite and Walmart brand Game, with

the new shopping centre supporting the growth of both retailers in the region.

Kumasi Mall is enclosed on either end, with a semi-enclosed food court at its heart.

“It’s exceptionally strong food court serves as an excellent third anchor. It responds to the outgoing and social nature of the people of Kumasi by offering a vibrant dining and entertainment space with generous seating and shaded areas,” explains van Heerden.

With superb access from the Eastern Bypass of the city’s main ring road, Kumasi City Mall has a prominent road frontage, generous undercover and on-grade parking, and two easy access points. There’s also a large taxi drop-off and pick-up facility right in front of the mall.

Designed in a joint venture between South African architect practice Boogertman + Partners and Ghanaian practice MultiCAD, the mall incorporates steel, concrete, and wood, in an elegant design inspired by an African tree, which branches out to create a roof canopy. Together, its many different tree-shaped columns create a forest, illuminated by plenty of natural light from beautiful African skies.

“We are incredibly proud of Kumasi City Mall and we are confident that it will make a real difference for its community,” notes van Heerden.

Kumasi City MallRenewed Confidence About GhanaBY ZAHN HULME

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consumers via a strict code of ethicics. s. RICRICS is a bentheee bubuuuuiltltiltiltilt eneneee virvironmonmn entent.”.

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GLOBAL OUTLOOK

Global Commercial

Top Investment Trends for 2017Real Estate


RESOURCES

Knight Frank

Top Investment Trends for 2017Commercial real estate remains an important asset class for private investors, with 27% of global transaction volumes attributed to private buyers in 2016. The 2017 Knight Frank Attitudes Survey data shows that a full quarter of private client wealth is held in real estate investments (excluding their primary residence and second homes). This varies significantly from region to region, with Asian investors holding the highest proportion (29%) and North American investors the lowest (15%). According to the Knight Frank Investment Trends Survey, the majority of investment into commercial real estate was primarily driven by the want of diversification, with real estate being used in portfolios to provide variation from both domestic economy and across asset classes. The survey identified office property as the most popular sector in investors’ portfolios at 54%, a finding borne out by both long-term global transactions data and the results of the Attitudes Survey.

Real estate continues to be a safe-haven for investorsSurvey sentiment strongly shows that real estate continued to provide a safe-haven for capital and a stable and secure income return in a low growth environment. A sentiment reflected in the survey’s interview with Ian Bremmer, and the significance of safety of capital over size of returns. Despite an element of caution expressed from some parts, investors have a healthy appetite for further commercial real estate investment in 2017. Most survey respondents talked in terms of large double-digit percentage target increases in the level of assets under management.

Investors prefer the UK as an investment targetThe survey shows the majority of investors still feel under-invested in property and are looking to rebalance overall portfolios. Typically, respondents were looking to secure lot sizes from £20 million to £50 million, although a number talked of scaling up to over £100 million. Respondents’ preferred locations varied considerably depending on their domicile, with Australia, Africa and the US all cited as investment targets for 2017. The majority, however, continue to look to Europe for their allocations, the UK being the most popular individual country. The reasons cited for this include the scale of the market, relative liquidity and the depth of opportunities available.

Logistics provides the biggest opportunity for investorsThe findings also show that logistics real estate is becoming increasingly attractive with 15% already invested and 22% looking to invest. Retail property is being affected by a huge shift in consumer behaviour; specifically, urban logistics, as part of the new ecommerce supply chain is seeing the biggest step-change in how property is used and where it is located. It is in these urban, local facilities that are seeing the greatest potential for private investors seeking secure long-term returns, and looking to tap into the growth opportunities created by the rise of cities and increasing urbanisation. The results of this first Investment Trends survey clearly show that family offices’ relationship with commercial property will only strengthen further over 2017. The asset class remains an important diversifier from their domestic economy and a “real” asset capable of providing both a store of wealth and a stable income component.

The commercial real estate industry was full of indecision for a large part of 2016. Global events like Brexit caused their local subsidiaries to freeze on decisions regarding new leases, acquisitions and disposals until further notice of the impact of Brexit.

South Africa had its local municipal elections in 2016, with many clients feeling uncertain of the outcome. We saw the Rand fluctuating significantly because of these two major events, which, in turn created a freeze across the leasing industry, as well as for owner occupiers looking to acquire premises for their business. These clients found it preferable to extend their current leases to ‘ride out’ the rocky market.

Investors were, and still are, very active in the market and, for the most part, the events of 2016 didn’t deter them from buying income generating properties. We did see a lot of coastal investors coming inland to acquire properties at more favourable yields - often outbidding their local counterparts.

Generally, 2016 was a year of large volumes of smaller lease and sale transactions with smaller local clients, whereas the listed companies and national clients preferred to lay low during 2016. As a result, 2017 has gotten off to a great start and we are excited about the opportunities that lie ahead of us this year.

By Markus Dickerson

SOUTH AFRICA: AN ACTIVE MARKET PREDICTED FOR 2017


URBAN DEVELOPMENT

RESOURCES

RICS

Africa’s cities need to brace themselves for millions more people over the next few decades, with the continent having one of

the fastest urbanisation rates in the world. This was one of the main messages at the Royal Institution of Chartered Surveyors’ (RICS) Africa Summit in February in Johannesburg.

Delegates heard that Africa’s rapid urbanisation presented both challenges and opportunities. Better urban planning and massive investment in infrastructure is needed to cater for the influx of people looking for job opportunities, higher salaries and urban lifestyles in Africa’s burgeoning cities.

Bennet Kpentey, head of Ghanaian-based Sync Consult Management Consultants, highlighted the rapid pace of urbanisation in Africa.

He said: “Cities in Africa with more than a million people increased from 52 in 2011 to 65 in 2016. This rate of urbanisation is on par with Europe and higher than India and North America. With 40% of the population living in cities, Africa is more urbanised than India (30%) and almost at par with China (45%). By 2030 Africa will have 760 million urban residents, increasing to 1.2 billion by 2050, according to the African Economic Outlook 2016 report.” He added that Africa’s rapid urbanisation presented infrastructure challenges for its major cities, but was also a sign of a prospering continent.

Jacob Mamabolo, Gauteng MEC for Infrastructure, said that, as the economic powerhouse of Africa,

Gauteng was attracting about 300,000 people annually from the rest of South Africa and other African countries. He cautioned that the rollout of infrastructure in the province was no easy task, given that Gauteng was the most populace province and continued to attract more people.

“We have prioritised infrastructure investment in Gauteng…In the last three years – between 2013 and 2016 ‒ Gauteng’s infrastructure investment amounted to R30 billion. This translates into an average annual growth rate in infrastructure spending of 20.7% – the fastest growth rate for any province in the country,” said Mamabolo.

RICS President Amanda Clack, who is also Partner at EY and Head of Infrastructure (Advisory) for the UK and Ireland, said that by investing in core infrastructure, governments were ensuring the economic future of a country and its cities.

“Infrastructure investment is vital to supporting rapid urbanisation and creating the world’s future cities. The world is facing an infrastructure funding gap of US$57 trillion until 2020…With rapid urbanisation, cities are taking on greater importance and need to deliver infrastructure to accommodate growing populations and attract talent and investment,” said Clack.

BY SUREN NAIDOOTop of the Agenda at the RICS Africa SummitAfrica’s Rapid Urbanisation

REIM is the brand new host and partner with South African Property Investor Network (SAPIN)

JohannesburgPretoria

Cape TownDurban

Port ElizabethBloemfontein

Windhoek, Namibia

For more information and dates please go to www.reimag.co.za and click on REIM events. Visit South African Property Investor Network @ www.sapropertynetwork.com

SA PROPERTY INVESTOR NETWORK

Events will take place in 2017 in the following cities:


MANAGING

How do you know your Facilities Management (FM) practitioner is a professional, and why does it matter? Accredited FM professionals

understand the role of FM in business, how it affects the fourth bottom line, and how it can be used to promote sustainable, eco-friendly business practices, whilst also saving costs. It might sound like a fantasy, but a top-level FM professional can do just that ‒ and more. Luckily for local business, the number of Designated FM Professionals in South Africa is growing, and there’s fierce competition at the top to be the best in the field.

Professional Designations in Facilities ManagementThe South African Facilities Management Association (SAFMA) offers four accredited Professional Designations. These not only give FM professionals credibility and acknowledge experience, they also provide a measure of accountability, as each designated professional must sign a code of conduct.

These designations range from Practitioner ‒ open to drivers, handymen, specialists and so on ‒ through to Accredited Facilities Professional (AFP). It is important to note that even the highest designation can be achieved through Recognition of Prior Learning and Experience, and not only through a combination of formal degrees and experience, making a Professional Designation accessible to anyone in the FM industry, regardless of age, gender, or race.

Women in Facilities Management FM is a fast-growing, rapidly evolving and dynamic industry, and women are making their mark. But this should come as no surprise: South African women have never been shrinking violets and the FM industry is one where knowledge and experience, rather than traditional gender roles, truly speak for themselves.

Just ask Louise Joynt, the 2017 SAFMA Awards FM of the Year. “It’s an absolute privilege to have won

BY ANN BAKER-KEULEMANS

Why They Matter

Professional DesignationsIn Facilities Management

www.reimag.co.za

RESOURCES

SAFMA

the FM of the year award. Having a woman win helps to balance any gender inequality in the industry, and creates the opportunity to showcase that.“My experience is that women in the FM industry are far more driven than our male counterparts as we still need to prove that we can do everything they can do, and do it better, even as we bring a softer touch to the industry. That said, I do believe the FM industry is a growing market with definite career opportunities for all,” says Joynt.

According to the World Economic Forum’s Global Gender Gap Report of 2016, South Africa is ahead of the UK and the United States in closing the gender gap. Although globally the rate at which this gap is closing is woefully inadequate, it’s important to note that South Africa ranks 15th out of 144 countries, with gender parity in Sub-Saharan Africa projected to be achieved in 79 years or so, well ahead of the United States’ projected 158 years. But there’s still work to be done, which is why SAFMA encourages the growth, development and up-skilling of every single FM professional, and why the soon-to-be-launched FM qualification, a first for South Africa and currently with the Quality Council for Trades and Occupations for approval, is so important.

Recognition of Prior LearningOne of the biggest hindrances to achieving gender equality (apart from the pay gap), is that of education ‒ a hot topic both historically and currently. To help counter the historical disparity, as well as the more recent lack of FM-related courses at a tertiary level, the SAFMA Professional Designations take into consideration, in addition to formal education, all learning, prior experience in FM, and knowledge gained from active participation in the FM field, making a Professional Designation accessible even to the previously disadvantaged and those who haven’t had access to a formal tertiary or technical education.Those who are considering FM as a career path, or who already find themselves involved in the FM industry and wish to advance, have several option available to them. Endorsed training providers provide essential courses for FM professionals who wish to improve their knowledge, and for those who would like to consider FM as a career. Only a few South African universities offer FM-related degrees, but these are certainly worth investigating.

The future of FM is a bright one indeed. South Africa is a developing country, and the FM industry is growing and evolving with it, making it fertile ground for youngsters and existing FM professionals looking to make their mark.

INVESTOR OF THE YEAR

AWARD

Do you have a property story to tell? Have you managed to creatively secure a property and maximise your investment? It could be an incredible experience, goal achievement, monetary return, reward, obstacles you overcame, something that you learnt or something that impacted you and people around you.

Impress our expert panel of judges with the number, value and types of properties in your portfolio. Go to www.reimag.co.za to download your entry.

ENTER & WIN

Do you think you have what it takes to be the 2017 Real Estate Investor of the year?

Submit your application to [email protected] by 16 October and stand a chance to win*

• R50, 000 in cash• An all expenses paid trip for two to Mauritius• Plus other prizes and gifts• PR exposure across REIM/SAPIN social media platforms• A feature article in Real Estate Investor Magazine

R50 000

*T&Cs Apply

INVESTOR OF THE YEAR2nd ANNUAL

AWARD 2017

M E M B E R S H I P T O T H E E X C L U S I V E W A R D I A N C L U B ’ S P R I V A T E F I R S T C L A S S F A C I L I T I E S

O N E & O N L Y H O T E L C A P E T O W N

A T T E N D A N C E I S S T R I C T L Y B Y R S V P

T H E O Y S T E R B O XD U R B A N

T U E S D A Y 9 T H M A Y W E D N E S D A Y 1 0 T H M A Y

S U M M E R P L A C EJ O H A N N E S B U R G

F R I D A Y 1 2 T H M A Y

Whilst every care has been taken in preparing these particulars, Knight Frank and the respective landlords/vendors give no warranty, express or implied, as to the completeness or accuracy of the information contained herein. These particulars are subject to errors, omissions, change of price/rental or other conditions, withdrawal without notice, and any special listing conditions imposed by our principals. Knight Frank will not be liable for negligence, or for any direct or indirect consequential losses or damages arising from the use of this information. You should satisfy yourself about the completeness or accuracy of any information or materials. The information contained herein does not form part of an offer or contract “*Prices and details correct at the time of going to press. Readers are advised to make their own enquiries to verify such information.” Our sales representatives for overseas property work exclusively in relation to properties outside Hong Kong and, unless expressly stated otherwise, are not licensed under the Estate Agents Ordinance to deal with Hong Kong properties.

J O I N U S F O R A L O N D O N R E S I D E N T I A L M A R K E T U P D A T E A N D E X C L U S I V E A C C E S S T O O N E O F L O N D O N ’ S F I N E S T N E W R E S I D E N T I A L D E V E L O P M E N T S – W A R D I A N .

A P A N E L O F L O N D O N P R O P E R T Y E X P E R T S W I L L P R O V I D E A N U P - T O - D A T E M A R K E T O V E R V I E W , I N C L U D I N G S O M E O F T H E M O S T I M P O R T A N T F A C T O R S

I N F L U E N C I N G L O N D O N ’ S H O U S I N G M A R K E T .

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Wardian 2_.pdf 1 3/27/17 9:23 PM

OFFSHORE

DOUGLAS DRISCOLLCEO, STARR PARTNERS“We know that the current affordability crisis is a matter of simple economics – demand heavily outweighs supply. Foreign investors are only exacerbating the problem by buying properties and leaving them vacant…”

YVONNE SIEWEXECUTIVE DIRECTOR, CBRE GLOBAL CAPITAL MARKETS“With more scrutiny on cross-border capital flows and rigorous checks by the government, which may lengthen the approval process, Chinese outbound real estate investment may moderate, gathering at a more sustainable rate. Instead of larger transactions, Chinese investors may simply opt for a higher number of smaller deals.”

NICOLE DOUGLASWEALTH MANAGEMENT ANALYST, GLOBALDATA.“Residency-by-investment programs should be designed so that they are of benefit to the investors and the country for which the program is offered. At the same time, many HNWIs care about how the money they’ve invested is used beyond the process of granting residency. With a number of residency programs available, investors are likely to favour those that can have a meaningful and positive impact on the country in which the residency is offered.”

HOW MUCH RISK IS RIGHT?



INVESTOR INSIGHTS

The house of multi occupation (HMO) strategy is the cash cow of the property world. In simple terms, a HMO is when you repurpose

accommodation to allow for multiple tenants. This means that you will receive more than one rent check per month and it is a very lucrative strategy from a cash flow point of view.

Using the HMO strategy, you will attract various types of tenants, and this is dependent on your features, location and the letting agent that you use. Most HMOs are suited for students and young professionals. When investing in houses of multiple occupation, we prefer to buy family homes and subdivide them into five or six bedrooms, housing one tenant per room.

Making a success of itA critical success factor to the HMO strategy is attracting the right tenants. When we employ this strategy, we don’t pick just any property in any town, but rather, we analyse the market conditions, the regional development plans and the kind of tenants that would be attracted to the area. We ensure that we invest in locations and properties that attract young,

up-and-coming professionals. They tend to yield the most stable returns for us.

Luckily, in the United Kingdom (UK), there are lenders that specifically invest in HMO. Unlike South Africa, getting funding for a HMO project is not impossible and we have negotiated interest rates in the arena of 4%-5.5%. When you have the right deal, credibility and plans in place, funding the deal isn’t an issue.

Unpacking the benefitsThe upside of the HMO strategy is obvious, but it can be a risky adventure. The UK government expects many regulations to be complied with when applying this strategy, because with more tenants there is increased risk of something going wrong. Some of the basic regulations one must follow are:

1 Fire doors with intermittent strips: this is critical and a must for any HMO in the UK. The fire door is expected to last for 30 minutes, which provides the tenants with enough time to evacuate the building.

2 Interlinked fire alarms: because of the number of tenants and rooms, interlinked fire alarms must

BY WARREN BRUSSEThe Cash Cows of the Property WorldHMOs


RESOURCES

UK Property Partners

be installed to warn each person of the impending threat.

3 Fire blankets: these can be stored within the kitchen to help slow down a fire

4 Emergency lighting: that aides the tenants to a safe escape route.

5 Escape routes: when constructing a HMO you will need to design the floor plan for an easy exit route.

The above are just a few examples of the regulations behind the HMO strategy. It is a fantastic strategy that provides incredible rental yields, but it can be a mine field of risks for the uninformed investor. Luckily, with our experience and contacts within the UK, we have tried, tested and perfected the HMO strategy to bring us consistently good rental returns.

Minimising the risk:To lessen your risk, you must do two things: Firstly, get a good letting agent on board. The HMO strategy only works when you are receiving your rentals. If you have bad paying tenants, you turn your asset into a liability overnight, and will continue to bleed monthly. Also, your letting agent knows the

area inside out and knows how to target the right kind of tenants. In our investment portfolio, we only work with vetted letting agents that provide scrutinised professional tenants.

Secondly, get a partner who has the experience and track record when working with houses of multiple occupation. This strategy has many upsides and, equally, many risks involved. Rather than investing your money into a potential opportunity, partner with a team of professionals who are already investing their own money into successful HMOs. It’s a niche market with few players in the game, but the team at UK Property Partners can secure your investment in a positive, cash-flowing rental HMO and provide you with the returns you deserve.

The HMO strategy requires a high capital input to get going, but the cash flow is incredible and we are seeing returns of over 15% per annum. This strategy requires preparation, planning and partnership to make work. It’s not a beginner strategy, but a beginner can invest with the right team.


UNITED KINGDOM

RESOURCES

Sable International

South African businesses are expanding and opening offices and branches in the United Kingdom (UK) for three reasons, says Scott

Brown of Sable International Accounting.

1South African business owners can gain access to expansion opportunities in the UK and Europe by

setting up a UK business ‒ without having to emigrate. The regular presence of senior management in the UK is recommended, however, as it is advantageous for strengthening a UK-based office.

2Corporate tax is less in the UK than in South Africa. The UK government has also removed

obstacles and is offering ‘sweeteners’ such as grants and incentives to companies wishing to expand offshore.

3Subsidiary applications are cheaper and simpler than alternative visa categories. The Entrepreneur

Investment Programme, for example, requires business owners to purchase a business for no less than 200 000 British Pounds and employ a stipulated amount of UK staff in the business.

Chris Wilkins, the CEO of Dynamic Technology Holdings (DTH), waited until the company was one of the top three significant players in its sector before spreading his wings and opening an office in the UK.

The practical factors that played a role in Wilkins’ choice to expand his business to the UK included similarities in time-zones, language and business culture. Strong business and familial ties with the UK, as well as the prospect of a Rand that is expected to deteriorate faster against the British Pound than the Euro or the Rupee, were also key considerations.

Wilkin’s eight top tips for UK business expansion

1Ensure your business is at the right stage of its lifecycle, so that you are not just reinventing the

wheel but offering a compelling alternative to a mature and established model in the UK.

2Keep as much of the cost in South Africa as possible, as this is the model that really kicks hard.

Apply the 70/30 rule to SA/UK costs.

3A product or service that is promoted in the UK, but serviced from South Africa is a winner. Avoid the

mistake of parachuting in a South African citizen with a pat on the back and a few words of encouragement ‒ it really does not work. This person won’t know the market, wouldn’t have worked within the highly-regulated UK environment and will be unfamiliar with the UK commercial context. A South African citizen won’t have the established support structure or network on the ground in the UK either.

4Pick a specific region and service or product for the UK, don’t try and be everything to everyone, or

everywhere.

5Ensure the service or product is focused and specific, clearly communicated and as commoditised as

possible.

6Make sure that the marketing collateral has been critiqued and reviewed intensively for the UK

market The UK is less hung up on price, but a shoddy brochure could scupper the deal.

7Make sure that you have sustainable funding, as you don’t know how long it will take, and the margin to

keep going could mean the difference between success or failure in breaking into the UK market.

8Craft an approach using partners, channels and individuals. This means establishing a UK network

of companies and individuals, in a variety of contractual relationships, who will help you take your product or service into the UK market.

Finally, expect the UK market to take twice as long. “It costs three times as much to break into and utilize a credible organisation with knowledge of the South African and British tax and legislation requirements and systems,” says Wilkins.

BY KIM BARTY

8 Top Tips from a CEOHow to Expand Your Business to the UK


UNITED KINGDOM

South African investors observing the United Kingdom (UK) property market would most certainly have received mixed messages from

what they have been seeing and hearing from the media.

In the run-up to the June 23rd referendum last year those strongly in favour of ‘Remain’ were accused of using ‘Project Fear’ to support their cause, predicting a complete crash in the property market if the country voted to leave the European Union (EU). There was a spike in the purchase of residential investment at the end of March 2016, due to significant changes to property taxes (Stamp Duty Land Tax). What inevitably followed this spike was a downturn, with the doldrums continuing right up until the referendum, after which quite a few deals went sour and the market stalled.

Those who had advocated ‘Project Fear’ felt vindicated – “we told you so!” However, we noticed activity returning to the market in late July 2016, which remained buoyant overall ‒ in part propped up by very low interest rates encouraging more borrowing.

The UK tends to experience a lull in property movement in the January and February months, with things usually starting to rebound in the spring. This is exactly what appears to be happening.

An unexciting, predictable and slow marketModest increases in prices nationally, more realism in the highly priced central London market and the adverse effects of high property taxation (SDLT, annual charges and introduction of capital gains tax for overseas investors) working through the system

BY RAYMOND HAYES

What’s Happened to The English Property Market?

Beyond Brexit

have combined with low interest rates to create a relatively unexciting, reasonably predictable, but somewhat slow market, with some inevitable hot- and cold spots.

For many investors, yields remain reasonably good when compared to interest rates on bank deposits but those requiring borrowing, who are also higher-rate, UK taxpayers will start to be hit in April when the tax relief on mortgage interest will be restricted to the basic rate. For this reason, some investors are looking to hold properties in a limited company.

I reflected in September 2016 that “it is of course far too early to tell what the medium and long-term impacts of Brexit will be on the market but the initial worries appear to have been proved totally unfounded”. What’s interesting is that a lot of the current commentary on the property market contains no mention of the word “Brexit”.

What is happening appears instead to be driven by traditional influences, such as supply and demand, low interest rates, very low unemployment and the continuing robustness of the UK economy.

There are also some very major national infrastructure projects on the cards, which will also have significant impact. Crossrail in London will come on line in two years’ time and will speed up movement within the capital, which will inevitably have local effects on parts of Greater London and central London. Additional projects include HS2 (the

high-speed railway planned to run between London and Birmingham and on into the north), the runway at Heathrow airport, and the construction of the major nuclear power station at Hinkley Point.

South African investmentsWe continue to see significant interest from South African investors, particularly in respect to readily lettable units in Western London, but also in much more affordable areas outside of London, especially in apartments in purpose-built blocks.

Also, while there has been increased legislation surrounding the tenancy agreements, it has not been enough to deter entry (or exit) to the market, which is fully accessible to overseas investors.

The main complaints I can observe concern the difficulties for South African investors in obtaining mortgage finance. There are specialist lenders around but there is clearly a large gap in the lending market, which, if filled, would encourage even more investment by South Africans eager to diversify their portfolio.

As conveyancing lawyers, we tend to see a snapshot. For those wanting want to have a wider view of the statistics, I would recommend visiting sites like rightmove.co.uk.

RESOURCES

Bartons Solicitors

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GLOBAL MARKETS

BY WILSON MAGEE2017 Outlook

GlobalThe outlook for profit and dividend growth

for real estate companies around the world generally remains positive, but differing

macroeconomic influences, as well as varied local supply and demand trends, suggest that fundamental outcomes will differ by market and even within property segments in markets.

Investor concerns continue to be dominated by potential changes in long-term interest rates in the United States (U.S.), monetary policy in Europe and Japan, and specific property market policies in Asia. Strength Among Various Global Real Estate Markets As we survey real estate markets globally, we see pockets of strength currently in office markets such as Stockholm, Sydney, Tokyo and Hong Kong. We think rent growth is also likely to bolster operating

performance for rental apartment landlords in Germany and for high-quality retail property portfolios in Europe and Australia. Meanwhile, expanding tourism trends should support continued strong revenue growth for hotel property owners in Spain. Due to strong demand from e-commerce tenants, we expect positive trends to continue in many industrial markets in Europe, the United Kingdom and the United States. Possible ChallengesNonetheless, there are certainly areas of concern. Uncertainty regarding the consequences of the United Kingdom’s Brexit referendum vote to leave the European Union make forecasting London, office occupier demand trends difficult.

Properties have continued to trade firmly in the investment market, however, due in part to the

Real Estate Markets


positive effect from the devalued British pound. In Singapore, we expect rents to remain soft for most property types, and our outlook for Hong Kong luxury retail properties remains negative, even as recent data suggested signs of stabilization in tenant sales. Hong Kong also recently introduced additional stamp duties, aimed at non-local residential buyers and speculators, that may cause a change in pricing trends that have been positive recently. Potential Dividend Growth in the U.S. In the largest segment of the market, U.S. real estate investment trusts (REITs) continue to report strong growth in portfolio operating profits, commonly measured in the US REIT market by same-store net operating income (‘same store NOI’) growth. However, in sectors with shorter lease durations—hotels, storage and rental apartments—growth rates have remained positive but are decelerating, a trend we expect will continue. Job growth and moderate-to-low levels of construction should support revenue growth across most U.S. property sectors. Leverage has remained low in the context of historical ratios, and, accordingly, we anticipate these sectors’ generally strong record of growing dividends has the potential to continue in 2017. Renewed Political Appetite for Infrastructure InvestmentPolicymakers around the world appear to be renewing their interest in making infrastructure investments as a fiscal stimulus to seek to lift economic growth rates, while also improving overall economic efficiency and their constituents’ quality of life. Low funding costs currently provide further incentive, but often governments’ spending capacity is limited due to budget constraints and the enormity of the capital required.

We think significant private capital investment would be essential for policymakers to achieve their goals, and this would be good news for many listed infrastructure companies. Investors Look to Clean, Renewable EnergyRelative to electric utilities in general, we expect relatively higher financial growth rates from renewable power companies, which we believe remain generally well positioned for the global transformation toward cleaner energy sources. Lower costs and greater efficiency, coupled with supportive regulatory policies, are creating attractive capital investment opportunities, in our view. We think challenges remain for utilities that have greater reliance on coal and nuclear generation.

The trend toward cleaner energy sources has provided capital investment and growth opportunities for many energy infrastructure companies in North America, as demand for pipelines and other facilities serving natural gas producers has been strong. We think long-term contracts may provide stability for relatively higher dividend distributions with the potential for inflation-linked growth, and those with construction capabilities appear to us to be well positioned for potential public policy initiatives that target improving infrastructure.

What are the risks?All investments involve risks, including possible loss of principal. Investing in real estate securities involves special risks, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments affecting the sector.

Investments in REITs involve additional risks, since REITs typically are invested in a limited number of projects or in a particular market segment they are more susceptible to adverse developments affecting a single project or market segment than more broadly diversified investments. Investments in infrastructure-related securities involve special risks, such as high interest costs, high leverage and increased susceptibility to adverse economic or regulatory developments affecting the sector. Investments in utility company securities, if purchased for dividend yield, involve additional interest rate risks. When interest rates have risen, the stock prices of these companies have tended to fall.

Special risks are associated with foreign investing, including currency rate fluctuations, economic instability and political developments. The risks of foreign investing may be greater in developing or emerging markets.

RESOURCES

Franklin Real Asset Advisors

The trend toward cleaner energy sources has provided

capital investment and growth opportunities for many energy

infrastructure companies in North America...


INVESTMENT INSIGHTS

For those of you viewing us from the outside, yes, Washington, D.C.—the entire country, in fact—is a different place today than it was just a

few short months ago. Donald Trump, 45th President of the United States, is fulfilling the promises that got him elected. He’s draining the swamp in our nation’s capital, and the effects of this long-overdue shakeup are being felt from coast to coast.

As you would expect, liberal America doesn’t like it. Our mainstream media, controlled by the liberals, is portraying the situation as dire, the nation’s mood as somber and Trump himself as a conniving ‘king in waiting’. But nothing could be further from the truth, let me tell you.

Things are different. You can feel it on the streets; those of us who love capitalism have hope again. The bad decisions of the previous administration are systematically being undone and righted, and that’s good news for profit-seekers both inside and outside the U.S.

It’s about time we had someone who understands business—and how to succeed—running the country and steering it back to its place as a global leader in commerce, education and politics. Any foreign investor

who’s smart will recognize the momentum is just beginning and will catch this wave on the front end.

OK, so Trump is a no-nonsense guy, who says what’s on his mind and sometimes tweets those unfiltered thoughts to the world at all hours, making even his staunchest supporters cringe. He’s definitely breaking the mold at every turn. But here’s the thing: it’s not ‘business as usual’ in U.S. politics anymore.

Trump is president precisely because our citizens don’t want things done “the way they’ve always been done.” Trump doesn’t have the political baggage that every other politician carries into office. He doesn’t owe any favors, and he didn’t need this job. (By the way, he’s taking a $1 per year salary.)

He ran for office because he loves this country, and he knows the foundation of capitalism is crumbling. Let the chips fall where they may, because he is going to do everything in his power to undo what his predecessor screwed up—from entitlements to business-unfriendly tax rules and everything in between.

America was out of control across the board, domestically and globally. The business sector is breathing a huge sigh of relief that Hillary Clinton wasn’t able to sustain the choke-hold those bad

The Disruption in the

It’s for Your Benefit TooBY RJ PALANO

U.S. Status Quo


decisions put on our—and your—dreams of profiting and thriving in this economy.

A Clinton presidency would have spelled disaster for this country under her kind of leadership, which makes promises with everyone else’s wallet. Yes, it’s possible to improve our educational system—even without promising free college tuition to the entire populace. Our new Secretary of Education has her own ideas on academic excellence, and that doesn’t involve giving away the bank.

Ignore the sensationalism that’s making headlines, courtesy of CNN and the rest of the liberal U.S. media. Sure, Trump made a mistake by choosing Michael Flynn as Secretary of Defense. But the president acted swiftly and decisively to fire him after it was revealed that Flynn lied to Vice President Mike Pence. Now, that’s the way a proper leader of the free world should act!

To those overseas, this must seem like a reality TV show, and I must admit, it is somewhat entertaining! Right up to where you see Democrats Nancy Pelosi (Minority leader of the House of Representatives) and Dianne Feinstein (Senior Senator of California) twist and turn the truth. It’s as if they will say and do anything to preserve their sick entitlement habits. They are part of the disease that is rampant in America and that is dumbing down our citizens. They don’t want leaders. They want followers who they will protect at the price of their vote.

But despite their demented efforts to stonewall Trump, there is an uprising in this country for a safer, better America. You don’t do this by taking away citizens’ guns and leaving them only in the hands of criminals and the government. You don’t do this by failing to vet who comes into this country. You don’t do this by making deals with terrorist nations like Iran.

We need change in America, and we are getting it. Look at the optimism on Wall Street as the stock market is in an unusually long bull run! The U.S. is on a major upswing in spite of the sickness in Washington. Is it really any different anywhere else?

Trump postures, he pushes, and then he walks it back and negotiates. Isn’t it great to finally have a president who knows business and actually understands a balance sheet? It’s the first set of balls in the White House since Hillary left. This is no small undertaking, and most people in Trump’s position would find the scrutiny of their every word unbearable. But that’s what makes him Trump! He doesn’t care what people say; he’s looking out for this country and is going to run it like a business. Can I get an AMEN?!

The Republicans have already torn up Obamacare, which was a joke from the start. But you know—

promise people anything to get their vote and you can preserve your power almost indefinitely. We don’t know what the new healthcare system will ultimately look like, nor Trump’s policies for education.

But this we do know for sure: there is optimism like never before for U.S. businesses and their employees, with lower income tax rates coming for corporations and individuals alike. The impact this is having on business can be seen from Miami to Atlanta, as well as other parts of the U.S., but especially the Southeast where roads are being widened and developers are building again.

The future is bright not just for Americans, but also for overseas investors ready to ride this massive wave.

RESOURCES

BuyCashFlowProperties.com

RJ Palano is a turnkey operator in Atlanta, Georgia, an author and marketer and is an invited speaker for the Information Management Network (IMN) Conferences for hedge funds and family offices. His new books, The Buy Sell Machine will be released in the 3rd Quarter of 2017 and No BS Retirement Account Investing in the 4th Quarter.

About RJ:


MALTA

RESOURCES

Henley Global & Partners, Forbes

The Henley & Partners ‒ Kochenov Quality of Nationality Index (QNI) is an index that objectively ranks the quality of nationalities

worldwide, based on their internal and external value factors. The internal value of nationality measured by this index relates to the “quality of life within a nationality’s country of origin”, while the external value identifies the “diversity and quality of opportunities” that each nation allows its citizens to pursue beyond their country of origin.

Based on this QNI, Malta was ranked number 22 of 161 countries in 2015 ‒ categorised as a country with a ‘Very High’ quality of nationality, and scoring high on factors like scale of human development, weight and diversity of travel freedom, and weight and diversity of settlement freedom.

According to a Forbes business profile, due to its low debt-to-GDP ratio, and a financially sound banking sector, Malta has been able to weather the euro-zone crisis better than most EU member states. It also has low unemployment relative to other European countries, and led the euro zone in growth in 2014 & 2015.

Citizenship-By-Investment ProgrammeMalta is one of only six countries offering citizenship-by-investment programs that provide a direct route to citizenship based on investment. These programs are a quick and simple way to legally acquire new citizenship.

Key factors about the Malta Individual Investor Programme (MIIP):• Designed and implemented by Henley & Partners

for the Malta Government in 2014.• Includes three financial requirements: a

contribution to the development of Malta, a purchase of stocks/bonds and a property transaction

• Combined upfront financial requirement: EUR 900, 000.

The Malta Residence and Visa ProgrammeAccording to Henley & Partners, a change of residence is a sensible option for clients living in countries with limited options for tax and estate planning. Other reasons include the availability of more lifestyle choices and a better quality of life, as well as increasing personal security (if living in a country with an unstable political or economic situation, for example). Key factors about the Malta Residence and Visa Programme (MRVP):• Minimum requirements include 1.) an investment

in government bonds (to be retained for a minimum period of five years) and a property purchase 2.) OR a property lease and non-refundable government contribution.

• Combined financial requirement for Option 1: EUR 520,000 ‒ EUR 570,000.

• Combined financial requirement for Option 2: EUR 120,000 ‒ EUR 144,000 per annum (for five years) plus a non-refundable government contribution of EUR 30,000.

BY JEAN BROWN

A Quick Look at Your Residence or Citizenship Options

Why Malta?

NOW!Invest in US Property

Find out why more South African Investors are moving their Money to the US!

Contact RJ directly on [email protected] or 813 495 3006 to get involved in the best cash flow houses in America…with the SAFEST property management system that delivers your results right into your bank account.

Special buyers trips or personal visitations are organized for your busy schedule and videos and pictures are available of all houses


ECONOMIC INSIGHTS

BY ANTON VAN TEYLINGENHere’s What Will Happen

SA Downgraded

South Africa’s sovereign credit rating is on the brink of being downgraded, with all three major credit ratings agencies assigning our rating a

negative outlook. In these torrid times, a question I’m often asked is: What happens if South Africa gets downgraded? Let’s take a look at the effect a ratings downgrade would have on South Africa.

In 2016, South Africans far and wide were kept on the edge of their seats by the constant threat of a “looming ratings downgrade”. Thanks to the efforts of Pravin Gordhan and the National Treasury, we escaped

the fateful event. However, murmurs of a possible downgrade are starting to surface once again.

What happens if South Africa gets downgraded to junk?The first and most visible reaction will be reflected in currencies and bond yields. Since these are directed by market sentiment in the short term, they are most vulnerable. The Rand will weaken considerably. The extent of the weakness depends largely on whether the chance of a downgrade has been “priced” in to the rate.

to Junk Status?


Red: PPP rate | Yellow: IRP rate | Gray: Actual rate | Green: IRP & PPP combined

To determine this, we need to look at whether the Rand is over- or under-valued. Currently, market analysts feel that the Rand is close to being correctly valued after taking economic theory into account.

How will the Rand behave?Looking back from 1994 to now, we have used two popular measures to assist us with a forecast. Purchase Power Parity (PPP) and Interest Rate Parity (IRP) are economic models that are often used when looking to determine future currency performance in the medium to long term.

Although the formulas are fundamentally sound, we know too well that economic theory and real world application are two different things. They seem to provide us with a decent outlook as to where the Rand should be trading, roughly.

At the time of writing, the Rand was trading at 12.78 to the dollar. According to the graph above this placed the Rand slightly higher than the 12.87 the combined IRP & PPP predicts. This is to say that the Rand is still somewhat undervalued to the USD and there may be some residual “risk premium” priced in. Unfortunately, for emerging markets, this premium is present more often than not, due to the nature of their sovereign, political and economic risks.

Learning from Brazil’s RealFrom August 2014 until February 2016 Brazil was downgraded three times each by S&P, Moody’s and Fitch. Over the course of that period we saw the Brazilian Real weaken by 76%, from 2.27 to 4 against the USD.

This effect was largely overstated and I am pleased to report that the BRL has since recovered by 28% from

its lowest point. This confirms that in the period leading up to the expected downgrade, markets could overstate the expected effect due to fear of the unknown.

What happens to South Africa’s government debt?In the event of a downgrade, currencies often take a hammering, but while this happens bond yields will rise. This may sound like a good thing but it’s not, as yields are inversely correlated to price. Foreign investors will be offloading local bonds partly to avoid any possible risk and to prevent possible exchange rate losses.

Ultimately this means our government’s debt (bonds) lose their coveted “investment” grade status. Many global bond Indices will remove South African bonds from their tracking. This then prompts global investors, both institutional & individual to sell South African bonds (if they are using Indexes to manage their funds).

Currently, we are included in the Bloomberg USD Investment Grade Emerging Market Bond Index and the World Government Bond Index. Should both two of the three agencies downgrade South Africa, we could find ourselves falling off these Indexes.In addition, one also has to take into account that many Global pension funds are prohibited from investing in “ junk” debt. This will all contribute to a massive flow of money out of the Republic.

How will the SARB intervene?In the days following the downgrade, the market will look to the Reserve Bank for a response. The most expected reaction will be for them to raise interest rates. This should encourage capital inflow that is expected to bring exchange rates back under control.

USD -ZAR valuation


RESOURCES

Sable International

Inflation should have a lagged effect. Economic theory suggests inflation should move opposite to interest rates, however looking back, this does not always appear to be the case. Brazil experienced a similar correlation in the months following their downgrade, so in theory we should expect the same.

What will become of South Africa’s GDP?GDP growth will be the next important factor to consider. With lower levels of foreign direct investment, productivity begins to take strain. This in turn hampers GDP growth, which in South Africa, is a cause for concern.

With GDP growth levels last reported at 0.2%, the effect of a slowdown could ultimately lead South Africa into a recession. This in turn would put strain on the labour market and would likely increase the chances of social and political upheaval.

Turning this ship aroundNow that we have taken a sobering look at the possible repercussions of a credit downgrade, let’s look at what can be done to turn things around.

South Korea is a great example for us to use as reference. In December of the 1997 Asian financial Crisis, South Korea had its credit rating slashed to junk by all three ratings agencies. The reaction by government was largely to thank for their quick turnaround.

They accepted that some conglomerates could go bankrupt and it provided very little help in the way of bailouts. One of the chief proponents to its success was its adjustment to a dynamic and flexible labour market.

In Feb 1999, just over a year, it once again regained investment grade status.

That being said, South Africa’s economic and social construct is largely different to South Korea’s. The important point to take away from this is the crucial role that government plays. On the other side of the spectrum, Romania, for example, took six years to turn itself around from non-investment status.

Final thoughtsIn closing, the above does not consider all the possible ramifications a downgrade could have, and we haven’t even begun to look at the tax and austerity measures that could come into the equation.

The important thing to observe is that, when a downgrade is on the cards, the reaction leading up to the event is largely overstated ‒ mainly to panic. In the end, many nations have been down this road before and come back stronger. Let’s just hope our resilience is not put to the test anytime soon.

Blue: Inflation rate | Red: Interest rate

Inflation vs Interest rates

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INVESTMENTS

As South Africans, we have a lot of things going for us, but a great savings culture isn’t one of them. This is the number one reason

for the low savings rate and high debt burden among most South African households today, maintains Jac Laubscher, Group Economist at Sanlam.

The South African Savings Institute points to low disposable income, low employment growth, a rising tax burden and an inflationary environment as the primary reasons for the poor savings rate in the country. In addition to this is the general lack of confidence that South African have towards the future.

BY JEAN BROWN

Save Towards Your First Property Investment

Tax FreeSaving Accounts


RESOURCES

SARS, Trading Economics, South African Savings Institute, Fin24, Personal Finance, BiZNews, Times

Live, Sygnia Asset Management, SASSA, Money Web

Reasons aside, South Africans need to save. For one, we need to prepare for those inevitable rainy days, as well as for our retirement. The Older Pensions Grant for 2016/2017 stands at a mere R1 510.00 per month ‒ barely enough to keep body and soul together. Add to this the ongoing payment debacle with SASSA and their outsourced grants payment company, Net1, and it’s quite evident that South Africans need to avoid being overly dependent on government for their long-term financial security.

Tax-Free InvestmentsTo incentivise better saving habits among South Africans, SARS has introduced a savings vehicle that allows individuals to invest and save on a tax-free basis. A Tax-Free Investment (TFI) of up to R33 000 can now be made into a Tax-Free Saving Account (TFSA) each year; all savings are then exempt from income, capital gains and dividend withholding tax. TFSAs currently have a lifetime limit of R500 000 and are effective vehicles for saving towards a deposit on a big investment purchase ‒ like your first property.

According to Investec, if you take out a TFSA for your new born child today, you would have met the current lifetime contribution of R500 000 by the time they are 17 years old. By 18, this investment could have grown to over R1,04m ‒ a healthy lump sum that you can then put towards towards their tertiary education. If this TFSA remains untouched until your adult child is 35 years old, they will have R3.3m to put towards a new property investment of their own.

How TFSAs workYou can either make a once-off payment of R33 000 into a TFSA each year, or you can make monthly deposits ‒ as long as the total amount in a one year period does not exceed the R33 000 limit or push your overall savings beyond its lifetime limit of R500 000. According to Alexander Forbes, ongoing investments into a TFSA can grow significantly over time. They key word here being ‘time’. The longer you can keep your savings invested, the more time your investment will have to grow and benefit from the relevant tax exemptions.

Other pointers to consider:• You cannot carry forward your annual tax savings

limit to the following year. If you don’t invest the full R33 000 in year 1, you may not roll-over the outstanding amount to year 2 and invest more than the annual limit of R33 000.

• If you exceed the R33 000 annual investment amount you will be required to pay a penalty of 40% of the excess. i.e. If you invest R36 000 in a year, you will be taxed 40% of the extra R3000 deposited ‒ you must then pay a total of R1 200 back to SARS.

• Returns on your investment may push your balance to over R33 000 in a year. This will not affect the amount you can invest in your TFSA the following year.

• You can have more than one tax free investment spread across a few financial service providers, (i.e. Absa, Sygnia Asset Management, Investec) but you are still only allowed to save R33 000 per annum across all investments.

• Withdrawals from a TFSA cannot be replaced: if you withdraw the returns on your investment and then want to reinvest the same amount within the same year that amount is regarded as a new contribution and impacts on both the annual and lifetime limits.

Limits to TFSAsTax free investment accounts cannot be used as transactional accounts, nor can an existing account be converted to a TFSA. In addition, debit or stop orders and ATM transactions from these accounts are not possible.

There are a number of financial service providers that offer TFSAs. These include• Absa• Allan Gray• Coronation• Investec• First National Bank• Nedbank• Old Mutual• Sanlam• Standard Bank• Sygnia Asset Management Company

WHERE TO OPEN UP A TFSA:

WEALTH

RESOURCES RESOURCES

Forbes.com Knight Frank

The global population of Ultra-High-Net-Worth Individuals (UHNWIs) is set to rise by 43% by 2026, says The Wealth Report 2017 by Knight Frank. The report reveals considerable variation in growth rates in different regions and countries, however. According to the Report:

• London, UK: the number of UHNWIs ‒ those with $30m or more in net assets – rose by 6,340 in 2016, taking the total to 193,490. The Wealth Report estimates that the UK will remain the front-runner in terms of its ultra-wealthy population, with a forecast 30% rise in UHNWIs over the next decade.

• A higher rate of growth in the US’s UHNWI population is expected in the next 10 years than for many other developed countries, despite uncertainties surrounding Trump’s policies.

- Vietnam has seen the biggest growth in its ultra-wealth population over the last decade. The number of millionaires is predicted to jump from 14,300 to 38,500 by 2026.

- Asia is starting to challenge the USA in terms of the largest regional population of UHNWIs. The region is also set to strongly outperform Europe in terms of the rate of growth of UHNWIs over the next 10 years, with a 91% increase predicted, compared with 12% in Europe.

• The predicted hotspots for growth in ultra-wealthy populations in Africa and Latin America include Mauritius, Ethiopia, Tanzania, Uganda, Kenya, Rwanda, Mexico and Argentina.

• Australasia, Canada, Malta, the UAE, Qatar, Monaco and Israel are examples of key ‘safe havens’ attracting migrating UHNWIs.

• Drop your living expenses: ensure that your expenses are lower than your income.

• Save on vehicles: buy cash if you can and, if you can’t, do your homework properly to make sure you’re getting the best interest rates on loans.

• Save on accommodation: initially rent rather than buy, especially if you need financial flexibility to build up that emergency fund or retirement savings.

• Only buy what you need: follow a set budget to avoid spontaneous and unnecessary spend.

• Save a percentage of your income: the percentages vary, but some experts say between 30 to 50%.

• Put in the hard graft now: building wealth doesn’t happen overnight, and requires sacrifice and diligence.

• Become an entrepreneur: expect to lose money and make mistakes, but be sure to learn from every experience along the way.

• Invest in real estate: buy to rent or buy to flip. This won’t make you wealthy overnight, but will add to your net worth over time.

Global Wealth Trends: Countries to Look Out For

Wealth Tips

How to Grow Wealth

& Insights


MY STORY

Conversations with TT MbhaBY JEAN BROWN

Black Excellencein Real Estate

61APRIL 2017 SA Real Estate Investor

Once a young boy growing up in Pimville, Soweto, now the Director of Black Real Estate, Thato ‘TT’ Mbha is fast making a

name for himself as the go-to real estate practitioner for high net worth celebrities in South Africa.

His friendship circles include SA Idols judge, Somizi Mhlongo, he’s already been featured in one of the country’s popular men’s magazines, Destiny Man, and is now being described as the man responsible for bringing swag back to the real estate industry.

That being said, TT insists that his services are not exclusive; he works with anyone and everyone looking for property to invest in, no matter the size of their budget or the colour of their skin.

I recently caught up with TT to find out more about his unique business model and vision.

BeginningsTT is a qualified fashion designer, Chartered Marketer and a recently qualified Master Practitioner in real estate. His primary passion is real estate, however, which is what eventually lead him to establish his own company, Black Real Estate, in 2014.

“I always knew I would work in real estate one day, I just didn’t know how,” TT explained. He described scenes of himself as a young boy walking the streets of Soweto with his friends, standing on piles of rocks to look at houses ‒ the ones on street corners, specifically ‒ while dreaming of owning a corner house of his own one day.

TT very much attributes his current success in real estate to his experiences growing up in pre- and post-apartheid South Africa. “I come from the era of black kids who were the first to be accepted into white schools in South Africa. I went from my predominantly black neighbourhood to a school populated with Indians, Coloureds, Whites ‒ you name it. It was initially quite a culture shock for me, as I then had to go back to the township each day. And I had to be black about it.”

“I eventually had friends of all colour and from all neighbourhoods in Johannesburg. I believe this experience has made it easy for me to work with clients across all demographics. This ranges from families wanting to move out of a township for the first time, to high net worth individuals who can afford a property worth millions.”

PartnershipsThe strategic partnership between Black Real Estate and Keller Williams Realty Worldwide evolved after TT did some shopping around to learn about other agencies’ business models and partnership opportunities.

“Keller Williams stood out for me because of their empowering business culture. The entrepreneurial partnership I formed with them allows me to operate under my own branding, with their full blessing, and provides me with access to Keller Williams’ resources. This has greatly reduced my overheads,” explained TT.

This partnership has also enabled him to extend his services to a pool of U.S. based investors looking for property investment opportunities in Johannesburg and Cape Town. In turn, TT develops partnerships with small, black-owned businesses ‒ painters, photographers, plumbers ‒ to provide them with ongoing work opportunities. He selects these businesses based on their levels of excellence. “They MUST deliver,” he emphasised, “I’m not trying to use BEE to leverage my business on the merits of my ‘blackness’ alone. I want to become the most preferred agency of choice because my services are good, not because it will make other companies look good to work with me.”


RESOURCES

www.ttmbha.kwsa.co.za

On being blackBlack excellence, empowerment and upliftment is very much at the core of what Black Real Estate is all about. “Black is a state of mind. It’s a lifestyle and a movement. It’s about being proud of being a black South African and then striving to do our best, to focus on upliftment and move beyond the injustices of the past,” explained TT.

He emphasised that this doesn’t mean that he is against white South Africans. “The reality is that, in a population of 55 million people, 90 percent of South Africans are black, and I am simply catering to the majority,” he explained.

Property portfolio“I know how important it is that I have practical experience in property investing, which is why I have a sizeable property portfolio of my own, made up of land, apartments and holiday homes across the country.”

On mentoring It is TT’s hope that his story will inspire other black kids living in informal settlements to pursue their dreams and rise above their circumstances. “I can only hope for the South African real estate industry that there will be more TTs who will emerge ‒ individuals who are willing to start from the bottom up, as I did, who are passionate about the job and aren’t expecting everything to just fall into their laps.”

TT shared that he is frequently approached by individuals wanting mentorship from him; over the years he has realised that, while he strongly endorses mentorship, the mentee needs to understand the need to own the process and drive their own mentorship programme.

“People in South Africa want mentors, but they can’t simply expect an information download over a five-minute cup of coffee. They should rather approach a mentor with an idea in mind and ask for help with unlocking it. Something else that will get a busy business person’s attention is if they are presented with a compelling solution to talk through.”

The broader vision for Black Real Estate includes the upskilling of workers with limited access to formal education to increase their labour value and help improve the economy. TT had the following to say about this vision: “The aim here would be to help unlock the full potential of the black entrepreneur who cannot afford to study, or who doesn’t necessarily want to ‒ because, let’s be honest, formal training isn’t for everyone. I want to be a servant leader who serves the interests of others to help them build their own legacy through real estate.”

Where to find Real Estate Investor

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WWW.REIMAG.CO.ZA

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