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Buy Dullstroom Property & Earn Income

Dullstroom and small upcoming tourist towns linked to the Highlands Meander, offer ‘Gautengers’ the perfect country escape from the big city. Many buyers have taken the option of ‘buying to let’ and have been able to earn income on their properties to contribute towards their bond repayments.

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So what type of property will be the most attractive for holiday rentals?

Dullstroom Reservations say that the majority of their enquiries are for couples or families of four, so you don’t have to buy the biggest house on the market. For the more brave being able to offer flexible accommodation options is ideal. For example  a grouping of cottages that sleep 2 to 4 guests individually but are close enough together to book out as a group. This can be done in the village by buying and building on a stand that already has subdivision approval, but is easier on a farm property where obtaining Resort Rights on agricultural land is far easier than gaining Full Title approval.

Farm or Village Accommodation?

Both offer pros and cons and cater for two markets which are equally as popular.  Visitors are split with half enjoying being near to all town’s amenities, shops, restaurants etc. The other half prefer to book farm accommodation with access to private fishing waters.  Venues located within a 10km radius of Dullstroom will have an advantage over those in outlying areas, but you will pay more for the privilege! Access is one of the most important considerations, and if you can only make it to your venue in a 4×4 then understand that your target market will be limited.

Occupancy Rates

Dullstroom attracts a weekend clientele filling 75-85% occupancy over weekends, while midweek occupancy is approximately 10 -15%. However it must be noted that this area has experienced a marked increase in the number of midweek and off-season bookings over the past 2 years. It takes time to establish a strong venue presence, sometimes up to 18 months, so one must be realistic that creating meaningful income will take time. However it is good to know that venues operating for 3 years or longer, which have maintained their standards, have been known to increase their overall occupancy levels to between 40% and 60%.

Servicing & Standards

Often it is a drop in servicing standards that is the demise of  venues just as they start to gain popularity. Venue owners should set aside a percentage of their income to reinvest in their properties. Soft furnishings should be added and replaced annually, with linen and towels being replaced as needed according to occupancy levels. The public and regular feet can sometimes play a part in wear and tear and the industry often requires for decor, carpeting and painting upgrades every 5-7 years.

Most venue owners do not live on the property, often managing it from afar. It is important to investigate the services in your area to ensure that standards don’t drop from one guest visit to the next. Dullstroom have a few service providers that are particularly geared up to do just that from cleaning and changeover services to property management services who employ a dedicated staff member to ensure that the venue is maintained and that changeovers are done effectively and efficiently.

The reservations office charges clients a booking commission anywhere between 12% and 16% commission depending on a sole mandate or open listing with them. They will market your property to their client base, confirm bookings, collect the deposit and key collections. The two operations, Dullstroom Reservations and Dullstroom Accommodation (013 254 0020), are professional and have many years worth of experience and can help you when first consulting on rates to charge (ranging from R250 to R550pppn), servicing and décor ideas.

Stats in this article are courtesy of Dullstroom Reservations 013 254 0254 or info@dullstroom.biz.

Dullstroom Winter Festival Set To Rock 10th – 19th June 2011

blog101The 2011 Dullstroom Winter Festival is jam packed with music, outdoor activities, winter goodies and the creative arts. The Festival is running for a total of 9 days with a public holiday in-between on the 16th June and will cater to all visitors.

During the festival this quaint village comes alive with shops, businesses and restaurants putting up sparkling decorations and Christmas lights to ensure families will continue to enjoy the midwinter Christmas theme that has been a firm favourite for many years.

Most pubs and restaurants will offer various Winter Festival specials or Christmas goodies on their menus and will ensure you will have a warm welcome with a roaring fire and drink in hand.

Artists performing over the Festival include Laurie Levine, Andre Swiegers, Albert Meintjies, Albert Frost and the Blues Broers. They will perform at various venues and times throughout the town including Harries Pancakes (who are celebrating their 25 year anniversary), Mrs Simpsons Restaurant, The Mayfly Restaurant and the Cherry Grove Shopping Centre.

For golf lovers itching to get on to the exclusive Ernie Else Golf Course check out the Birchcroft Private School Fundraising Golf Day at Highland Gate with R30,000 worth of prizes (limited entries).

There will also be a flea market and a farmers markets every Saturday as well as competitions, artist exhibits and creative fun at icreate.

There will also be a stunning Abba evening with Christmas Carols by Birchcroft students, the famous DJ Wors at the Duck & Trout, Beer & Whisky Tours and Tastings, a family day atWalkersons (where Zest Property Group will be hosting a property expo), Cheese & wine tastings, artist exhibits, horse rides, Clay Pigeon Shooting and more.

Go to the official Dullstroom Winter Festival Official Website for an updated program, contact details, accommodation bookings.Or alternatively email info@dullstroomwinterfestival.co.za.

CPA = Protection For Property Buyers in Dullstroom & SA

I thought this article by Adrian Goslett was great and applies to all Estate Agency practitioners in SA. We at Zest Property Group Dullstroom hope that this will be the start to cleaning up the industry.

With the new Consumer Protection Act (CPA) now in effect, property professionals will be forced to look at the way they do business and how certain procedures affect both them and their clients.

blog103The act has been a work in progress for many years but now that it has been implemented it will change the way businesses operate in South Africa completely.  In certain cases, risks that were previously assumed by consumers will now be placed on the supplier.  This means that South African’s are now among the most protected consumers across the globe.

So what impact will this have on the real estate industry? Adrian Goslett, CEO of RE/MAX of Southern Africa, highlights important aspects of the act pertaining to property.

“With regard to the sale of property, the CPA will definitely have an impact on how property professionals draw up contracts.  All standard contracts will need to be reviewed and must be brought in line with the requirements of the act. Certain terms may have been ambiguous in the past but now the act calls for clear and understandable terms that are partial to both parties.”

Goslett notes that as the main objective of the CPA is to promote a fair, accessible and sustainable marketplace, all terms within the property sale agreement must be fair and reasonable for both parties.

Until now parties could agree to any term in the contract, even if it severely prejudiced one party, which in most cases was the buyer. Parties had the freedom to negotiate contract terms at will, but now the CPA will set out to restrict contractual rights and make sure that parties prescribe to specific, just practices in the negotiating and selling of property.

“The voetstoots clause for example, was a one-sided term designed to safeguard the seller from liability for any damages that arouse from any hidden defects in the property. Voestoots can be simply translated to “as is”, which is how property was sold before the Consumer Protection Act was introduced. When a property was sold “as is” it meant that it was sold in whatever condition it was in – this is no longer the case.  This has now been changed and any defects that the seller is aware of must be made known,” adds Goslett.

The Voetstoots clause cannot be inserted into agreements for any property sold to an individual or small corporation in the ordinary course of business and a list of defects must be included. The purchaser must be made fully aware that the property is offered in its condition with the defects listed and agree in writing to accept the property in that condition.

“Essentially what this will do is get the seller to make sure all necessary aspects of the property are in suitable working order and indirectly this will give the buyer an implied warranty of quality on their purchase,” explains Goslett.

It must be noted that the Consumer Protection Act does not apply to any private once-off transaction where the seller’s ordinary course of business is not that of selling property and these sellers will still be protected by the voetstoots clause.  However, if an estate agent is involved in the transaction by means of marketing or negotiating the sale of the property, this service will be covered under the ambit of the act.

When property professionals are involved in the marketing of any property or services that pertain to their ordinary course of business, they will need to make sure they adhere to the restrictions laid out in the CPA regarding direct marketing.  This is defined in the act as approaches in person, by mail or electronic communication, which is further defined as telephone calls, fax, sms, wireless computer access, email or any similar technology.  Consumers may request that suppliers do not contact them at all.

“Estate agents will need to have permission from prospective buyers before they engage in any form of direct marketing and the buyer will have the right to withdraw from any transaction that may occur as a result of this marketing,” says Goslett.

Transactions that result from non-direct marketing such as regular print adverting or show houses that are open to the general public will be exempt from the cooling off period.

“Although some aspects of the Consumer Protection Act may seem severe and will require certain suppliers to adjust their business practice, it is important to remember that this act will have a positive effect on the sentiment of consumers in the current market,” concludes Goslett.

Article By Adrian Goslett – 12 May 2011

SA House Prices Show Growth April 2011

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Is this an anomaly or a return to positive price growth?

Property prices showed positive year-on-year growth in March, according to the latest results released by ooba – South Africa’s leading bond originator.

The March oobarometer price index reveals that the average house price rose 1.1% year-on-year to R860 492 from R850 864 a year earlier. The growth in the average purchase price amongst first time buyers also showed an increase, with year-on-year growth of 4.5% to R623 179 in March 2011 from R596 357 a year earlier.

According to Saul Geffen, CEO of ooba, the results are both positive and surprising. “Given the high levels of growth experienced in the first half of last year, and the negative growth recorded for the last consecutive 4 months, we did not expect prices to return to positive territory so quickly. We will have to wait until next month to see whether this is an anomaly or a return to positive price growth.”

According to other indicators tracked by ooba, the average approved bond size increased 7.4% year on year in March to R725 973, compared with R676 256 a year earlier. The average deposit as a percentage of purchase price also fell 23.9% year-on-year to R134 519, equivalent to an average deposit of 15.6% of the purchase price.

The average decline ratio during March also decreased by 8.1% year on year, from 52.8% in 2010 to 44.7% in 2011. An additional positive indicator is that the effective overall approval rate continued to show a year-on-year increase of 5.6% to 64.5%.

The number of bond applications in March through ooba was the highest level recorded for nearly three years (since May 2008) and was 36% higher than the average monthly application intake recorded throughout 2010. March volumes were however only 36% of the application volumes recorded at the peak of the market in May 2007.

The levels of approved home loans also reached a recent high in March 2011. ooba’s March figures was the highest value of approved home loans since October 2008, two and a half years ago.

Geffen says that he expects the growth to continue. “ooba has experienced consistent month-on-month increases in application intake since the beginning of 2011. February was already significantly up, and March exceeded February by some margin. We expect to see this growth continuing.”

“With interest rates currently at a 30 year low, improved affordability has enabled many would-be homeowners to take the leap, as the cost of servicing a bond has reduced considerably. The improved affordability, combined with subdued property price growth, low inflation rates and real wage growth, has combined to make this a favourable environment for homebuyers.

Geffen says the continued relaxation in lending criteria by the major lenders is also a contributor to this rise in applications and approvals.

Dullstroom Farms For Sale Are Attracting Strong Buyer Interest

Full oobarometer analysis:

Indicator Mar-11 Mar-10 Change yr on yr Mar 11 vs Mar 10  Feb-11 Change month on month Mar 11 to Feb 11
Avg purchase price 860,492 850,864 1.10% 832,105 3.40%
Avg purchase price of  first time buyer 623,179 596,357 4.50% 599,105 4.00%
Avg approved bond size 725,973 676,256 7.40% 666,836 8.90%
Avg deposit (as % of purchase price) 15.6% (R134,519) 20.5% (R174,608) -23.90% 19.9% (R165,269) -21.60%
Avg age of applicant 37 37 No change 37 No change
Avg initial decline ratio (first bank decline) 44.70% 52.80% -8.10% 45.90% -1.20%
Ratio of applications declined by one lender but approved by another 22.70% 22.10% 0.60% 23.30% -0.60%
Effective approval ratio 64.50% 58.90% 5.60% 64.80% -0.30%

This report was prepared by Ooba: www.ooba.co.za

Occupational Rent Explained – The Ins and Outs

I thought this article written by Adrian Goslett was excellent and worth replicating on this blog.

Make sure you are covered.

Reading the fine print and ensuring that every eventuality is covered in an agreement of sale is one of the most crucial aspects of buying or selling property.

According to the laws governing property sales in South Africa, everything has to be reduced to writing and anyone who wants to conclude a sale without any complications should bear this in mind before signing any agreement.

Although a sales contract normally has a section discussing occupational rent, many buyers and sellers do not realise its importance.

Essentially, this clause is intended to protect both parties as it covers the seller when the buyer moves into the premises before transfer has taken place, or the buyer should the seller stay in the property after it has been transferred into the buyer’s name. The clause should clearly state how much occupational rental must be paid each month.

While a buyer may have no intention of moving into a property before it is registered in his/her name, situations may arise where early occupation has to take place. Delays at the Deeds Office and problems with obtaining rates clearance certificates are just two of the factors that may delay the transaction.

Likewise, a seller who initially didn’t plan to move out before the transaction has been completed may have to leave a property simply because they didn’t factor delays in transfer into the equation, or they might need to stay on for longer for a number of reasons.

Although frustrating, those who have foreseen such problems are in a far better position to deal with them than those who have simply chosen to ignore the occupational rent clause.

Both sellers and buyers who do not ensure that the required occupational rent amount is stipulated in the agreement of sale leave themselves wide open. Buyers do not call the shots in this area and the seller needs to ensure that the amount of occupational rental reflected in the sales contract covers the actual bond repayments that he has to continue making until the sale has gone through.

On the other hand, the seller cannot be unreasonable in these cases by demanding a figure well in excess of the market-related value of the property and the bond amount owing.

It is imperative for the buyer and seller to agree upon a figure that is fair to both parties. The main objective of any sales agreement is to clearly set out the intention of the parties so that there can no argument later on.

Generally speaking it is normal practice for an agent to insert an amount that ensures that the bond amount that the seller is paying is fully covered. However, some agents put in an amount equal to 1% of the purchase price. This can result in seller losing money in the event that he is servicing a high bond.

It is vital for both the buyer and seller to read the sales contract in its entirety, ensuring that every eventuality is understood and taken care of adequately. Buying and selling property is an emotional time for everyone and adopting a ‘things will work out for the best’ approach could end up in conflict, costing money and souring what should be one of the most exciting moments of your life.

*Adrian Goslett is the CEO of RE/MAX of Southern Africa.

Capital Gains Tax Explained 2010

How much Capital Gains Tax could you pay when selling your Dullstroom property?

blog104What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax paid on the profit made when property (or any asset of a capital nature) is sold.  CGT was introduced in South Africa on 1st October 2001, bringing us in line with international practice.

Who has to pay CGT?

All South African and non-SA residents who make a profit on the sale of a property located in South Africa need to pay CGT, including properties registered in the names of trusts, companies and close corporations.

How is capital gain or loss determined?

Capital gain or loss is calculated by deducting the base cost of the asset from the amount you sell it for.  If you owned your asset before 1 October 2001 (when CGT was introduced) you need to know what the value of your asset was on that date.

Base cost comprises:

  • Expenditure incurred to own the asset, including purchase price, transfer costs, conveyancer and legal fees.
  • Installation costs of the asset, including foundations and supporting structures on a building.
  • Any expenses to make improvements.
  • Costs incurred from selling the asset, such as estate agent’s commission and advertising costs.
  • Costs arising from evaluating the asset to determine a capital gain or loss.

Base cost does not include any expenditure that is tax deductable, interest paid on loans to finance the asset, expenses to upkeep and repair the asset including insurance premiums, devaluation of the asset through wear and tear and the effects of inflation.

What is an Annual Exclusion?

An Annual Exclusion of R20,000 capital gain or loss is granted to individuals and special trusts.  This means that if you make a capital gain of R20,000 or less for the year, you are not liable for CGT.

In the event of your death, instead of the Annual Exclusion rate of R20,000, the exclusion granted to individuals for the year of death is R200,000, which means that your estate can dispose of your assets without incurring tax, unless the gain or loss is more than R200,000.

Is my Primary Residence Exempt?

The Primary Residence exemption is applicable if you sell your primary residence (your home, where you live):

  • For R2 million or less.
  • For a profit or loss of R1.5 million or less.  Any profit or loss over R1.5 million will be subject to CGT.

You will be liable for CGT in the following situations:

  • You sell your primary residence of which a portion was used for gain, for example you rented out a cottage on the property, or used this for business purposes, then that part of the property is subject to CGT, worked out on a pro-rata basis.
  • Your property is larger than two hectares, with the area over and above two hectares being subject to CGT if sold.
  • You purchase a property in your name, it is the only property that you own, and you decide to live elsewhere. You are liable for CGT when you sell this property due to the fact that you do not stay on the property permanently.

The taxable portion of the asset is currently:

25% of net profit for natural persons,  50% of net profit for companies and close corporations, 50% of the net profit for trusts if the capital gain is retained by the trust and  25% of the net profit for trusts if the capital gain is distributed or credited by the trust to a resident or individual beneficiary.

This taxable portion of your net profit (the 25% or 50%) will be taxed at your Income Tax Rate. This means that you will pay an effective rate of approximately 10% for natural persons, 20% for trusts and 14% for all other legal entities, of your taxable portion.

Posted by Natacha Cunningham on Tue, Mar 01, 2011. All figures subject to change year on year. For more information on CGT, contact SARS on 012 317 2000 or www.sars.gov.za

Buying A Dullstroom Property? Think before you Buy

Buying a holiday home is a big decision and one that must be made with care – after all it is a big financial investment.  With so many options to choose from , it is well worth taking a few minutes to make a short list of what you want your property to deliver to your lifestyle before you start your search.

Your first place to start is by defining the ‘type’ of country property you want.

Ask yourself the following questions:

  1. Do you dream about owning a farm or a country house?
  2. A place in Dullstroom village or in a managed Country Estate?
  3. Would you like to buy a vacant stand in order to design and build your own home or would you prefer to buy an existing home?
  4. Do you want to keep your home to yourself as a private getaway or do you want to rent it out when you aren’t using it to generate an income?

Know Your Budget.

With the introduction of the National Credit Act and with banks having stricter loan criteria since the economic downturn, it is probably a good idea to understand where you stand. For example, at present the banks are granting bonds as follows (but this is subject to change on a regular basis and it also depends on your personal financial position):

Agricultural Land: Farms and small holdings larger than 3 hectares in size: 50% bond

Vacant Land: In country estates or in a village: up to 75% bond

Residential House:  Anywhere from 80% to 100% bond on the value of the property.

South African Citizens Living Abroad: 70% LTV (loan to value)

This means that now, more than ever, if you are property-hunting you need to have cash to hand for the outstanding balance that isn’t covered by your bond . Another consideration is to keep aside enough to cover transfer costs (conveyancing fees and transfer duty).

Why You Must Sign a Mandate Before Selling Your Property

blog105We are sometimes asked why we at Zest Property Group will only begin marketing a property when a mandate is signed – and not a moment before.

Well we believe that it is in a Sellers best interest to understand exactly what the nature of the arrangement is upfront so that there are no disputes later.

It is not unusual for property owners to have vague recollections of their property details such as their property name or even the exact size. Many properties for sale in Dullstroom are farms with unusual portion numbers or houses with odd erf numbers and part of our mandate clarifies the property details so that your property is marketed correctly. Our mandate also confirms in what specific entity the property is held or any title deed servitudes or restrictions.

Sometimes, if a property is owned by more than one owner, we need to clarify which parties need to be kept in the loop throughout the sales process and ultimately which parties have the right to give us a mandate.These may seem minor technicalities but they count when it comes to a hassle-free sale.

Some further benefits of signing a mandate

  • A mandate provides the estate agent with time to secure the highest price
  • It eliminates unecessary confusion as the terms of the mandate are clearly stipulated and agreed upfront by both seller and agent. These include mandate type, commission rate, length of the mandate etc.
  • In some cases, if you sign a Sole and Exclusive Mandate your Agency may offer you a better rate of commission. For example at Zest Property Group Dullstroom all our open mandates are signed at 7% plus VAT while our Sole and Exclusive Madates are signed at 6% plus VAT.
  • It is safer to have a limited amount of people through your home and the estate agent with your mandate will ensure to their best ability that the prospective buyers are genuine.
  • It creates a moral commitment between the agent and the seller ad motivates the agent to sell your property
  • The agent will most likely provide you with regular activity reports (at Zest Property Group Dullstroom all our sellers are sent a monthly activity report that outlines all advertising, enquiries and feedback for the previous month)
  • The agent is more eager to spend his advertising budget on your home.
  • Most importantly you avoid the risk of double commission claims.

If you are thinking about selling your property and would like to talk through the various options, then please don’t hesitate to contact us on 013 254 0219 or email info@zestpropertygroup.co.za.

Zest Property Group Dullstroom – selling properties for sale in Dullstroom and the greater highlands of Mpumalanga. Some info courtesy of Property Power 6th Edition.

How to Sell Your Home In A Buyer’s Market

o all Sellers out there, it’s a Buyer’s Market! There are no if’s buts and maybe’s about it and NO amount of wishful thinking is going to change it.  If you are in limbo because you haven’t sold your property, here are some tips on how to do so in a depressed market.  A good start is to accept that property values have come down – once you do this you give yourself the best possible chance of success.

Realistic Selling Price

Firstly, set a realistic market price. Your Estate Agent can point you in the right direction by providing you with a CMA (Current Market Analysis) when listing your property. The  CMA will give you an unbiased view as to the true market value of your property.

A good CMA will include:

  • an Area Analysis of properties sold in your area,
  • a Comparable Property Sales Analysis
  • an Age Analysis of how long these properties have been on the market
  • any special features or negative aspects specific to your property and how these may influence the selling price.
  • Finally – A suggested listing price

 

Pick The Right Agent

During the economic downturn, almost half of all estate agencies in South Africa closed their doors. It bears to reason that the ones still standing have been doing something right and are ready to take you through these hard times with honed selling and negotiation skills. An experienced Agent will not only market your property to new buyers, but more importantly, has a network of loyal, long-term buyers just waiting for the right property to come along. These buyers trust your Agent implicitly and if your property meets their checklist – then you may have a quick sale ahead of you – fantastic! Remember, getting an offer quickly does not mean it is under priced or is a sign of things to come – it is most likely because your Agent has exposed your property to these clients.

Buyers Will Bargain

Your price should allow for a small degree of negotiation as most offers right now will be lower than the asking price – especially if you have a cash buyer. ‘Cash is King’ because getting bond finance now is harder than ever. Don’t be fooled that the banks have ‘opened up their lending coffers’, the reality is that the true national average of bond application approvals is sitting at a miserable 35%.

Dealing With A Lower Offer

Getting a lower offer can be a tough pill to swallow. So how do you deal with it? 1) don’t be too rash to turn down an offer – take your time. 2) Don’t be insulted by a lower offer, expect it (if you had the cash, you would also do the same). 3)  Decide if you would rather have the money now and avoid further interest payments or take the chance of waiting months or years for a  higher offer. 4) Finally, understand that you have the right to counter-offer and if you show a willingness to negotiate in part, this is a good strategy to adopt.

Budget for Commission

Your Agent does this for a living.  All he does is eat, sleep and breathe property and is your biggest ally to sell your biggest asset. However he does this totally on risk (you don’t pay him a retainer to go about selling your property). Also, as commission is a percentage of the final selling price, it is in your Agent’s interest to get the best possible deal for you. In turn you need to acknowledge that if you get a lower offer, your Agent is also getting a lower commission –  so do not expect to negotiate commission down further at that point. You should be happy to pay for a job well done – especially in a tough market, so factor the full commission into your asking price.

Don’t Sell

If you don’t have to sell now, then don’t. There is nothing more detrimental than having your property on the market for months on end because the price isn’t market related. The market will bounce back, but it’s going to take time.  The choice is yours.

 

Need A Deposit? No Cash?… No Problem!

blog109You have finally found your dream home in a cute country village. The offer is in, the paperwork is done and the bank has indicated that you will have no problem getting a bond. Its all going very well…

Finally your bond approval arrives, but it is only for 90% of the value of the property. Now you need to find 10% deposit in cash which you just don’t have. Before you give up on your dream, remember that there are other avenues to get a deposit. Here are a few ideas:

What can be used as a deposit?

  1. A cash amount that a buyer can deposit with the conveyancing attorney;
  2. Government State Guarantee;
  3. Pension Backed Loan – This is a loan against your Pension Fund which can serve as a guarantee (Selected employers only – your bond originator will be able to tell you if you qualify);
  4. Some Type Of Collateral Security for example:
  • A Life Cover Policy with a surrender value (older than 2 years)
  • A Fixed Deposit
  • Surety with security (only through directly related family members).  Please note that as the buyer you will still need to be able to afford repayments on the loan and both buyer & surety have to qualify in their own regard.

Now sit back, relax and get ready for moving day.