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Valuers' Newsletter Issue 08
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#08 issue: Thursday 01 June 2017






Herewith your next Valuers newsletter issued by the SAIV.

Sectional title levy increases you can expect

“My body corporate has warned that due to recent changes in the sectional title legislation we should be expecting higher than normal levy increases. I live on a tight budget and this news has me very worried. Is it true that my levies will increase or is the body corporate just making this up?”

New legislation affecting the sectional title environment came into effect recently, namely the Sectional Titles Schemes Management Act 8 of 2011 (“STSMA”) and the Community Schemes Ombud Service Act 9 of 2011 (“CSOSA”), with both pieces of legislation potentially having an impact on sectional title levies.

The STSMA requires a body corporate to establish and maintain two funds, namely 1.) an administrative fund,  and 2.) a reserve fund.

The administrative fund must be used to fund the estimated annual operating expenses of the body corporate for the particular financial year. Such expenses will include maintenance, repair, management and administration of the common property, and rates, taxes and other municipal charges and insurance premiums relating to the sectional buildings or land. The reserve fund in turn must primarily be used to cover the (unexpected) costs of future maintenance and repairs of the common property. 

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Application of the National Credit Act to property instalment sale agreements
“A buyer is interested in buying my flat. Her bank is not prepared to give her a loan because she is paying off a few personal loans, but she is prepared to enter into an instalment sale agreement to pay the purchase price in instalments over a period of time, much like a rental. I like the idea of at least getting a monthly income, but I am worried whether I can do this and charge interest on the instalments, particularly as it will take a few years for her to pay the price in full?”

The two primary pieces of legislation that should be considered in your situation are:
1. The Alienation of Land Act
2. The National Credit Act

The Alienation of Land Act regulates the requirements for the sale of immovable property where the purchaser agrees to pay the purchase price to the seller in more than two instalments over a period exceeding one year. 

The National Credit Act regulates credit agreements, i.e agreements that provides for: 
A deferral of payment;  and
A charge, levy or interest that is payable as a result of the deferral of payment. 
Read More

Banks's Letter enough for Bond clause fulfilment or must quotation be provided?
Phepeng and Another v Estate Late Ame Combrinck and Others

Clauses making a transaction subject to a buyer’s successful loan application are
common features in sale agreements of land. The wording in these clauses often rings
similar, requiring a letter of offer, a quotation and a pre-agreement to be provided as proof
that the loan has been obtained. This matter dealt with an agreement that required such
documentation to be obtained by the purchaser, with no obligation that these had to be
provided to the seller or his agent. As such, communication by the purchaser to the seller,
accompanied by the bank’s letter confirming that it approved the loan application, was
regarded as adequate to fulfill the suspensive condition. The seller’s argument that the
sale had lapsed as no quotation and a pre-agreement were provided, was rejected.

The Judgment can be viewed here.
To continue reading the summary click here
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World’s Biggest Solar Farm in South Australia to Cost $1 billion

Construction of the world’s biggest solar energy storage farm will start soon in South Australia. Brisbane-based renewable energy developer and investor Lyon Group announced that if everything goes as per plan, the project will be complete by the end of 2017.

This masterpiece is being built in South Australia’s Riverland region. The South Australian government has the target to double the renewable energy output by 2020, by installing many such projects. Tesla CEO Elon Musk has offered to install a 100MW battery system for energy storage in just 100 days.

As per Lyon Group partner David Green, “The combination of the solar and the battery will significantly enhance the capacity available in the South Australian market. We see the inevitability of the need to have large-scale solar and integrated batteries as part of any move to de-carbonize.”

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Know your retail dynamics and consumer markets!
An excellent understanding of markets and consumers is vital for successful retail property investment, and this is true whether investing locally or abroad.
This is the word from Stephan le Roux, Growthpoint Properties Retail Division Director, who was recently part of a panel focusing on retail abroad, hosted by the KwaZulu-Natal chapter of the South African Council of Shopping Centres.
Growthpoint is the largest South African primary listed REIT and is well on its way to becoming a leading international property company. It provides space to thrive with innovative and sustainable property solutions in a diversified portfolio of 533 properties it owns and manages, including 473 properties in South Africa, 59 properties in Australia through its investment in Australian Stock Exchange listed Growthpoint Properties Australia and a 50% interest in the properties of the V&A Waterfront, Cape Town.
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Gauteng residential regions….and a look at the City of Joburg…..a very different world to Cape Town at present
Our 1st quarter 2017 Gauteng Sub-Regional House Price Indices show mediocrity in terms of house price performance to be widespread.

This is a very different situation to our City of Cape Town Sub-Regional Indices which show a very strong market on the other side of the country. The advantage of this mediocrity, however, is that our estate agents surveys continue to show very strong levels of 1st time buying in Gauteng compared to the Western Cape. For Gauteng’s economy, home affordability for 1st time buyers is important, as it is these young labour market and housing market entrants that provide the skills base for region’s economy.

Using Deeds Office Data, we have recently constructed a new set of house price indices for key sub-regions within the province of Gauteng, the aim being to evaluate this regional housing market’s performance in more detail.

We have then rolled up this set of sub-regions into overall house price indices for each major metropolitan council region as well as for each district municipal region in those areas outside of Gauteng’s 3 metros.
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Housing solutions for middle-income earners

The appeal of city living encompasses far more than just the allure of having a convenient base in the hub of the daily hustle and bustle.
With less travelling time and more time for “living”, city dwellers can truly enjoy urban living to the full, as they have more time available to explore their city's offerings and mingle with a cosmopolitan mix of people. They can more frequently visit local establishments and enjoy cultural and health activities, without the stress of lengthy commuting afterwards.

However, despite rapid developments in our cities, housing solutions have overwhelmingly been provided at the lowest and uppermost ends of the market - leaving the millions of households in the middle without an entry point into the urban property market.

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Historic Debt Liability: Relief

Residential building activity remained under pressure in both the planning and construction phases of the South African market for new housing in the first quarter of 2017.

The number of plans approved declined from a year ago whereas the number of housing units reported as completed showed single-digit growth. These developments are based on data published by Statistics South Africa in respect of building activity related to private sector-financed housing (see explanatory notes).
The number of new residential building plans approved contracted by 4,0% year-on-year (y/y), or 542 plans, to 13 064 plans in the first quarter of the year from13 606 plans approved a year ago. This decline in plans approved was driven by the two categories of houses, which showed a combined contraction of 14,3% y/y, or 1 227 plans, to a total of 7 359 plans, whereas the segment for flats and townhouses recorded growth in plans approved of 13,7% y/y, or 688 plans, in the first quarter. 

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Eris Property Group announces R1, 5 Billion new development in Umgeni, Durban
Umgeni Deco & Lifestyle Park, Durban’s prime destination centered for success.
Eris Property Group a leading property investor and developer in South Africa, with their development partners, Accessio, Intersite & PRASA has designed the prime destination park to provide 90,000sqm of modern business space. The park is ideal for users requiring commercial, retail, showrooms & offices space.

Umgeni Deco & Lifestyle Park is ideally located within the existing Umgeni Business Park and takes advantage of the thriving node. The land is the last centrally located undeveloped piece of land in Durban. 

Lance Meyer, Development Manager at Eris Property Group explains that, in addition to its track record of demonstrated development success in the Durban area, it chose this site as part of its expanding portfolio of developments in Durban because the node is set to receive a new injection of investment.
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Best Regards

Melanie Vallun
General Secretary 
South African Institute of Valuers
(086) 100 SAIV


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