Positive Feeling for Property 2011

The residential property market has several factors in its favour going into 2011:

1. exceptionally low interest rates
2. slower-than-expected consumer price inflation
3. decreasing levels of household debt

Where you aware that the interest rate is the lowest it has been in 36 years?

With decreasing household debt couples can now consider purchasing a home of their own. Banks will be more favourable to granting a higher percentage bond. Low interest rates are already helping the property market by putting extra money into household piggybanks and boosting the demand for credit such as home loans.

Economists are predicting another rate cut early in the year, which can only be good news to consumers.

Standard Bank has estimated that inflation will average 4.6% y/y in 2011, so even if house prices only grow at 7% – which we think is what we can reasonably expect – these will still beat inflation in most cases.

Experts predict there will be a noticeable growth in the “small house” segment sales. All in All there is an atmosphere of positivity for the property market. Although property won’t boom, there will definitely be growth.  Purchase Price will still remain a strong factor. The general feeling is that buyers. Similarly, while access to shops, schools and major transport routes is still important, these are also secondary considerations to price and running costs in almost every case.

There is a general feeling of positivity and growth for the property market for 2011, although there consensus that we cannot at this stage expect a property boom.

This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za

Call To Reduce Electricity Use

“Heavy rains have hampered the supply of coal to Eskom power stations and the utility has now put 500 of its largest customers on a mandatory energy conservation scheme in order to cut electricity consumption in the country.”

Call to reduce electricity use – Market News, News.

What Does a Ring Around the Sun Mean?

“A diffraction disc or Airy disc has similar appearance, but is a disk, rather than a ring, and has a red border on the inside. Its size depends on the size of the ice or water particles that cause it. These are also known as coronas, but are not to be confused with the thin streaming luminous gas that makes up the sun’s own corona.

NOAA Photo Library

In folklore, a ring (often called a halo) seen around the sun or the moon means precipitation (usually rain) is coming.

Cause

The ring is caused by sunlight or moonlight being diffracted as it passes through cirrostratus clouds that are usually at altitudes above 20,000 feet. Cirrostratus clouds are composed mostly of small ice crystals that spread out into a thin layer. They are sheet-like, and the sun and moon can be seen through them easily.

Types

Halos are most commonly seen as a white ring around the sun or moon, but sometimes they can appear as a rainbow-colored ring with red on the inside and going to blue-white on the outside. This is seen more often around the sun than around the moon.

Sizes

Halos most commonly form at a 22-degree radius. A more rare halo is the great halo, which forms at a 46-degree radius.

Good for Predicting Weather?

A ring around the sun or moon in the warmer months is a good, but not guaranteed, indication there might be precipitation within 12 to 24 hours. Cirrostratus clouds usually come before a warm front, which often brings precipitation.”

This article was originally printed by eHow Blog.
http://www.ehow.com/facts_5232115_ring-around-sun-mean_.html#ixzz1411XElc3

Tentative recovery likely, Bank warns

The leading indicator of business activity in SA dipped slightly in August after a strong rise in July, adding to evidence that the recovery is tentative and may slow down over the rest of the year.

The leading indicator, which points to trends six to 12 months ahead, declined 0,1% in August, after a robust 1,3% rise during the month before, figures from the Reserve Bank showed.

The Bank’s economist, Iaan Venter, said that while it was dangerous to look at one month in isolation, the monthly dip was part of a sideways trend, suggesting that growth remained subdued.

“I still believe it’s indicating a moderate growth trend,” he said.

Other figures yesterday showed that company failures rose 2,1% last month compared with September last year, after a fall of 8% in August.

“Business is still struggling,” Investec economist Kgotso Radira said. The data from Statistics SA did not bode well for household finances and consumption going into the festive season, he said.

Consumer spending is the economy’s main growth engine, accounting for 60% of demand.

“This is a further indication that more jobs were lost in the third quarter of this year,” Mr Radira said in a research note.

“Employment growth is only expected to start emerging in the latter part of 2011 when growth starts gathering momentum.”

SA’s economy shed more than 1-million jobs since the start of last year, making it one of the hardest- hit emerging markets during last year’s recession, in terms of jobs.

Last week, Finance Minister Pravin Gordhan said the economy would expand faster this year than the 2,3% predicted in the national budget last February.

Updates to official forecasts are due in the Treasury’s medium- term budget policy statement tomorrow, with market consensus betting the economy will grow about 3% this year. The Treasury’s estimate will probably be lower, reflecting its traditional caution.

The “basically unchanged” leading indicator pointed towards “stability and recovery” in the economy, said Brait ’s Colen Garrow.

But no one should be “wildly optimistic” that growth would be more than 3% this year.

Mr. Garrow sees the economy expanding just 2,3% next year — well below market consensus.

The Reserve Bank’s data showed that six of the leading indicator’s 11 components were negative during August.

This included the average number of hours worked by factory employees, probably due to strikes in the vehicle industry.

Building plans approved also had a negative effect.

The value of plans passed by municipalities between January and August this year fell 7, 8%, or by R3, 3bn, compared with the corresponding period last year, official data showed last week.

The weak performance of the leading indicator was in step with SA’s main trade partners, according to the Bank’s data yesterday.

Compared with the same month last year, the index rose 18,8%, but this reflects the “base effects” of last year’s recession.

It was also lower than the 20, 4% increase seen in July.

This suggested that although growth in the economy would slow in the months ahead, it might not be as severe as expected given strength in the rand, Stanlib economist Kevin Lings said.

The rand scaled a 33-month peak at R6, 76 to the dollar earlier this month, but has since relinquished some of its gains, trading at R6, 90/ yesterday.

“There is a reasonably good relationship between the leading indicator and overall economic activity,” Mr. Lings said.

“This suggests that the South African economy should show solid growth in 2010, with some loss of momentum into the second half of this year … but not a very significant slowdown,” he said.

Last month’s rise in liquidations was driven by failures in finance, insurance, real estate and the business services industry. Most were voluntary.

Other data from Statistics SA yesterday showed that the number of individuals and partnerships that were declared insolvent dived 47,2% in August compared to the same month last year.

That was the ninth successive year-on-year decline.

This was “further evidence that the number of individuals and partnerships that cannot pay their debt is declining relative to last year”, Mr. Radira said.

Household finances would take some time to improve due to high debt levels — which are still hovering at 87% of disposable income — and the rising cost of living, which was outstripping growth in income, he said.

“The deleveraging process will take some time … the rapidity will largely depend on the pace of employment growth.”

The indicator has a good correlation with the Organisation for Economic Cooperation and Development (OECD) leading indicator, which tracks the global economic cycle, with a short lag.

The OECD leading indicator has moderated downwards slightly on an annual basis over the last few months, suggesting that SA’s leading indicator would also move lower in the months ahead, Mr. Lings said.

Written by Alistair Anderson
This article has been reprinted with the kind permission of Betterbond
Tel: 011 516 5500
Fax: 086 677 1162
Website: www.betterbond.co.za

National Health Insurance – “Wishful thinking”

“It is estimated that about R11bn is required to start implementation of the NHI by 2012. Government has indicated that it will roll out the NHI over 14 years, starting with rural areas in 2012. The scheme will be publicly funded and administered, providing high quality healthcare free of charge. Speculation, however, is rife that government is planning to increase tax in 2012 to support the NHI.

SA’s official population is 49.9m, of which 8m contribute to a medical aid scheme. The NHI will cost the government an initial R128bn in 2012, R267bn in 2020, and R367bn in 2025. The GDP spend by 2025 is estimated to be 7.8%.

Commentators indicate that South Africa cannot afford the NHI with the current taxpayers. It is “wishful thinking” and we need to think carefully about it. It is not possible with 5m taxpayers. If we increase tax on professionals they will leave the country. The country has about 5.5m registered individual taxpayers, of which about 4.8m actually earn enough to pay taxes. Of the 4.8m, about 25% earn 60% of the taxable income but pay 75% of all individual taxes.

With South Africa’s tax already around 30% of GDP, the cost of the NHI may increase the already heavy burden carried by taxpayers and will have a negative impact on the morale of taxpayers.”

Written by Stiaan Klue
This article was originally printed by The South African Institute of Tax Practitioners (SAIT)
PO Box 73, Featherbrooke, 1746
Tel: 011 662 2837
E-mail: info@thesait.org.za

Myplan – The Equity Market’s Surge

After a surge in equity markets during July, August saw global equities sell off across the board. Global equities declined by 3.9% in Rands. Catalysts for the sell-off included further declines in high-frequency leading economic indicators in the US, China, Japan and the Eurozone and further declines in US and Chinese new orders to inventory ratios. The significance of the latter is that inventory rebuilding will be less of a growth driver going forward.

Disappointing US payrolls data and a sharp decline in US housing data added to the negative sentiment on markets, reigniting fears of a double dip recession. The VIX Index (measure of global risk appetite) also increased during August in line with the market’s overall risk aversion, ending August at a level of 26.05%, up from 23.5% at the end of July.

Global bonds were the best performing asset class in August as fears of a double dip recession intensified following indications that the slowdown in the world economy was more pronounced than previously anticipated. Domestic bonds yielded 3.0% in August, underperforming global bonds (3.3%) and emerging market bonds (3.6%).

The Myplan Assertive Wrap managed to mitigate a significant amount of downside in tough market conditions presented in August, producing a return of -0.21% when the equity market declined by -3.58%. The Portable Alpha strategy (Prudential Optimal) was the best performing strategy and managed to outperform cash, due to value add through the manager’s stock selection. Even though the Value Biased Equity (Coronation Absolute and Re:CM Flexible Equity) and Protected Equity (Prescient Positive Return) strategies underperforming relative to the other underlying strategies, the must be commended for the downside properties they exhibited in August, producing – 0.15%, -0.87% and -0.10% respectively. This further instills conviction in our approach to managing absolute return portfolios.

SMMI remains of the view that a cautious approach is prudent, given the market volatility. Equities, still however, look reasonably attractive over the next 2-3 years, but over the short term we believe the market to be fairly priced. Bonds both locally and globally are quite expensive, given the recent purchases of these instruments and an underweight position is well warranted.

This article has been reprinted with the kind permission of Myplan.
Tel: 011 475 0946
www.myplan.co.za

Health Insurance Tax sends shockwaves

VAT increase, income tax surcharge among options. A national health insurance scheme funded by dedicated new taxes will be implemented for all South Africans from 2012.

Announcing the latest version of a plan that has been in the works for more than a decade, KwaZulu-Natal premier Zweli Mkhize yesterday released estimates showing the health department would need an additional R11-billion in the first year.

The scheme – to be implemented over 14 years – would guarantee a full range of healthcare services to everyone, regardless of their ability to pay, and is intended to make some private-sector facilities available to people currently denied access to private hospitals.

The forecast initial increase in the government health budget of R117-billion for 2012 is nearly four times the amount the government admitted it could not afford to pay public servants to end the recent strike. It is seven times the cost of the eventual settlement, which the government said would demand cuts in other spendings. Health’s share of government spending would have to increase by a fifth from 12% to 14.5% for NHI. Economists have warned South Africans to brace for significant tax increases to fund the new plan.

As it stands, all South Africans would have to be members of the scheme and everyone with an income would have to contribute, but of course, no one would be obliged to use its services. Private hospitals would be encouraged to join the system, but would not be obliged to do so. Individuals would be free to buy private medical insurance and to go to hospitals that did not participate in the scheme.

Economists were divided on whether the ANC’s plan to increase taxes in order to fund the national health insurance (NHI) would work.

The ANC said it was considering a tax surcharge, increasing value added tax and a payroll levy for the NHI, which seeks to provide universal cover for all citizens

NHI members will be free to decide which participating clinic or doctor in their area to register with, but will not have any choice about the specialists or hospitals they will be referred to if the clinic could not deal with their illness. Medical treatment will be free at the point of treatment.

It is said that South Africa had been massively set back by consistent underspending on health infrastructure between 1997 and 2007.  

Apparently, Finance Minister Pravin Gordhan had given the scheme the green light and was working with planners on a funding plan. The biggest portion of the cost of NHI would come out of the existing health budget. The rest would be paid for by one or more of the following: a ring-fenced VAT increase, a surcharge on income tax, a special payroll levy and the abolition of tax exemptions for medical costs.

Some are very concerned about the increase in company tax, as they fear it may lead to some of the smaller businesses going bankrupt, while the larger companies may decide to move to countries with lower tax rates. Companies may also employ less people if they make less profit and this will reduce the amount government receives from the income tax and VAT those workers would have paid.

However, others claim that the NHI contributions would be lower than current medical aid contributions for most people. Existing facilities would need significant and expensive upgrading over the next year to 18 months.

Government income comes mainly from taxes. The four biggest sources are:

• Personal income tax (29% of government income): Income tax is paid by everybody who earns a regular wage or salary. Richer people pay a higher percentage of their income as tax and once a person earns below a certain amount they pay no income tax.
• Company tax (27% of government income): All registered companies have to pay 29% of their profits as company tax.
• Value added tax (VAT – 26% of government income): All people in South Africa pay 14% VAT on any item that they buy unless that item is exempted from VAT (like bread, fresh vegetables and paraffin.) Many people think that poor people do not pay tax, but VAT is the one form of tax that they make a big contribution to.
• Customs and Excise (5%): When you import things from other countries you have to pay a set amount in import duties or tax. The reason for this is to protect jobs in South Africa. If we could import cheap things without paying any tax on them, then South African companies that make the same products would suffer.

Amendment of The Financial Centre Intelligence Centre Act

The Financial Centre Intelligence Centre (hereinafter referred to as ”the Centre”) is in the process of enhancing its operating systems in order to optimize its services.

It is now a requirement that due to an upgrade of the Centre’s website, estate agencies (indeed all accountable institutions) to use the following new forms (which forms are available on the website) when a report is being filed:

1. Suspicious Transactions Report (hereinafter referred to as “STR”)
2. Terrorist Property Report (hereinafter referred to as “:TPR”)
3. Cash Threshold Report (hereinafter referred to as “CTR”).

In addition an estate agency is now required to acquire new login credentials from the Centre in order for the estate agency to file reports in terms of the new systems. Please be advised that your existing log on credentials will expire shortly.

You are therefore advised to visit the Centre’s website: www.fic.gov.za in order to acquire new log on credentials and also to advise the Centre of the name and contact details of the compliance officer duly appointed.

Roll-Out of Cash Threshold Reporting Process
From the 1^st of December 2010 estate agents will be required to file a CTR with the Centre in order for the Centre to monitor cash transactions which can potentially be identified as proceeds of crime in order for the same to be investigated.

Definition of Cash
Cash is defined as coin and/or paper money and travelers’ cheques.

What is excluded from the Definition of Cash?  
Any negotiable instruments, transfer of funds by means of bank cheque, bank draft, electronic funds transfer, wire transfer or other written order that does not involve the physical transfer of cash.

The threshold for reporting is the sum of R25 000, 00 and above. This amount can be made up of a single cost transaction to the value of R25 000, 00 or an aggregation where multiples of smaller amounts would add to the threshold of R25 000, 00.

What is included?

1. Any cash payment received by the estate agent exceeding R25 000, 00 will have to be reported
2. Where an estate agent pays a client physical cash in excess of the threshold this amount will also have to be reported
3. An estate agent will be responsible for reporting cash in excess of R250 000, 00 in the event of the agent receiving cash on behalf of (for instance) a purchaser from a bank or other third parties.

If cash is received into the estate agency’s bank account then the reporting duty is on the estate agent and on the bank as well to report the cash transaction to the Centre.

The reporting duty arises when the agent becomes aware of the cash payment to the value of R25 000, 00 or more, i.e. when the agent physically receives the cash or paid out the cash or it peruses in its bank statement or it receives a bank deposit slip in respect of a cash transaction exceeding R25 000, 00 or more.

Electronic Method
The Centre has developed an electronic process, making use of an internet portal on its website facilitating the filing of a CTR.

Who is required to obtain login credentials?
It is clearly stated that each branch of an estate agency is regarded as a separate accountable institution and is required to acquire separate login credentials from the Centre. For example, if estate agency X has 40 branches throughout the country, then each individual branch will have to acquire separate secure login credentials i.e. 40 different login credentials will have to be acquired.

Should you need any additional information, please do not hesitate to contact the Dykes, van Heerden team or alternatively, you can visit the Centre’s website on www.fic.gov.za.

Published by: Dykes, van Heerden Inc.
Tel: (011) 279-5000
Fax: (011) 955-4799
E-mail: info@dykesvanheerden.co.za

Deeds Office Fees Increase from 01 September 2010

The Deeds Office fees are to increase from 1 September 2010 as set out in the Government Gazette of 27 February (No. 33413 Notice No. R659). These are the fees charged by the Deeds Registry in order to process the actual registration of a Mortgage Bond or Transfer and is levied as a disbursement payable by the Purchaser to the conveyancing attorney who on turn pays it to the Registry. The Deeds Office fees on Transfer and Bonds will be increasing with the exception of Deeds Office fees for Transfer below R150 000,00. The changes will be as follows:

How Are These Fees Changed?

Registration of Transfers	Prior to 01/09/ 2010	After 01/09/2010
Less than R150 000	R70, 00	R70, 00
Above R150 000 not exceeding R300 000	R300, 00	R350, 00
Above R300 000 not exceeding R500 000	R400, 00	R450, 00
Above R500 000 not exceeding R1 000 000	R500, 00	R550, 00
Above R1 000 000 not exceeding R2 000 000	R600, 00	R650, 00
R2 000 000 not exceeding R3 000 000	R800, 00	R850, 00
Above R3 000 000 not exceeding R5 000 000	R1000, 00	R1050, 00
Above R5 000 000	R1200, 00	R1 250, 00

 

Registration of Mortgage Bond	Prior to 01/09/2010	After 01/09/2010
Less than R150 000	R260, 00	R310, 00
Above R150 000 not exceeding R300 000	R300, 00	R350, 00
Above R300 000 not exceeding  R500 000	R400, 00	R450, 00
Above R500 000 not exceeding R1 000 000	R500, 00	R550, 00
Above R1 000 000 not exceeding R2 000 000	R650, 00	R700, 00
R2 000 000 not exceeding R3 000 000	R1000, 00	R1050, 00
Above R5 000 000	R2000, 00	R2050, 00

 

Published by Dykes van Heerden
Tel: (011) 279-5000
Fax: (011) 955-4799
E-mail: info@dykesvanheerden.co.za

Public Sector Strike – It Does Effect All

What do the latest public sector strike negotiations mean for us?

Workers who have threatened to strike include customs and immigration officers, police, health care staff and teachers.

Perhaps you have heard of Congress of South African Trade Unions (Cosatu) and its affiliates baulked at public service sector wage offer increase of 7%. The Public Service Ministry said in a statement that it was prepared to increase salaries by 7%, after previously offering 6.5%. Its offer of a monthly housing allowance of R630 remained unchanged. The average wages in the private sector are moving in line with the inflationary and recessionary realities. Unions are demanding an increase of 8.6% – double the current inflation rate – and a housing allowance of R1 000, which would put pressure on the state budget.

Statistics from the central bank show that average monthly wages in the public sector are a whopping 43.6 percent higher than those in the private sector and therefore not in line with inflation nor the recessionary realities. Eskom had offered an 8.5% pay rise and a R1 000 per month housing allowance, but trade unions are seeking a 9% wage rise and a R2 500 allowance. Eskom have advised that the strike will have an impact on their ability to supply power. We all know the serious impact power failures have on our businesses. What about the transport systems, thus causing staff to have problems getting to and from work – again another strain on the private sector.

What does it mean for us, the Sellers, the Purchasers, the Agents and the Attorneys?

Our frustrations will rise – with Government sectors striking we will experience further delays with our transactions. Now not only with council and obtaining rates clearance figures. Other areas are also going to be affected. Think of:

• SARS and the obtaining of transfer duty receipts
• The Deeds Office and the actual registration of our valuable transfers

The effects of the strike are likely to be felt long after the strike is over as well, due to the back log which the strike will cause.

What can We as the Attorneys and Agents do?

We need to make our Sellers and Purchasers aware of how the strike action is and will affect their transfers. That way they will not be frustrated at the wrong parties for the delays experienced. Let’s be pro-active about our deals and more diligent about getting the necessary supporting documents in as early as possible, such as copies of rates accounts and income tax numbers. Let’s get our documents drawn and signed as early as possible – this means having all FICA documentation in – collect as much as possible when signing the Offer to Purchase.

Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za