Real Estate Investor Magazine South Africa September 2013 | Page 20

NEWS ALERTS

BY MONIQUE TERRAZAS

In The Property Headlines
The Good

The Bad

The Ugly

Buy-to-let boom on the cards

Joburg clearance certificates
debacle

Bank of America sued by
government

Bolstering prospects for buy-to-let investors,
Generation Y - most of whom are still in their
20s – is also rapidly also becoming known as
“Generation Rent” in property circles.

The lengthy period it takes to get clearance
certificates from the City of Johannesburg to
facilitate property sales has become a serious
issue. Instances have been reported in which
it has taken more than eight months to get
a clearance certif icate from the council,
significantly delaying the transfers of property
in the Deeds Office. In Cape Town, clearance
certificates are usually obtained within four to
five days. Some conveyancing legal practices
have set up separate divisions to deal with
the problem, while others are charging a
consultant’s fee of around R950.00 to obtain
clearance certificates, strongly suggesting to
clients to make use of these consultants as it
“can take the council a very long time to issue
figures if we do not make use of a consultant
and this will cause unnecessary delays in the
transfer process”.

In August, the US Government sued the Bank
of America for defrauding investors in the sale
of $850 million in mortgage-backed securities,
alleging that the bank deceived investors regarding
the riskiness of the mortgage loans backing the
securities and intentionally avoided performing
adequate due diligence, leading to investor losses
of more than $100 million. According to media
reports, the mortgages in question were sold as
“prime” loans, implying a low likelihood of default
and signifying “a safe and conservative investment”,
which “justified” the high prices of the investments.
However, at least 23% of the mortgages in the
securities have defaulted or were delinquent as at
June 2013. The government claims that more than
40% of the loans in one of the bonds did not meet
Bank of America’s own underwriting standards,
with “glaring” problems such as overstated income
for the borrowers or fake employment data,
which made them “wholly inconsistent” with a
prime rating.

According to Berry Everitt, MD of the Chas
Everitt International property group, many
members of Gen Y are too weighed down by
student loans, other debt and a lack of savings
to buy a home, while others are simply not ready
to settle down, preferring to rent. Either way,
the trend is positive for buy-to-let property
investors.
The average age of first-time buyers in South
Africa has shifted from about 27 years of age
to 35 over the last 20 years, which means that a
significant number of young people are staying
in the rental pool for at least eight years longer
than they used to. The rental demand has also
been boosted since the 2008/09 recession by
homeowners who had to sell their properties to
relieve financial pressure and have been unable
or unwilling to buy again.
“And the pressure on supply continues to grow,
because there has been so little new housing
development in the past f ive years,” adds
Everitt. “In short, with interest rates at their
lowest in almost 40 years and the demand for
rental accommodation set to keep growing especially when interest rates start to move up
again – and with annual rental yields rising and
property value increases starting to get ahead of
inflation