Housing in Southern Africa December 2015

Settlements

Infrastructure

in Southern Africa

LEOPARD’S REST

www.crown.co.za

CELEBRITY BUILD AT SAVANNA CITY • R165 M FOR STUDENT ACCOMMODATION

december 2015

H O U S I N G in Southern Africa CONTENTS

NEWS

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Ed’s Notes Fall of the Big Five R750 million for Road Infrastructure PEU Investigation by Gordhan Mokonyane Under Pressure EPWP Wage Increase Township House Price Growth Youth Contractor Delivers 115 Houses R165 million for Student Accommodation Affordable Green Housing Leopard’s Rest Bridge City Attracts Entrepreneurs Ill-timed Repo Rate Increase Dutch Fund Cape Town Infrastructure Celebrity Build at Savanna City The Housing Report BATHROOMS, KITCHENS & PLUMBING 10 Good Reasons to Use Geberit Mepla INFRASTRUCTURE & MIXED USE Revamp of Muizenberg’s Historic Mile Informal Sector 11,3% of City’s Workforce INDUSTRY BUZZ, EVENTS & PRODUCTS Top Award for M&R Western Cape 273 Tram Street Aruba Wins Energy Award Refurbished Quality Plant Machines 23 24 21 22 26 27 2 3 6 4 6 6 9 8 9 11 12 14 13 15 10 16 20 HOUSING BRICKS & PAVING Olympus Rental Development

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H O U S I N G in Southern Africa

ED’S NOTES

The sector's shift shapers

With so many exciting Catalytic Projects on the horizon for 2016 it bodes well for a positive and thriving housing sector. The banking sector are still making things happen for developers and each have carvedout a solidmarket, whichdespite the challenges in theeconomy are still performing and delivering bonds.

THE TEAM

EDITOR Carol Dalglish housing@crown.co.za ADVERTISING Brenda Grossmann brendag@crown.co.za DESIGN

T h e M i n i s t e r o f H uma n Settlements, Lindiwe Sisulu, has made a number of moves to ensure that she has a team that will not only follow her direction but deliver on their promises. We under- stand that the Minister makes sure that at the time of appointing people to top posts that they also need to know that their pre-signed letter of resignation will be utilised if they fail to perform. The no-nonsenseMinister expects everyone involved to match her passion for housing delivery and vision going forward. Changes to the current Develop- ment Finance Institutions’ roles and mandate will be streamlined under one state entity, and the changes are expected to be solidified in the new financial year. Although it has been mooted for many years it ap- pears it will happen in 2016. This will affect the National Housing Finance Corporation, NURCHA and the Rural Housing Loan Fund. This year was one of revolving doors in government aswe said good- bye to Taffy Adler as the CEO of the Housing Development Agency (HDA) and the amicable Department of Human Settlements Director General, Thabane Zulu, took over Taffy’s posi- tion for a brief spell. No sooner had he settled in and he was snapped up by the Department of Energy as Director General. We welcome Pascal Moloi who has taken up the challenge to take the HDA to even greater heights and deliver on an expandedmandate as a one-stop housing shop. Yusuf Patel swopped his role at Basil Read to offer his services as an independent consultant and his wealth of experience has benefitted many organisations. He recently as- sisted the Minister of Human Settle- ments, Lindiwe Sisulu to facilitate sessions between government and developers and contractors and host workshops with the Minister. There were changes to the Coun- cil at the National Home Builders Reg i s t ra t i on Coun c i l a s Ab - bey Chikane was appointed as

Chairperson, to oversee the state’s regulatory authority and work with Mongezi Mnyani and his team. Rory Gallocher leaves the Johan- nesburg Social Housing Company (JOSHCO) to take up the top job as CEO at the Social Housing Regulatory Authority andwewish himall the very best in his new role at SHRA. This year has whizzed by and we would like to thank all our readers and advertisers for their continued support, comments and suggestions, we wish you all a very happy holiday and a prosperous New Year!

Colin Mazibuko CIRCULATION Karen Smith DIRECTOR Jenny Warwick

PUBLISHER Karen Grant

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Carol Dalglish • Editor

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December 2015

News

Fall of the big five C annon Asset Managers PortfolioManager, Samantha Pauwels, says that investors and analysts often put the biggest companies on a pedestal. Industry heavyweights and familiar household brands usually dominate their sectors for years. This often creates a barrier for newcomers and investors find comfort in investing in large, prominent companies as they invariably perform very well. Pauwels says, “The big five in the construction sector includes Wilson Bayly Holmes, Murray & Roberts, Basil Read, Group Five, Aveng or rather it was. Remarkably, the big five of the construction industry have fallen from their high-rise status.” She explains, since 2007 the big five have lost 79% of their value, a total loss of R60 billion in value. There are a handful of companies that have been able to increase shareholder value during this tough period. “Things have structurally changed with China shifting from an investment-driven economy to a consumption-led one. Certain industries are cyclical and there will be peaks and troughs. This we should accept. However, we need companies to be able to adapt, be flexible, innovative and entrepreneurial during these challenging times.” “While government spend is not on stadiums, it is being directed at other vital pockets such as roads, housing andwater infrastructure which are currently very buoyant. We need companies to be agile, withmanage- ment teams that are able to do business in challenging times. Whilst the big five were falling, the likes of Calgro M3 and Afrimat were rising. Noth- ing stopped the big five from adapting and navigating as times changed. However, they continue to look in the rear view mirror, missing today’s opportunities that lie straight in front of them.” ■

News

R750 million for road infrastructure

The City of Cape Town has proposed R750 million for road infrastructure to alleviate traffic congestion.

Patricia de Lille

points across the city andaddress this in terms of infrastructure, operations and behavioural change. TCT is currently responsible for the planning and implementation of the MyCiTi bus rapid transit mode within the public transport network. In real- ity, MyCiTi footprint is still relatively small and carries a small percentage of the city’s daily commuters. On the other hand, the Golden Arrow Bus Service (GABS) is providing a sched- uled bus service to hundreds of thou- sands of daily commuters and does so under amonth-to-month contract with the Western Cape Government. “TCT should be the contracting authority for GABS, since this will give us the opportunity and the responsi- bility to integrate and align GABS and MyCiTi services with each other and ultimately with Metrorail.” The City submitted an application to the National Government for the assignment of the contracting au- thority function, which relates to this scheduled bus services contract in October 2012, and for the municipal regulatory authority function in May 2013. Unfortunately the city is still waiting for the Minister of Transport to respond. With the integration of the My- CiTi, GABS and Metrorail services, commuters will start to experience flexibility with the roll-out of the myconnect ticketing system across the board. A trip will become one journey, with one fare regardless of transfers across the different modes or services. ■

T he Transport for Cape Town (TCT) Congestion Summit hosted by City of Cape Town Executive Mayor, Patricia de Lille revealed that in 2013, the TomTom global traffic index rated Cape Town as the 55 th most congested city in global rankings. The survey also revealed that mo- torists are spending an extra 71% of their time in traffic. De Lille said: “We are also the fast- est growing city in the country, with a growth rate of 30% according to the 2011 Census. Congestion comes at a great cost, with time and money be- ing lost, but also in terms of pollution and its long-term effect on our living environment.” The City’s Mayoral Committee Member: Transport for Cape Town, Brett Herron and delegates from Na- tional andWestern Cape government will also have towork together to find economically sustainable long-term solutions to ensure that we meet the travel demands of a population which is predicted to increase to

approximately 5,6 million by 2032. Transport for Cape Town’s latest statistics confirm that the morning peak-hour period on the city’s major arteries has already increased from 7am to 9am to the current 6am to 10am within two years. More resi- dents are leaving their homes at 5am in themorning to avoid traffic conges- tion on their way to work. The Kuils River area around Bottelary, Amandel and Saxdown Roads; Kommetjie aroundOu Kaapse Weg and Kommetjie Road; and the Blaauwberg area around Plattekloof, Blaauwberg and Sandown Roads are among some of the first pressure points to be addressed. Further pressure points that the Congestion Programme will be cov- ering include congestion along the M3, M5, N1 and N2 freeways, the V&A Waterfront and foreshore. De Lille proposes that the R750 million is spent in accordance with a Conges- tion Management Programme and approved by Council by the end of the year. This will prioritise congestion

December 2015

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News

PEU investigation by Gordhan The Minister of Cooperative Governance and Traditional Affairs Pravin Gordhan has called for an investigation into the City of Tshwane’s corrupt and unlawful PEU Capital Partners (PEU) smart-meter contract, which has wasted R1,84 billion to date.

T his follows the Democratic Alli- ance’s request to both Minister Gordhan and the Minister of Finance Nhlanhla Nene to initiate a forensic investigation against Execu- tive Mayor, Kgosientso Ramokgopa, and all those involved in the contract. According to DAMayoral Candidate for Tshwane, Solly Msimanga, “In fact, Gordhan instructed the City of Tsh- wane not to enter into the PEU con- tract when hewas Minister of Finance. Executive Mayor Ramokgopa and Municipal Manager Ngobeni chose to ignore this instruction.” The total amount lost by the City of Tshwane to date on the terminated PEU smart meter contract is R1.84 billion, which is money that the T he Department of Public Works says the new prescribed mini- mum wage of the Expanded Public Works Programme (EPWP) will be increased from R75.10 to R78.86 per day, with immediate effect. The EPWP wage increase is adjust- ed annually in line with the current infla-

T heMinister of Water and Sanita- tion, Nomvula Mokonyane, is under pressure to release the Blue and Green Drop reports. The Blue Drop Programme mea- sures water treatment plants and Mokonyane under pressure Mamabolo to launch an investigation into the matter and has given his de- partment 30 days to respond. ■

residents of Tshwane have been robbed of. This exorbitant amount has only resulted in around 12 000 meters being installed, out of the 800 000 meters needed. Msimanga says that Minister Gord- han’smove to investigate the contract is a welcome first step against this corrupt, fraudulent and unlawful situation. Gordhan has asked Gauteng MEC for Local Government Jacob EPWP to timeously adjust the pro- gramme participants’ wages accord- ingly and to comply with the state requirements. She said the EPWP mandate to alleviate poverty and unemploy- ment remains steady in addressing the challenges of unemployment, inequality and unemployment within communities. “It provides a safety net formillions of unemployed South Africans who depend solely on Public Employment Programmes for survival. The EPWP remains one of the suc- cessful government initiatives aimed at reducing unemployment through the provision of training and work opportunities.

EPWP wage increase

the quality of drinking water and the Green Drop Programme as- sesses the quality of wastewater treat- me n t wo r k s . “These reports are crucial for i den t i f y i ng systems that fail to provide communities with clean and safe water. As South

tion rate. Acting EPWP Deputy Director Gener- al Kelebogile

Se t h i be l o urged all

Africa braces for an unparalleled wa- ter crisis, these reports are essential to understanding the state of our water infrastructure nationwide,” says Democratic Alliance Shadow Deputy Minister of Water and Sanitation, Leon Basson. According to Basson, “The Minister is stalling in submitting the report to parliament. South Africans deserve answers on the state of water provi- sion in South Africa.” ■

t he im- plement- ers of the

Sethibelo says that the programme aims to create six million job opportunities over a five year period from 2014 to 2019. ■

December 2015

News

Township house price growth

A ccording to John Loos, House- holdandProperty Sector Strate- gist, FNBHome Loans, township areas saw house price inflation con- tinue to outperform that of the major metros. However, the average house price inflation showed early signs of tapering off in the third quarter. The higher average house price growth of the townships reflects the greater residential supply constraints relative to demand, compared with the suburban areas. The townships market also appears to be more cycli- cal than other residential sectors. The FNB House Price Index for townships in the six major metros rose by 10,7%year-on-year in the third quarter. However, this is slightly lower than the 12.3% revised price growth rate of the previous quarter, but well- above the overall Major Metro Regions House Price Index (Ethekwini, Cape Town, Nelson Mandela Bay, Ekurhu- leni, Joburg and Tshwane) growth rate of 5,4%. The former townships remain the most affordable area of themarket on average with house prices averaging

Former black township house price growth continued to outstrip the higher priced white suburban areas, but slowed mildly in the third quarter of 2015.

R331 826. Township prices outperform themajor metromarket largely due to affordability, as HouseholdDisposable Income growth comes under pressure. Loos says, “Whatever the reasons, township markets do appear to have the characteristic of lagging the over- all market somewhat, outperforming later in a cyclical upswing phase, or after the broader upswing phase. We saw this a decade ago, too, wherema- jor metro overall house price inflation peaked at the end of 2004 at 35.5% year-on-year. Township house price inflation only peaked a few years later at 51.5% in the 2nd quarter of 2007, by which time the cracks were showing in the economy, interest rateswere rising and the overall residential market was slowing.” Lower income groups are highly credit dependent, and often work in more cyclical sectors in larger num- bers, such as manufacturing.

Over the long term, major metro house price inflation outstrips the township index. “However, overall growth in trans- action volumes suggests a different picture. We have built transaction volume indices using Deeds data property transactions by individuals, which should be residential domi- nated. We started both the overall Metro Markets Volume Index and the Former Township Volume Index at 100 in December 1999. Over a six month period, township volumes were 140.5% higher in the six months to June 2015, compared to December 1999, while the Overall Metro Markets were only 22% up over the period.” Loos suggests that this contrasting situation reflects a far sharper growth in transaction volumes in township regions relative to the suburbs. This results in a steady normalisation of thesemarkets inmanyways, including the reported release of a large amount of former local government owned rental stock into the traded township markets over time. In addition, Loos says, “There has been a major Affordable Housing development drive over this period, much of it around former township areas. Therefore, former township supply levelsmay well have improved a lot faster than suburban areas. Greater supply improvements may explain why over this 15 year period the average house price inflation rate of former townships has underper- formed compared to the Overall Major MetroMarkets over this long period.” ■

December 2015

News

Youth contractor delivers 115 houses The Deputy Minister of Human Settlements, Zoe Kota-Fredericks has called on young people to workwith government in building quality low cost houses.

T he Deputy Minister was accom- panied by the Executive Mayor of the Matlosana Local Munici- pality, Mike Khauoe, at the launch of the youth build programme in Kanana near Orkney. At the handover of 115 houses built by a youth contractor, she said that the Department of Human Settlements will continue to provide decent quality houses. Government want to see young people andwomen forming cooperatives, in order to get access to housing opportunities. Thomas Littler, the Provincial and National Best Youth Contractor Award winner at the Govan Mbeki Housing Awards 2015, was awarded the con- tract to build 187 houses in 2013. So far, Littler has delivered 115 houses. He said that he heeded the call by

The Deputy Minister, Zoe Kota-Fredericks, with Thomas Little r

government to become employers instead of relying on government for employment. After establishing his own company, he invested in skills development for the youth and says that the world would prosper if there is a concerted effort to support emerg- ing youth contractors. Government’s Youth Build programme aims to fa- cilitate the formation of youth owned entities; Initiate legal contracting

processes, agreements and arrange- ments between youth contractors, provinces, municipalities and main contractors; Develop an emerging contractor incubator training and mentorship programme; Facilitate the participation of youth contractors in the Govan Mbeki Human Settle- ments Awards and other excellence platforms; and housing allocations to youth owned contractors. ■

R165m for student accommodation

A veng Grinaker-LTA has been awarded a contract worth R165 million for the construction of a 602 unit, seven storey student boarding house with three levels of basement parking. The site is within walking distance of the University of Cape Town and the new accommodation is specifically targeted at students enrolled at the

University. The project is a good fit within Aveng Grinaker-LTA’s growing portfolio of coastal projects, some of themost significant being theDr Pixley Ka Isaka Seme Memorial Hospital in KwaZulu-Natal, the extension to the Cape Town International Convention Centre and the Aspen Pharmacare’s manufacturing facility in Port Eliza- beth. The site was recently handed

over to Aveng Grinaker-LTA’s Coast- al division during November 2015 and is scheduled for completion by November 2016. The multidisciplinary company offers a range of standalone or in- tegrated services which range from building, civil engineering and earth- works, to mechanical and electrical engineering. ■

December 2015

Housing

Tlou Ramaru, DEA Chief Policy Advisor: Sustainable Development with Manie Annandale of Nedbank and Mohale Rakgate from DBSA.

Affordable green housing

D BSA’s Green Fund managed on behalf of the National Department of Environmen- tal Affairs (DEA) has earmarked a R120million concessionary loan fund- ing pool, which will be administered by Nedbank. The agreement between Nedbank and DBSA’s Green Fund will enable the development of sustainable green housing in the affordable housingmar- ket. The agreement also includes the monitoring of energy and water con- sumption in green affordable housing units to verify the actual savings. “Green affordable housing com- bines social and environmental sus- tainability to promote access of lower tomiddle income individuals to better quality housing units with lower run- ning costs. This captures the spirit of Nedbank’s Fair Share 2030 initia- tive, recognising that in order to be a thriving bank, we need to operate in a thriving society,” says Manie Annandale, Head of Affordable Hous- ing Development Finance at NCIB. The 400 units in Gauteng and the Western Cape will not only provide housing but local industries will be stimulated through the increased demand for green housing technolo- gies. This includes creating new job opportunities with the demand for in- sulation, efficient lighting, heat pumps and solar water heaters. “Funding initiatives such as this are meant to support South Africa’s efforts to move towards a greener economy, which is a priority focus area for the DBSA’s Green Fund. The partnership with Nedbank’s Affordable Housing

In a pioneering move, Affordable Housing Development Finance at Nedbank Corporate and Investment Banking (NCIB) and the Development Bank of Southern Africa (DBSA) Green Fund, concluded an agreement to jointly fund the development of 400 affordable green housing units in the Western Cape and Gauteng.

Unit makes it possible to fund in- novative affordable housing projects which contribute towards achieving the objectives of theNational Develop- ment Plan,” saysMohaleRakgate, Gen- eral Manager for Project Preparation Development unit at the DBSA. A typical household in the afford- able market earns up to R20 000 per month with bond instalments averag- ing R6 500 for a R620 000 home utilities representing almost 40-50% of the gross income. This places pressure on the home owner in terms of afford- ability. “Above-inflation increases in electricity tariffs will erode affordabil- ity further in years to come. Meaningful savings in electricity and water bills can reduce the likelihood of default on rentals or bond payments, and help to improve access to housing for new market entrants,’’ says Annandale. In South Africa, the new bench- mark for environmentally sustainable housing is the EDGE (Excellence in Design for Greater Efficiencies) tool. It was developed by the International Finance Corporation (IFC) for appli- cation in developing economies and was recently adopted by the Green Building Council of South Africa (GBCSA). This forms the basis for a new green housing certification system.

Compliance requires savings of at least 20% in each of three categories namely; energy, water and building material embodied energy. It is an- ticipated that a family of four living in a new two bedroom unit, compliant with EDGE and SANS 10400-XA, could save as much as R350-450 per month, compared to an older conventional unit with no energy efficiency features. Once savings are demonstrated, it is anticipated that property develop- ers will be able to recover the green construction premium from residents by sharing in the operational savings, either through marginally higher sell- ing prices or rentals. In the case of housing sales, mortgage lenders will play a critical enabling role by taking into account the likelihood of lower operational costs in their assessment of home loan applications relating to units in green developments. Fair Share 2030 is Nedbank Group’s business response to a series of economic, social and environmental challenges that threaten society’s long-term success. It represents an annual flow of money to be lent in a way that contributes to meeting eight major long-term goals for the future. The goals relate to the provision of affordable energy services. ■

December 2015

Housing

Leopard’s Rest Residential property developer, Cosmopolitan Projects new mega developments, Leopard’s Rest in Albertsdal, will offer 2 015 affordable housing opportunities.

T hewell-locatedaffordablehous- ing development, on the corner of Kliprivier and JG Strijdom Roads in Albertsdal, near the R59, comprises free standing houses, four public parks, retail and commercial space, four community and recre- ational facilities and a private school. The Royal School Alberton, an af- fordable private school, is funded by a partnership between Old Mutual’s Schools and Education Investment Impact Fund South Africa (SEIIFSA) and the Royal Schools Management Company (RMC). The objective is to deliver quality affordable educa- tion with a commercially acceptable return. The new school is registered with the Gauteng Department of Education

and the co-ed Englishmedium school will open its doors for pre-school to Grade 10 in January 2016. Grade 11 will start in 2017 and Grade 12 in 2018. School fees across the board cost R1 460 per month. The school will cater for 1 655 learners and 65 staffmembers. Almost 300 scholars have already pre-registered and con- struction will be complete before the school term begins. This state of the art school, built by Cosmopolitan Projects’ in-house con- struction division, consists of 63 class- rooms, two computer laboratories, three science laboratories, four pre- school classes and a well-equipped play area. The school includes sport and cultural facilities such as a large hall with a stage, sports fields and

for learners, parking area for staff and parents andwill also provide aftercare facilities. The catchment area of the school and the residential development is mainly Katlehong, Thokoza, Vosloorus and Alberton. This unique develop- ment is within 20 km of Johannes- burg’s CBD andmajor industrial areas such as Alrode, Wadeville, Jetpark, Isando and City Deep, with direct access to highways. The stands vary in size from 150 m² to 300 m² with building packages ranging in price from R590 000 to R950 000. The units include burglar bars on all windows, security gates, oven and hob, built in cupboards, floor tiles and skirting, prefabricated wall around the stand and vehicle gate, solar geyser, tiled bathroom and glass shower. The de- velopment is equipped with a world class electrical sub-station, which adequately supports the energy usage of the entire development. ■

two sports courts. In terms of technology it has a fully equipped electronic net- work and the entire school has access to Wi-Fi as well as data, projectors and lap- tops in each classroom. There are security cameras in all the class rooms, cor- ridors and playgrounds and electric fencing around the perimeter. The school has an admin- istrative block, drop-off zone

December 2015

Housing

From left to right: HZ team Siyabonga Hlengwa, Wandile Zulu, Robert Phato, Bishop MM Qwabe and Brian Ive from Tongaat Hulett Developments.

Bridge City attracts entrepreneurs Bridge City, a key link in KwaZulu-Natal’s rapidly developing Northern Growth Corridor, is attracting entrepreneurs and new entrants into the property sector.

B rian Ive, a Development Execu- tive at Tongaat Hulett Develop- ments, said the wide variety of opportunities andholistic planning of both the Bridge City Town Centre and Business Estate provides for a wide range of business activities, including light industrial, medical, legal, com- mercial, retail and residential. Bridge City is one of KZN's largest inter modal transport facilities and will open up numerous opportunities across these sectors. It is expected to be the second busiest transport interchange in the city, second only to Berea Road/Warwick Junction. The first phase of the Go Durban! integrated rapid public transport network (IRPTN) is expected to be completed in 2018, withBridge City as the meeting point for three bus rapid transport corridors linking Durban CBD, Pinetown and Umhlanga. Once all transport modes are fully opera- tional, it is expected to service over 100 000 commuters daily. Ive points out that significant progress had been made on the first private development at Bridge City by independent property development company, Imabli Props 48. Construc- tion began in late 2014 and the first phase is expected to be completed by December 2015. Centrally located adjacent to the shoppingmall, themixeduse 5 500m² development includes a clinic, Musal- lah, as well as retail, commercial and residential spacewith anchor tenants such as KFC, Lenmed Medical Clinic

and Check Star Supermarket. Ive said that construction is due to begin during the first quarter of 2016. So far, half of the sites within the Bridge City Town Centre (30 ha) have been sold, whilst there are just four sites available inBridge City Busi- ness Estate. Bridge City mixed use develop- ment forms part of Effingham Devel- opment Joint Venture Public Private Sector Partnership between the eThekwini Municipality and Tongaat Hulett. He explained that Tongaat Hulett was reinforcing its commitment to creating meaningful stakeholder value through the growth and devel- opment of young entrepreneurs such as HZ Investments. The R250 million Phase One of the HZ Empire includes a petrol station and a six storeymixed use development. The design review process is due to be concluded within the next two months and all major consultants have been appointed. Phase Two will be located on an adjacent site, the purchase of which is underway. It is hoped to house a ‘gov- ernment mall’ - a one stop govern- ment shop that will include offices of strategic departments such as Home Affairs, the Department of Social

Development andmunicipal electric- ity and water services. Negotiations are currently underway. “Through the creation of a gov- ernment mall, we want to cater for those who cannot travel far. We want to provide jobs and are looking at projects that will have an impact on the area. We want to see this place being elevated. That is one of our core visions,” says Chief Executive of HZ Investments, Wandile Zulu. Together with his colleagues SiyabongaHlengwa, who is joint Chief Executive, Chairman Bishop Qwabe and Chief Operating Officer, Robert Phato, established HZ Investments in 2013. Tongaat Hulett Developments also stepped in to play a mentoring role, according to Ive. “Although many other professional developers had shown an interest in this prime site, we chose to work closely with HZ Investments. In the last two years we have mentored and assisted them in reaching the position to where they are now about to see their first de- velopment. One of our key drivers is to get local black developers to invest in Bridge City and we felt that there was a synergy between the vision of HZ Investments and that of Tongaat Hulett Developments.” ■

December 2015

Housing

Ill-timed repo rate increase With inflation within the target range and a sluggish economy struggling

A ccording to Dr Andrew Gold- ing, CE of the Pam Golding Property group, “A stable repo rate would have sent a positive signal to South Africa’s housing market, which despite ongoing economic headwinds, continues to experience sustained residential demand. The year end is usually a precursor to a periodwhen people tend tomake de- cisions related to career and lifestyle choices for the year ahead, giving rise to property transactions as they relocate and/or acquire newproperty investments.” He adds, “We anticipate, as the new year unfolds that the trend towards the containment of water, electricity and rates costs will fur- ther stimulate the growing demand for convenient sectional title living and use of energy saving features. Although generally smaller in size, al- though not necessarily cheaper, sec- tional title offers low overheads and improved security. This is coupled with the growing trend towards urban living in proximity to the workplace.”

“South Africa’s residential property market is consistently seen as a safe haven for investment, with local residents increasingly recognising the medium to long term benefits of home ownership. Our outlook for the remainder of 2015 and into 2016 is that the current supply and demand environment will continue to prevail, notwithstanding the weakness in the economy,” says Golding. Head of Business Lending, FNB Property Finance, Attie Anderson says, “Commercial property inves- tors will be negatively affected due to a decrease in consumer spending. to regain impetus, while the country experiences the worst drought in decades, the Monetary Policy Committee’s decision to further increase the repo rate by another 25 basis points was ill-timed.

This will impact them directly if they are trading from the property, or indirectly if their tenants suffer as a result of the interest rate increase. This could lead to tenant vacancies or rental arrears, and may even force investors to reduce their rent in order to prevent tenants fromvacating and seeking more affordable rentals.” ■

T he deal signed between the Dutch government and the City of Cape Town will help to change the apartheid spatial legacy in the city. According to Mayoral Committee Member for Community Services andSpecial Projects, Belinda Walker the ORIO grant is validation of the city’s governance record. “We have worked tirelessly to- wards creating a well-run city. This government will ensure that the €500 000 euros (R7,6 million) ORIO grant is spent in the most efficient and responsible way possible. Part of the funds will be used on the IRT: Phase 2A roll-out in Khayelitsha. This will include building trunk routes, feeder routes, stations, stops, a de- pot and facilities for non-motorised transport. The funds will also be used to upgrade five public transport inter- changes in order to ensure that even broader socio-economic benefits and opportunities will be enjoyed by the surrounding communities,” says Walker. A further €19,4 million euros (R295,2 million) for the implementa- tion of the entire project is yet to be considered by the Dutch Government at a later stage. Walker explains that not only has the Dutch Government entrusted the city with funding, but they have also invested their time by sharing their expertise. “We look forward to imple- menting this project for residents, knowing that it has been formed by international best practice. We are also excited about the Memorandum of Cooperation on the Two Rivers Urban Park that was signed between The Dutch Government has provided an Infrastructure Development Facility (ORIO) funded by the Dutch Ministry of Foreign Affairs to encourage p u b l i c i n f r a s t r u c t u r e development in developing countries. Dutch fund Cape Town infrastructure Housing

From left to right: Martijn van Dam, State Secretary for Economic Affairs/ Minister for Agriculture of the Netherlands; Brett Herron, Mayoral Committee Member: Transport for Cape Town; and Belinda Walker, Mayoral Committee Member for Community Services and Special Projects.

the City and the Western Cape Gov- ernment partnership with the Dutch Government offering technical ex- pertise. They have introduced us to cross-sector design thinking through study tours and workshops, with a key focus on catchment manage- ment, innovative water technology solutions and flood mitigation.” Located at the convergence of the Black and Liesbeek Rivers in Cape Town, the Two Rivers Urban Park (TRUP) is a mixed-use, transit- oriented development model for sus- tainable living. The Live-Work-Play model envisioned for the site will be developed into an attractive, high- yielding destination that functions to

provide conservation, recreation, em- ployment, production and connected neighbourhoods. TRUP is primarily aimed at overcoming the legacy of spatial apartheid planning by creat- ing an accessible and inclusive game- changing development node that will function as a gateway to the city thanks to its central location. Walker thanked Henk Ovink, Spe- cial Envoy for Water Affairs for the Dutch Government, on his appoint- ment to guide specialist input from the Dutch specialist team. And for offering his services to the City at no cost. Both of the agreements under- pin the city’s commitment to combat the apartheid spatial legacy. ■

SAPMA acts against bogus members The South African Paint Manufacturing Association (SAPMA) has issued a strong warning that it will not hesitate to take legal action against companies falsely claiming membership of the Association.

E xecutive Director, Deryck Spen- ce, says it has come to SAPMA’s notice that Permatex Wall & Roof Coatings, was still implying it is a member of SAPMA. The coat- ing’s company had its membership to SAPMA terminated following complaints regarding poor standard of service and operational conduct. Secondly, Wondercoat Wall & Roof Coatings was also falsely claiming to be a SAPMA member whereas this company had, in fact, never been admitted as a member. “The Master Builders Association North in late

2012 successfully obtained a High Court interdict against Wondercoat Wall & Roof Coatings, which thenwas fraudulently claiming to be amember of theMBA. So the legal precedent has been set and SAPMA will not hesitate to institute similar court proceedings to combat bogus membership. “SAP- MA members uphold a strict Code of Ethics and we simply cannot afford to have unscrupulous companies masquerading as SAPMA members to add credibility to their operations, ruin SAPMA’s reputation and status of our members,” Spence warned. ■

December 2015

Housing

Celebrity Build at Savanna

T he development is being fund- ed by Basil Read and HIFSA, a R9 billion fund formed by Old Mutual, the Development Bank of Southern Africa (DBSA), the Gov- ernment Employees Pension Fund (GEPF) and the Eskom Pension and Provident Fund. Further funding will be provided by National Government and the Gauteng Department of Hu- man Settlements. The 1 428 ha site will provide 18 399 housing opportunities across the residential spectrumand the fully integrated Catalytic Project will pro- vide 16 educational facilities, 9 retail and commercial sites, 32 institutional Savanna City, a new Midvaal Catalytic Project , is being developed by Basil Read and the Housing Impact Fund of South Africa (HIFSA).

sites including social and community services as well as parks. The R24 billion project follows the successful pilot fully integrated human settlements model at Cosmo City, pioneered by Basil Read, the Gauteng Provincial Government and the City of Johannesburg. Service level agreements have been concluded between Midvaal, Emfuleni, contractor Basil Read Construction, Torro Ya Africa/Dryden Projects, Cosmopolitan Projects, the City of Johannesburg and the Sedi- beng District Municipality.

Situated near Orange Farm, the project will create work opportuni- ties, stimulate increased demand for goods and services and skills devel- opment programmes. During con- struction, 54 900 job opportunities will be created and 12 700 permanent employment post construction. The Gauteng Province flagship project saw a number of SABC TV ce- lebrities, government officials, MEC’s and Executive Mayors take part in a Celebrity Build day during November. The event culminated in the hando- ver of a number of houses to elderly beneficiaries including two recipients who were over 100 years old. The event brought together gov- ernment seniors managers, CEO’s of housing institutions, celebrities, sponsors, municipal managers and stakeholders to advocate and recog- nise access to shelter as a basic right for all humanity. The Celebrity Build highlights the critical role played by society through volunteer work, transmitting experience and knowledge, to help families. ■

T he City of Cape Town Mayoral CommitteeMember for Energy, Environmental and Spatial Planning, Councillor Johan van der Merwe told delegates at the 5 th World Town Planning Day event, “Cape Town has a planning legacy that works against the aims of integration and equality for which we strive. However, we have towork towards changing the spatial patterns of our city if we are to fulfil our commitment of an inclusive, integrated city which is strengthened by our diversity.” Van der Merwe adds that across South Africa, the spatial lesions of the apartheid regime are evident; but in Cape Town, combinedwith the topographical layout, town planning must be used as a tool to redress and social and economic stability in the dynamic fast-growing city. “Densification is a positive word - it represents opportunity, resil- ience, and progress. It is a message that needs to be conveyed to the public. An efficient and transparent planning and building management environment is essential for a strong, developing economy. The City has ap- proved building plans of R6,3 billion between July and September 2015. This is an increase of 27% compared to the previous three months. With over 10 000 active projects, van der Merwe says that it is their responsi- bility to ensure that development is measured against the sustainability ideals. “The principles of resource- efficiency and conservation are integral to the growth story of Cape Town’s countenance.” ■ Town planning drives integration

December 2015

Housing

The Housing Report

The household sector faced

increased financial strain during most of 2015. Household finances will continue

to be driven by factors such as economic growth,

C redit-risk profiles will most probably stay under pres- sure and are to remain a key factor in the accessibility of and the demand for and growth in household credit. According to AbsaHome Loans Property Analyst, Jacques du Toit, “In view of a persistent severe lack of sufficient savings, access to credit, together with consumer confidence will to a large extent drive household consumption expenditure, and even- tually economic growth.” He explains that in the first three quarters of 2015 year-on-year house price growth was lower in some seg- ments of themarket, while remaining relatively stable or rising in other seg- ments. The gradual slowing trend in middle-segment house price growth continued in the third quarter of the year. Declining real price growth came on the back of inflationary pressures up to the third quarter. Price growth in the affordable segment remained relatively strong, with the luxury segment showing a significant down- ward trend in price growth since a recent peak in late 2014. employment, income and consumption growth, debt levels, inflation and interest rates.

calculated as the total amount of outstanding household debt ex- pressed as a percentage of the total annual disposable income of house- holds, i.e. after deductions for tax, social contributions and transfers. Consumer credit-risk profiles in the second quarter of 2015: • A total of 10,53millioncredit-active consumers, or 45,1% of a total of 23,37 million, had impaired credit records, up from 10,41 million (45%) in the first quarter. In mid- 2007 a total of 36,4% credit-active consumers had impaired credit records. • A total number of 12,84 million (54,9%) credit-active consumers were in good standing, up from 12,7million (55%) in the first quar- ter. Asmuch as 63,6%credit active consumers were in good standing in mid-2007. • A total number of 82,17 million consumer credit accountswere ac- tive, of which 60,47million (73,6%) were in good standing and 21,71 million (26,4%) were impaired. Consumers’ credit-risk profiles are

House price growth is forecast to remain in the single digits for the rest of the year and in 2016. Lower price growth is forecast for 2015 and 2016 comparedwith the previous two years, mainly as a result of trends in and the outlook for key macroeco- nomic and household sector-related factors. In view of expectations for nominal house price growth and consumer price inflation, low real price inflation is projected for this year, with prices to remain virtually flat in real terms in 2016. Factors such as the National Credit Act (NCA), banks’ risk appetites and lending criteria, consumers’ credit- risk profiles and consumer confi- dence largely affected the availability and accessibility of and demand for credit by households. The ratio of household debt to disposable income eased to 77,8% in the second quarter of the year from 78,7% in the first quarter, with household debt rising by 1,2% q/q and nominal household disposable income increasing by 2,4% q/q in the second quarter. The debt ratio is

December 2015

Housing

reflected in banks’ risk appetites and lending cri- teria, impacting the access to credit and growth in household con- sumption expenditure against the background of a continued low level of savings. Consumer financial vulnerability, as mea- sured by the Bureau of Market Research (BMR), deteriorated in the sec- ond quarter of 2015 compared with the first quarter. At an overall

refers to make shift structures not erected according to approved ar- chitectural plans, e.g. shacks in in- formal settlements andbackyards. • 55,3% of households living in formal housing, fully owned their properties, with 10,6% partially owning their properties (financed by and not yet fully paid off to financial institutions) and 21,7% renting the properties they were living in. • 15,3%of households were living in RDP or state subsidised housing. Levels of residential building activity improved in the first eight months of 2015 compared with a year ago, but growth remained well in the single digits over this period. In the planning phase, as reflected by the number of building plans approved, as well as in the construction phase, i.e. housing reported as being completed, activity remained largely subdued along the lines of the past six years against the background of economic, household finance and confidence factors. Over this period these levels of building activitywerewell below those of 2005 - 2007, when the economy and real household disposable income were growing strongly and interest rates were relatively low. The number of new housing units for which building plans were approved was up by 6,8% y/y to more than 41 000 units in the period January to August this year. This was the net re- sult of growth of 10,1%y/y in the seg- ments of houses less than 80m² and flats and townhouses, whereas the segment for houses larger than 80m² showed a small decline of around 1% y/y in the eight-month period. The number of new housing units constructed increased by 7% y/y to

more than 25 200 units in the first eight months of the year, which was largely driven by the two categories of houses, which recorded combined growth of 14,5%y/y to an overall total of more than 18 000 units. However, the segment of flats and townhouses registered a contraction of 8,1%y/y to about 7 200 units built in January to August from almost 7 900 units built in the corresponding period last year. It should, however, be kept in mind that there is normally a significant time lag between the planning phase and eventual completion of large housing projects. Building Confidence Building confidence, based on the BER’s building confidence index, declined for the third consecutive quarter in the third quarter of 2015, to a level of 44 index points from a recent high of 60 in the fourth quarter of 2014. With an index reading of 50 representing confidence neutrality, the majority of survey respondents indicated that business conditions in the building sector were unfavour- able in the third quarter. This decline in building confidence was mainly driven by markedly lower levels of confidence in the sectors of building material manufacturers and retailers. The building confidence index mea- sures prevailing business conditions in the building industry sub-sectors of architects, quantity surveyors, main building contractors, sub-con- tractors, manufacturers of building materials and retailers of building materials and hardware. The variable mortgage base inter- est rate is 9,5%per annumafter being

Consumer Financial Vulnerability Index (CFVI) reading of 50,8 in the second quarter (52,7 in the preced- ing quarter), consumers remained financially mildly exposed. An overall and/or sub-index read- ing of 40 - 49,9 in consumer financial vulnerability indicates that consum- ers are financially very exposed, with an index reading of 50 - 59,9 indicat- ing that consumers are financially mildly exposed, whereas an index reading of 60 - 79,9 indicates that consumers are financially secure. Overview Based on statistics supplied by Light- stone, there were more than 6,1 mil- lion residential properties in South Africa with a total value of R4,16 trillion in the second quarter of 2015. Of themore than 6,1million prop- erties, about 2,18million (35,5%) with a total value of R2,29 trillion were bonded and 3,96million (64,5%) with a total value of R1,87 trillion were non-bonded. The General Household Survey 2014, published by Statistics South Africa in June this year, provided some insight into housing conditions in the country in 2014: • 79,4% of a total of 15,602 million households were living in formal housing. Formal housing refers to structures built according to approved architectural plans, i.e. houses on separate stands, flats, apartments, townhouses and rooms and flats in backyards. • 12,9% of households were living in informal housing. Informal housing

Continued ▶▶▶

December 2015

Housing

performed relativelywell during 2014 and in the first three quarters of 2015. House price growth varied across the provinces and major metropoli- tan areas, with prices declining in a few regions while rising in others. Year-on-year house price growth was largely positive in coastal areas in the third quarter of the year. Strong price growth was evident along the KwaZulu-Natal coast, which was mainly the result of the base effect of declining prices a year ago. Coastal property markets normally have a relatively large investment and lei- sure focus. Newandexistinghousing The average nominal price of a new house was down by 3,6% y/y to R1 713 800 in the third quarter of 2015, with real price deflation of 8% y/y recorded. The average price of an existing house increased by a nominal 6,3%y/y to R1 339 600 in the third quarter, which resulted in real year-on-year price growth of 1,5%. As a result, it was R374 200 or 21,8%, cheaper to have bought an existing house than to have had a new one built in the third quarter of the year. Building costs Building costs, driving prices of newly built houses and the cost of renova- tions and alterations to existing hous- es, continued to increase at a rate of above inflation in the third quarter of 2015, but cost escalations were on a slight declining trend since the second quarter of the year. The cost of having a newhouse built increased by 5,9%y/y in the third quarter, down from an increase of 6,3% y/y in the second quarter and 9,6% y/y in the first quarter. Factors impacting building costs include building material costs; equipment costs; transport costs; labour costs; developer and contrac- tor profit margins; and the cost of developing land for residential pur- poses, which is affected by aspects such as finance costs, land values, the cost of rezoning, the cost of prepar- ing land for construction and holding

repayment patterns on pri- mary residences showed

some shifts over the past two years up t o m i d - 2 0 1 5 . The percentage o f homeown - ers paying the minimum only on mortgage loans increased over this peri- od, whereas the percentage of homeownerspay- ing extra into their mortgage accounts

on a monthly basis declined significantly during the same period. The percentage of homeown-

raised by 25 basis

ers paying extra lump sums into their mortgage accounts has varied between 5% and 9% since mid-2012. Home loan repayment patterns by income category in mid-2015 showed that low- to middle-income homeowners are mostly paying the minimum only, with higher-income homeowners in a better position to pay extra on a monthly basis and are also able to pay extra lump sums into mortgage accounts. Housing rental indices, as pub- lished by Statistics South Africa, showed that national rental inflation averaged 5% y/y in January to Sep- tember this year, which was above the average headline consumer price inflation rate of 4,5% y/y during this period. Rental inflation measured 4,6% for houses, 5% for townhouses and 6% for flats over the nine month period. Affordable housing After rising by just over 9% y/y in the first half of 2015, the average nominal price of affordable housing (homes of 40m² - 79m² and priced up to R575 000 in 2015) increased by a relatively strong 10% y/y to average at R414 000 in the third quarter of the year. Real price inflationwas 5,1%y/y in the third quarter, contributing to a year-to date average of 4,8% y/y. Taking account of some key factors driving the affordable market, such as demand and supply conditions and households’ affordability to buy property, this segment of housing has

points in July. Themortgage rate has increased by a cumulative 100 basis points since late January 2014. This impacts monthly mortgage repay- ments for various loan amounts at various interest rates, aswell asmort- gage loan amounts based on various fixedmonthly repayments at various interest rates. These calculations are based on a 20-year repayment term. The residential mortgage market showed somewhat higher year- on-year growth up to the end of September compared with previous months this year. The performance of the mortgage market is impacted by developments regarding employ- ment, inflation and interest rates as well as trends in household finances, consumer credit-risk profiles, banks’ risk appetites and lending criteria and consumer confidence. Growth in the value of outstanding household mortgage balances (R855,8 billion at end-September, witha shareof 77,6% in household secured credit balances and 58,8% in total household credit balances) came to 3,8% in the first nine months of 2015. Outstanding mortgage balances are the net result of property transactions, mortgage finance paid out, capital andmonthly repayments on mortgage loans as well as loans fully paid up. According to information pub- lished by Old Mutual in the lat- est edition of the Savings and Investment Monitor, home loan

costs in general. Land values

The nominal value of vacant residen- tial stands in the middle and luxury

December 2015