In terms of Section 4 of the Act, an owner wanting to evict an unlawful occupier from any land in South Africa has to take various additional steps laid out in Section 4 of the PIE Act.

An unlawful occupier is defined in the PIE Act as a person who occupies land without the consent of the owner or person in charge of the land or without any other right in law to occupy the land.

The definition of unlawful occupier is currently very wide and therefore means that owners of land who wish to evict their ordinary residential tenants need to comply with the additional procedures of the Act.

Currently, I understand the talk to be that the legislature will be debating or has debated an amendment to the PIE Act, which will then be available for public comment.

I understand the debate to revolve around amending the definition of an unlawful occupier to exclude a party who previously occupied such land for residential purposes with the owner’s consent, meaning a tenant.

If such amendment is passed, a tenant who once occupied the land with the landlord’s consent may no longer be defined as an unlawful occupier.  The landlord on taking steps to evict the tenant may not

then have to comply with Section 4 of the PIE Act.

These steps by the legislature will be welcomed by land owners in South Africa and will result in eviction attorneys being able to more swiftly obtain eviction orders against defaulting tenants.

Alan Levy Attorneys specialise in eviction, providing advice on the eviction process and services in evictions in South Africa and Johannesburg.

The tenants argued that the cancellation was not compliant with the clause in their lease agreement because it was terminated unfairly and was in defiance of the Rental Housing Act stipulations.

They claim that the impact on the tenants would decrease their quality of life and leave seven of the group homeless.

The Inner City Resource centre submitted the landlord’s right to increase their profit is not a plausible reason to deprive their tenants of their rights. The lease cancellation and increased rent would have a disproportional impact on the tenants and is tantamount to unfair practice.

Aengus, a company that focuses on inner city revitalisation and developing upmarket living spaces in Johannesburg, argues that their action was compliant with their contractual obligations under the cancellation clause in the lease agreement.

Aengus stated that they were compliant under the Prevention of Illegal Eviction Act, which specifies that you can only evict someone if they have alternative accommodation. Aengus claims they offered each tenant alternative cheaper accommodation and three months’ notice of cancellation. Residents were also offered new rental amounts in new leases which, Aengus argued, stands as invitation to decide a new settlement.

Michelle Dickens, Managing Director at TPN, Credit Bureau, South Africa’s only specialist property credit bureau, says eviction procedures have often been the subject of South African court cases and each outcome has the potential to inform future rulings and stipulations.

“Should the court find against the landlord, cancellation of leases, even when done within the terms of a lease agreement, could be set aside as unfair or unreasonable.

As Aengus took these measures in order to increase their profit, this case sets the rights of tenants to adequate housing against the landlord’s right to pursue profit, says Dickens.

“The big questions in this case are: who is responsible for the social costs of cases like these, do constitutional rights exceed contractual rights and how should the rights of tenants and landlords be balanced when situations such as this one arise?”

In a developing economy and industry, capital accumulation is vital to the regeneration of areas like Johannesburg’s inner city. Although this may cause hardships for certain tenants, the long-term effect will create wealth and generate progress within the South African economy, ultimately benefitting all sides.

The tenants have escalated their case against Aengus, starting at the Rental Housing Tribunal, on to the High Court and Supreme Court of Appeal after the landlord applied to have them evicted, and now to the Constitutional Court.

The parties are now awaiting a decision from the Constitutional Court, where judgement is currently reserved.

However, while there are value-for-money properties to be bought, there are still a few guidelines investors will need to follow to ensure that they get the most out of their investment, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

Don’t be too hasty or forget the research 

According to Goslett, regardless of whether buying a property as a primary residence or as a rental investment, buyers need to do the necessary homework and start the exercise with the goal of gaining as much information as they can get their hands on.

With a vast mass of information at their fingertips, buyers can complete a large majority of their groundwork while sitting behind their computer. Internet property search portals are a great way to compare pricing and what different areas offer.

Do choose the type of rental market that suits you

Once the research has been concluded, an investor should consider the type of rental market they want to get into, as this will have a large impact on the return of investment.

This decision will mostly be based on the location of the rental unit. The off-campus student accommodations are always in high demand and with the constant influx of students each year, it is likely that finding a tenant will be fairly easy.

Units within walking distance of the campus that are in a secure complex are always popular among students and parents alike, and have shown consistent healthy return on investment over the years.

Another type of market is rental units in proximity to financial business hubs. These also generate a good return of investment with the high demand for properties within an easy distance for those who work in the business hub.

Given that these units generally cater to business executives, a higher rental price can sometimes be asked.

Don’t charge over-priced rentals 

Determining the rental price that can be charged for any rental property will be based on the area and average rental for units with similar offerings.

Over-priced rentals will make the competition look better and make it a lot more difficult to find a tenant. A comparative analysis of the rental market in the particular area the rental unit is situated in, will give a good indication whether the rental amount is fair and market related.

This comparison will also give the investor an idea of what they can expect to earn and whether the investment is worth it.

Do consider other costs

Buying a rental property won’t just cost the investor the bond repayment, there are also levies, transfer costs, legal costs and of course the cost of maintaining the property.

Unless covered by insurance, any defect that the property has will be for the owner’s pocket and even if nothing goes wrong, the property will still need to be painted and kept in good working order.

It is vital for landlords to have an emergency fund that they can use for large unexpected expenses that may occur.

Another cost for investors to weigh-up is their time and effort. If they are going to manage the property themselves then it will take time, alternatively if they decide to employ a management agent, it will be an additional expense.

Don’t forget to read the fine print

Make sure that the legalities of all agreements with tenants are correct.

Goslett says that it is important for landlords to have a lawyer or property professional check their lease agreement to make sure that they are within the requirements of the law.

It is also advisable for landlords to research and know the law and what it prescribes. There is no point in making a return on the rental investment, only to use the money to pay for legal disputes with tenants.

Do consider the following

- Apply risk management principles and have an agreement with regards to what is acceptable tenant behaviour, sign a legally valid lease agreement, secure a deposit and agree on breakage costs.

- Inspect the property on a regular basis at a time that suits the tenant. The timeous collection of rentals, levies, rates and taxes each month is also important.

- Consider appointing a professional rental management agent, which can be a cost-effective and efficient solution to managing a rental property. For a percentage of the rental income, the agent will screen potential tenants and conduct full credit checks as well as tenant history and they will collect the rent each month.

“If the guidelines to buying a rental property are adhered to, a rental property investment can be an exciting way to realise returns on your property investments, but be warned it is not everyone’s cup of tea,” says Goslett.

“These economists tend,” said Bauer, “to forget three fundamental things.  The first is that short-term price fluctuations generally do not matter in property because property investments are medium to long-term and current prices are at an all-time low.  The motto “buy low to sell high” is absolutely relevant now.

“The second fact overlooked is that interest rates, now at an all-time low, will not stay at these levels for ever, and a buyer has today the option to fix the interest rate for 12, 18, 24, 36 or 48 months at very low levels.  There is a real risk that a loan negotiated in 2013 might be at a 1 to 1,5% higher rate than one secured now.

“And, thirdly, experience has shown that, although there is some logic in the concept of renting now so as to save for a big deposit later, this is very seldom done by tenants.  All too often those who rent use up all their spare cash to finance their high-flying lifestyles and save little or nothing – whereas the obligation to pay off a bond, with severe penalties incurred for late or missed bond repayments, almost always results in the bond payer exercising restraint, budgeting and disciplining his monthly outlays.”

Worldwide, but especially in Germany, says Bauer, it has been found that those who have not owned or paid off their homes by the time they retire or can no longer work tend to end up paying 50 to 70% of their pensions for rent.

“Rent, even in bad times, will almost always rise year by year whereas pensions move up very slowly, if at all.  If you wish to avoid hardship in your old age and to have an asset you can pass on to your children, plan now to own and pay off for your home before or by the time you retire.”

Bauer added that right now is a good time to apply for a home loan because the banks’ appetite for lending has increased in line with their greatly improved skills in assessing a creditor’s financial position and credit records.

“This, of course, means that those with a poor payment history should very definitely put matters right before applying for a home loan – but if their financial and job positions are sound, they now stand a better chance of being successful.”

A majority of today’s new homeowners, said Bauer, are targeting the R400 000 to R700 000 market and this, he says, is also the sector in which capital growth is fastest with the price escalation exceeding inflation.

Bauer quoted as an example Bardale Village near Kuils River in Cape Town as prime example of a fast growing development. .

Here, he said, a two bedroom unit bought in 2005 for R206 000 can now be sold for R425 000 – i.e. it has achieved a 15% per annum in capital growth.  Further growth in the years ahead, says Bauer, remains more than likely because although the development is ongoing, the shortage of supply to the market has become an issue.  To date, 670 homes have been built and sold at Bardale.

Homes here, he added, are always in their own gated (and protected) estates to which access is controlled on a 24/7 schedule.

On offer at Bardale Village are homes ranging from two to four bedrooms, varying in size from 51 to 127m² with today’s prices ranging from R429 990 to R719 990.

“If, as seems likely, the misconceptions revolving around the advantages of renting are increasingly queried, potential homeowners should take a look at Bardale Village and view the offers and plans on the project’s website (www.bardalevillage.co.za).  Bardale has every facility and amenity, and is one of the best positioned of all the gated villages serving the greater Cape Town area.”

This is the view of Dr Koos du Toit, CEO of P3 Investment Group who says many investors, confused by the wide range of investment vehicles and mechanisms, which are often shrouded by foreign-sounding ‘financial’ jargon, simply hand over their hard-earned money to an unknown third party – be it a financial adviser, a banker or an asset manager, without really understanding the investment option they implicitly select.

In doing so, he says these investors relinquish responsibility for their money and their financial future. “They have absolutely no control over their investment and can do nothing to influence the performance of their investment, except to hope that this third party will deliver on the promises made.”

On the other hand professional property investors, explains du Toit, have empowered themselves with knowledge of how property investment works.

Given the simplicity of the property investment model, he says they are able to do their own due diligence on each investment opportunity, to ensure they invest their money in a good property in a good area with solid rental demand – where it will earn not only ongoing, compounded capital growth, but will also produce an ongoing, inflation-linked passive monthly income for life.

“They know exactly where their money is at all times, in a bricks-and-mortar property they can see and touch.”

He says an investor who directly owns income-producing properties is not at the mercy of volatile market sentiments or the performance of asset managers, but can actively manage his or her portfolio: taking advantage of exceptional buying opportunities, adding additional income streams, renovating or refurbishing properties to increase income potential, negotiating with tenants to avoid a vacancy or increase the return, and even selling non-performing assets if necessary.

For this reason, he adds you will seldom hear professional property investors lament the poor performance of their salaried asset manager or bemoan the fact that the economy has decimated their portfolios or that events on the other side of the globe have vanquished their carefully crafted long-term strategies.

On the contrary, du Toit says property investors who take a professional approach to their property investment business never relinquish control of their hard-earned money or their future success to any third party.

“They, and they alone, assume responsibility for their success and their wealth, and as professionals, they are competent and confident in doing so.”

This confidence is derived from following proven step-by-step systems, including using custom-made software, and implementing tried-and-tested risk management strategies such as appointing a reputable rental management agent and taking out rental insurance, explains Dr du Toit.

“In this way, professional property investors make solid investment decisions, manage their risk prudently and reap the benefits of an investment strategy that has proven to be infallible when applied correctly.”

In addition, while professional property investors never relinquish control over their money and their investments, they certainly do not have to do everything themselves.

They appoint experts such as reputable rental management agents and trust specialists to take care of the details, says du Toit, and as such, professional property investors do not manage properties or tenants.

They manage growing property portfolios and they manage the experts they have appointed to take care of the details, he says.

He says they have mastered the fine art of delegating authority without abdicating responsibility -they are concerned with identifying lucrative areas, scrutinising individual deals, negotiating, and turning their vision of passive income and wealth into reality.

Professional property investors take control of their own destiny, their own success and their own investments, with the assistance of professional organisations, which streamlines and simplifies their lives, says du Toit.

“At the end of the day, professional property investors – and they alone – reap the benefits of taking full responsibility for their own wealth creation.”

However, said Steward, very few property investors are able or willing to find and manage their tenants themselves. They have, therefore, to rely on rental agents to do this for them – for better or for worse.

“Rental agents,” said Steward, “like any other group, vary greatly in dedication and ability: some are excellent, others really should not be in this line of work.”

This being the case, said Steward, before an investor appoints a rental agent, he should make certain that that person has a track record of checking on and assessing tenants’ previous rental and credit history. Any tenant who has been blacklisted by credit bureaux should be suspect as should any who have fallen behind on previous rent payments or been disruptive in their communities.

Steward pointed out that in today’s rental market some buy-to-let investors favour gated communities and sectional title schemes because these maintain standards. They are, she said, (usually, not always) well managed by bodies corporate and managing agents, tend to be more secure and able to apply some control on residents’ behaviour.

“If and when a tenant misbehaves some bodies corporate have the right to impose substantial fines and to double and treble these and charge compound interest if they are not immediately paid.

“However,” said Steward, “a tenant who is fined, say, for rowdiness late at night, or for blocking drains or for leaving broken windows or doors unrepaired, will often not pay the fines, and the landlord, seeing these fines mount up month by month, will be forced to pay them. It is, of course true that the tenant’s one or two months deposit can be seized to cover these outlays but with this type of tenant the full deposit – and more – will often be needed to rehabilitate the unit when his lease has expired.”

It is far better, therefore, says Steward, to leave a unit untenanted than to accept a tenant over whom there is a question mark – but lazy or greedy rental agents will often do this and will later make matters worse by not reporting problems to the landlord and by neglecting to submit detailed monthly report backs and accounts.

“The moral of the story, therefore, is “Yes, buy-to-let is a good field to be in right now but be very careful about the rental agent you choose – and if his or her principal is not a good administrator (many agencies’ principals loathe this side of their work), look elsewhere for your rental management service.”

Lee has just read the autobiography of the Englishman, Lord Alan Sugar, the founder of Amstrad, today one of the world’s leading electronic companies.  In his earlier years Sugar gave £250 000 to a “financial expert” for placing in a Japanese equity fund – and lost it all in a remarkably short space of time.

Thereafter he made it a policy to invest either in his own company or in property – and for a start wherever possible he bought the factories and offices in which Amstrad operated.

“His policy,” said Lee, “was to invest in attractive premises in good locations and with leases of ten years or more.  Knowing that there would almost always be a capital gain benefit, he was usually content if the initial return matched what the same investment could achieve at the banks on a fixed deposit – and he has testified that this simple philosophy has paid off handsomely.  It has, he says, been one of the prime reasons why he is today one of the wealthiest people in Britain.”

Lee said that Rawson Commercial has many clients following the same investment strategy and, he added, right now they are in a particularly active buying phase.

The reasons for this, he says, will be clear to anyone who has kept an eye on property trends over the last ten years.

“Commercial property in SA today has on average held its value better than its residential counterparts.  Commercial property owners who have invested over medium to long periods typically enjoy double digit yields on their investments as a result of fixed rental escalations.  Despite the current economic global problems, the majority of South African commercial rentals are still rising annually by 8 to 10%.  By way of contrast, on the money market the average return is seldom more than 6% – if that.

Rawson Commercial has since its foundation in August last year had a very fast growth rate.  Today it has 16 franchises in three provinces and employs 27 brokers.

Lee said that their declared aim is by the end of this year to have the largest commercial footprint in South Africa.

“It is,” said Lee, “impressive the way some of these new franchises have already grown.  This is testament to the strength of our franchise system as well as the training and support structures on offer.”

Watson explained that a company can be placed under business rescue by its board of directors if they agree to this.  However, the State has to believe that the company is indeed financially distressed and that there is a reasonable prospect of rescuing it.  At the same time, any affected person may apply to court to place a business under business rescue.

The business rescue procedure, says Watson, cannot by law be implemented if the company’s finances are in reasonable shape or there is no real prospect of it being rehabilitated.  Furthermore, the procedure may be cancelled if the requirements set out in the Companies Act relating to such procedures are not strictly complied with.

The Act does, however, place considerable power in the hands of the company’s directors regarding whether to place a company under business rescue.  This decision, Watson points out, can have great financial repercussions for all those with contracts with the company – and these associated entities may have no choice but to accept non-payment or partial payment of the sums owing to them during the rehabilitation period (usually three to nine months).

A question which now arises, says Watson, is where do landlords stand should one of their tenants be placed under business rescue?

The relevant clause in the Companies Act is 134(1)(c), says Watson, states that “despite any agreement to the contrary no person may exercise any right in respect of any property in the lawful possession of the (rescue) company, irrespective of whether the property is owned by the company except to the extent that the practitioner consents to this in writing”.

“Without careful review and amendment of lease agreements,” says Watson, “this section may effectively leave landlords without the remedies of eviction or of suing for rent if a tenant is placed under business rescue.”

Typically, he says, leases provide for landlords to be able to cancel leases if the tenant is liquidated but in a business rescue case such clauses would not suffice because during that period the tenant would be in lawful possession and s134 of the Act would prevent any rights being exercised over the property.

According to Watson, it is, therefore, imperative that the lease contains a “surgically drafted” clause that renders occupation unlawful from the date that a tenant company is placed under business rescue.  This is necessary because s134 applies only to lawful possession. If, in terms of a lease agreement, the business rescue itself renders possession by a tenant unlawful, then landlords will be free to exercise their rights in respect of their properties. It is thus possible to mitigate powerfully the potentially prejudicial effect of s134 of the Companies Act, says Watson.

There are many reasons for wanting to get rid of tenants, such as causing major damage to the property, staying on the property after the lease has expired and continuously breaking rules of the contract. But the most common reason for wanting to evict a tenant is due to late or no payment of rent money.

Thereare a number of laws within South Africa that govern rental agreements, including the Rental Housing Act (Act 50 of 1999), Law of Contract, common law, Consumer Protection Act (CPA) and the Constitution.

However, evicting such tenants is not a simple process. There are certain do’s and don’ts dictated by  law that all landlords should be aware of in following the correct procedure and having their tenants removed from the property for good.

“When a tenant does not pay rent on time, although they are in breach of their contract and a landlord has the right to terminate the contract, this does not necessarily mean that the tenant will vacate the property or that the landlord can just put pressure on them to leave,” says Jan Myburgh, General Manager of Harcourts Real Estate South Africa.

The most important thing for landlords to remember is that they cannot evict a tenant themselves. As much as most landlords would love to personally be involved in evicting their troublesome tenant, this is not the correct route.

When a tenant is in breach of the contract, landlords should first ensure that the tenant is served notice to rectify the breach as stipulated in the lease agreement. If, or when nothing is done to rectify the shortcoming, a landlord can terminate the lease agreement and start the legal process to evict the tenant if they are showing no signs of leaving on their own.

The eviction can only be done by a court order, which may take up to 3 months. Legal fees will have to be paid to the attorney upfront, but these fees should later be reimbursed to the landlord by the tenant, as well as the outstanding rent money.

Although a landlord may feel that they have the right to keep a tenant from entering their property by changing the locks to the property, this is an illegal eviction and the landlord will find themselves in hot water with the law if they try this route. As in

normal circumstances, should any locks on the property be changed, landlords are obliged to supply tenants with the new set of keys.

“As angry as landlords may be towards their tenant and seek to reclaim unpaid rent money, they are not allowed to – under any circumstances – enter the property without notifying the tenant, or take the tenant’s possessions within the property as a means of

compensation for rent money that is in arrears,” says Myburgh.

Landlords in the past have had criminal charges laid against them by tenants. A court order needs to first be obtained before actions relating to the tenant’s possessions can occur.

Rental Risk cover could be utilised in order to protect the owner’s investment.  Having this form of insurance will give a landlord peace of mind knowing that the risk of cost due to damage of property can be minimised as well as rental payments and legal costs covered.

Myburgh says Harcourts Real Estate property management divisions offers such products as part of their management services.

The legal route can be a tedious and costly affair, so landlords should rather do everything in their power to choose the right tenant in the first place. This includes credit checks, getting references and being assured that the prospective tenant is employed and well able to pay.

The once booming residential industry has been bruised and bloodied from nearly every angle. Home prices have plunged nationally over the past five years, thousands of South Africans have lost their homes to legal foreclosure, tens of thousands more are on the brink of losing their homes with underwater home loans, and others are seriously delinquent on their home loans.

“Things in the residential property market are bad, possibly the most difficult they’ve ever been in our tumultuous history, but there’s likely to be more pain before there are any real gains for the sector, primarily because of the giant inventory of homes on the market and the certainty that more will be coming through the pipeline over the next few years”, says Auction Alliance CEO Rael Levitt.

Still, the South African economy is faring better than many in the developed world. The local economy has absorbed local political instability at home, a post-world cup hangover, near financial meltdown in Europe, and chaos in North Africa and the Middle East. Although the economy is likely to slow in 2012, consumers are still spending, our developing nation remains under-housed and corporate balance sheets remain healthy, all of which are key ingredients for the housing market’s resurgence.

The remaining puzzle piece is time, and how much of it the housing market will need to recover. Here are some other hurdles the housing market needs to overcome before a rebound takes root:

1. Employment growth

After a bumpy several months, the employment outlook in South Africa is still not looking good. The unemployment rate in South Africa was last reported at 25% in the third quarter of 2011. Total employment in the formal sector declined by 21 000 jobs from the first to the second quarter of 2011. The national unemployment rate is still sky high and the pace of job growth needs to double before it translates into the broader economic growth required to bolster a housing recovery. Due to the bad economy, and resultant high unemployment rate, a growing number of young South Africans aged between 25 and 34, have not been entering the property market. These are the people that are forming households and buying their first homes.

2. The global economy

The situation in the housing market is closely aligned with what’s happening in the broader economy. During 2011, we were presented with a host of unprecedented challenges including uprisings in the Middle East and North Africa, the Eurozone debt crisis and a number of natural disasters. Although South African banks have up until now been relatively insulated from the global meltdown, we are not immune to the threat of the Eurozone contagion. As our country’s second largest trading partner, the consequences for us may be dire if the Eurozone faces defaults in Greece, Spain or Italy. This would cause financial markets to spiral, and plunge South Africa into a worse position than 2008. If that happens, or even if the Eurozone is mired in a milder debt crisis, the impact on the property market, which has already suffered three years of recession, may be hit when its down, which may cause further downward pressure on the housing market.

3. Banks and the debt counseling assisting distressed debtors

Our banks have come up with great recovery processes to assist defaulting debtors. Lenders have held back on foreclosures, slowing the pace and potentially increasing the backlog of distressed houses hitting the market. The longer it takes for the market to improve, the longer it will take to clear distressed debt and the longer it will take for housing prices and the broader housing market to recover. If the housing recovery does not happen in the next 24 months, many of the deals which have been structured to assist distressed debtors will be unwound and we will see distress accelerate. Many deals were structured with higher value exposures and this could cause greater distress at the top end of the market. Debt counseling, for lower value debtors, has also slowed down legal recovery processes and inevitable foreclosures.

4. Faster distressed sales processes

Getting homes that are in legal foreclosure to the market is key to exposing the country’s shadow inventory, which has been keeping prices depressed around the country. The longer this goes on, the longer the foreclosure inventory will perpetuate and the longer we’ll be stuck in a rut. Slow court and judicial processes have slowed down the South African foreclosure process, lengthening the time it takes to get delinquent loans through the pipeline and on the market to be sold. However speeding up the foreclosure process is a double-edged sword. More foreclosures will further bloat the housing inventory, driving prices down even more.

5. Sellers need to get realistic

Generally, having overvalued properties sit around unsold is a dead weight on the housing market and it ultimately creates more downside potential because of the backlog. Sellers need to accept that the market has a dropped between 20% – 30, and they must either take their homes off the market or reduce prices and sell. Reducing inventory is key to unlocking a stagnant market. Clearing out the extensive unsold housing industry in South Africa is vital, especially with the influx of homes likely to enter the market if more distressed homes hit the market. However, reducing the supply of homes should help boost prices in the long run, and price appreciation is good for the housing market. There way to clear the excess inventory out there is to lower the price. The problem is, banks don’t want to lower the price too much because they’re very nervous about taking huge losses. But many of these losses are not real because sellers simply have inflated ideas of value.

6. Government’s involvement

Government in South Africa has been particularly quiet about the distressed housing market, leaving it to banks to sort out. But government has an important role to play in facilitating a housing recovery. It would help a lot to have some government-sponsored financing of buyers, and it would help the housing market if they grew state housing subsidies. Whilst government assistance of distressed debtors has not been on the radar, assisting with distress would help stabilise neighbourhoods and home values. Government has assisted consumers through the Consumer Protection Act and tenants through the PIE Act, but these laws don’t fundamentally assist the housing market. In fact, in many ways they have impacted the market negatively by slowing down sales and making it difficult for investors to deal with non-payment of rentals.

Some relief can be expected from beleaguered home loan applicants when a R1 billion mortgage-backed insurance fund becomes operational in October 2012 in an effort to motivate the banks into approving more home loans, which the National Housing Finance Corporation (NHFC) chief executive, Samson Moraba confirmed in November this year.

7. Rental increases

Many buyers cannot afford to buy and do not have access to funding, which is converting them into tenants. In 2011, we have seen residential rentals rise as the supply of new houses slows and demand increases. The completion of the downward cycle comes when rentals increase to a point where it’s more attractive to buy a home than to continue renting. In a low interest rate environment this can happen quite quickly. If affordability increases, when the job market recovers and the economy finds its footing, more tenants will turn into homeowners, which will reduce the supply of homes and help stabilise prices.

8. Banks opening the taps

Many market pundits have blamed the banks for constraining funding through conservative lending practices and low valuations. This is not true because banks in South Africa have been open for business – even if they have not been the aggressive lenders they were in the midst of the property boom. Banks have to play their role in rebuilding the market by opening up funding to new home buyers. Our banks are strong and they should be focusing on the interests of potential clients whilst balancing their commitments to shareholders. In many ways, the banks fuelled the property boom by opening up lending which ultimately proved to be riskier. Now they have the ability to fund in a sensible market, and they need to grow market share and thus grow the housing market.

Auction Alliance Press Release