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Thread: Property prices going down

  1. #11
    Site Caretaker Dave A's Avatar
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    Over the long term, property has always performed - and property in SA is still relatively cheap compared to large chunks of Africa, so I don't think prospects of us "following in the footsteps of the rest of Africa" is grave cause for concern, either.

    I suspect the key at the moment is whether it is wiser to hold off a few months longer for better deals. But I'm sure there are a few bargains out there already.

    Karen is probably the best voice to listen to on this, though.

  2. #12
    Email problem Karenwhe's Avatar
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    Right now the market is very much a buyers market.

    That said it is always risky - no matter what market and what product - to buy something if you do not understand the market or products.

    Therefore, there are plenty of bargains right now in property, but if one does not do the homework about the area and have a clear purpose for the reason one buys, one can buy the wrong deal even though right now we are flooded with good deals and not enough buyers.

    A good friend of mine just bought a property with 1.2 million equity in it. In other words, he did not buy for 1.2 million, he bought for a saving of 1.2 million in the price. In other words he can sell for 1,2 million more and make a huge profit when the market turns around or just keep it, refinance it and buy more cash+ property - LOTS of it.

    Even I was impressed, and believe me I do see some good deals around that one can't believe they even exist.

    I guess that is it in a nutshell.

    Now it is the time to buy property.

    It is never the time to buy property without a strategy for the purchase and without understanding the local microeconomics.

    Hope this helps.

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  4. #13
    just me duncan drennan's Avatar
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    Quote Originally Posted by Karenwhe View Post
    It is never the time to buy property without a strategy for the purchase and without understanding the local microeconomics.
    This is a complicated question, but how do you suggest one goes about developing that strategy?
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  5. #14
    Email problem Karenwhe's Avatar
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    Duncan,

    Ouch that is too much to write, I think you should rather go to www.PropertyInvestorNetwork.co.za you will probably find at least a few hundred posts on strategy alone out of some 10,000 posts on everything from affordability to what to buy and where.

    I really don't think I can replicate that in one post.

    There is just too much to know. Not rocket science, but a mass of data and information.

    Once you know that, you start building your own strategy.

    But in short you would need:

    1. To know the purpose of the purchase (hence exit plan).
    2. What entities you use (has to match with the above to max profit)
    3. Financials of your own and then of the property with forecasts.

    Now that said, there are many, many types of strategies, from investing, to trading, to living in a property and speculating.

    Generalizing here but to give am example, you would not speculate in down market that would constitute a bad move (to say in the most mild way). But what I said could be totally wrong if you look at microeconomics of an area.

    If you buy the wrong property for the wrong reasons - you bought wrong. And it does not matter in what market or at what price because your exist plan may not be achieved to what you wanted or end up paying taxes that are not necessary (e.g. income tax instead of CGT).

    Therefore even the price, no matter how low or high would have match the end purpose of the property and exit plan.

    Hope this helps.

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  7. #15
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    Dear Marq, on the third of June you asked "Could one ever consider that you actually own your property? These numbers are in addition to your current expenses." I reply that
    you own your property until you surrender the title deeds through a sale or because of a default iro of secured creditors.
    It is also a fact though that, ignoring inflation, land prices go up (in a boom) and down (in a slump) whilst building values only go down because of depreciation. What ever happens your building is heading for the scrap heap over a generation or so. The trick is therefore to own land with limited improvements and to otherwise lease properties. But don't tell too many about this until you have bought because they are in short supply. Silly damn thing that it does not pay to make improvements!
    But did ratepayers in Durban object to the City valuation? I did a sample audit there and 50% of values were below the selling price at the valuation date. That means, prima facie, that the valuation roll would be set aside. Peter Meakin

  8. #16
    Platinum Member Marq's Avatar
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    If I have to pay a monthly amount to the municipality, that is greater than my bond, just to retain title, then I submit that while you may have a title deed in hand, it is a huge liability and certainly not an asset. As such - you do not own your property - the council does.

    The Durban rates scenario is slowly gathering momentum with rate payers association and opposition parties giving it stick. The municipality received over 50 thousand objections and the valuations continue to be challenged. Dictator Sutcliff carries on denying and remains arrogant and petulant as ever, according to the latest news from the Mercury.

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    Quote Originally Posted by Marq View Post
    If I have to pay a monthly amount to the municipality, that is greater than my bond, just to retain title, then I submit that while you may have a title deed in hand, it is a huge liability and certainly not an asset. As such - you do not own your property - the council does.

    The Durban rates scenario is slowly gathering momentum with rate payers association and opposition parties giving it stick. The municipality received over 50 thousand objections and the valuations continue to be challenged. Dictator Sutcliff carries on denying and remains arrogant and petulant as ever, according to the latest news from the Mercury.
    Marq, true. But say all your taxes and rates too are confined to a single land tax based on the benefits which your land(s) enjoy and not your work, profits, interest and VAT. If I may make a plug have a glance at my booklet "A Creative Solution to Poverty and Unemployment" and perhaps you will want to join us. Peter

  10. #18
    Platinum Member Marq's Avatar
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    a single land tax based on the benefits which your land(s) enjoy and not your work, profits, interest and VAT.
    Got me here Peter - I have no idea what this means.

    My land does not enjoy anything - it just is. The utilisation of the land is another thing. How I work and what I generate is another.

    Perhaps you would like to expand your theory a bit?

  11. #19
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    Marq, I will try to answer your question. You say "My land does not enjoy anything - it just is".
    PIM: 1) If it does not enjoy anything then, excuse me, why does it have a price? Why is the average vacant plot price in the upper R3Ks and small-holdings double this? Land prices are a multiple of land rents: PRICE= LAND RENT times its P/E RATIO, like share prices.
    PIM : 2) Does your land not enjoy any natural endowments; no fertility, no rain, no sun, no view?

    PIM : 3) Does your land not enjoy any infrastructure such as roads, pipes, telekoms, electricity.

    PIM : 4) Does your land not enjoy any access to jobs, hospitals, schools, shops and other ammenities?

    PIM: 5) If it lacks all of these then it has no benefits and is worthless.

    PIM: 6) But note here that all of these benefits come from nature or society not from you personally.

    PIM: 7) So these benefits are entirely at taxpayer's (community) expense which become crystallised into private land prices. The big one is the Gautrain which you and I pay for in Cape Town and Durban but which those who own properties near the new stations will benefit from to the tune of R22Bn in improved land prices.

    PIM: 8) My case is closed but the solution is to tax land fully and to replace taxes on efforts which you personally make to earn a salary, profits, interest and to trade (VAT).

    I must now go and mow the lawn so as to keep my house saleable" You will find more about this at www.sacprif.org in out booklet.

    Peter

  12. #20
    Platinum Member Marq's Avatar
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    I have always battled to understand economics theory because it just does not appear to be logical.

    Here is an economic theory that has been around since 1879 and Peter you are correct - years of research lie behind your proposal - not a new one - but why has it not been implemented anywhere as a total system?

    The formula put forward that "When the tax rate equals 100% of the rent then the land price becomes zero", adds to what I said that we never own the land we live on or use. It is just set up as a liability in our system. The price of land is derived from my expectation of how I can use it, so excuse me if I differ from your opinion that land has this ability to enjoy itself.

    I also do not agree with the Physiocracy theory that there is no personal accrual of lands benefits. If it was not for personal effort nothing would ever happen in the first place. So I still think land does not enjoy anything; we do, after we as individuals work it as such. The roads, hospitals etc. are for our benefits not the lands. This system proposed still penalises the user. Either for not using it or for adding value and thereby creating a basis for the tax.

    Neither can I agree with your use of the example of the Gautrain. Those whose land was expropriated to make way would not agree with your benefits assumption and I cannot say that living next to a train station or rail tracks has ever increased any property value. The probability is that there will be a large reduction in values. Your billions in increased values, is from what I can determine, based on a model of the Jubilee railway in London - an entirely different world with hundreds of thousands of commuters likely to use it over a much shorter distance. The Gautrain it appears will cost more than the average person can afford and only services a few specific areas of the community who are unlikely to use it anyway. It is not a good example of 'community' structures to benefit all but more likely a good example of how the Government is keen to waste taxpayers money and fund their gravy train.

    You also do not mention where the land is coming from or put forward any financial numbers to prove the point. I looked at the numbers briefly and they went like this - The current income required is about 400billion. Halve this as we will not need all the grants and social stuff and we do not need so much admin, tax offices etc. So we need to now raise 200billion There are 30million in the potential work force, all of who are given this 12 hectares that you mention. No other taxes are involved. The answer therefore is that each land owner (everybody) must contribute 6,7million each a year from their small piece of land....mmmm - I wonder.

    Good luck with your legal action though. On this point I agree fully even though I think you are arguing against yourselves.

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