Latest news with #Kriek
IOL News
6 days ago
- Business
- IOL News
Why South Africa's high interest rates are stifling private sector investment
South Africa's persistently high interest rates, the lingering effects of the post Covid-19 recovery, and muted domestic growth in South Africa continue to stifle the local real estate sector. Image: Henk Kruger African News Agency (ANA) The real interest rate remains far too high to spur meaningful capital investment by South Africa's private sector, despite the recent interest rate cut by the South African Reserve Bank (SARB). The bank's Monetary Policy Committee reduced the repo rate by 25 basis points last week. While the news brought some welcome relief to property owners, it was another disappointment for the country's real economy, said Renier Kriek, the managing director at Sentinel Homes. 'The SARB has consistently preached that their policy bible contains only one chapter, titled 'inflation targeting', which requires sticking to within their 3–6% inflation target band and anchoring inflation expectations at the 4.5% midpoint. 'Their messaging has consistently and unfailingly pledged that their mandate is the only consideration that guides their decisions,' Kriek said. South Africa is unfortunate not to have a stable interest rate environment - a scenario that is likely to continue for at least the next five years, according to Tyson Properties. 'We spent the last couple of years straight after Covid seeing record lows and a little mini property boom. When those rates began to increase, people found that they could no longer afford the houses they had bought. We struggled to sell houses because expectations were too high. "Interest rates began to level off, and the market picked up again. Then along came Trump and markets became nervous again,' said Tyson Properties CEO, Chris Tyson. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Kriek said that despite inflation remaining low over an extended period, currently sitting at 2.8%, leaving the opportunity for a softening of monetary policy wide open, the SARB had not budged. Kriek asked then why the SARB has stubbornly refused to reduce the interest rate accordingly, even as inflation hovers at or below the bottom of their target band? Despite preaching vague and opaque 'risks to the upside' to justify their hawkishness in recent years, he said it is clear that the SARB has been disingenuous. He said this was made plain for the first time last week with the interest rate cut, but it has long been evident that there is a secret driver of their decisions. 'It was clear with the announcement that the SARB's policy bible has contained a new chapter, which is their anticipated future mandate, and they have already been guided by that expanded gospel, despite the existence of the chapter having been secret and further despite the content of the chapter not having been agreed to with Treasury and other stakeholders,' Kriek said. The argument advanced by the Monetary Policy Committee, by way of Governor Lesetja Kganyago's statement and answers to questions during the press conference, is that the MPC wishes to deliver a decisive blow to inflation in the long term, transforming the SA economy to a low(er) inflation economy. This will also mean lower interest rates for longer in future, per the MPC's reasoning, since lower inflation economies generally tend to have lower inflation rates. 'However, the question is, why do we want to do this now?' Kriek asked. 'Moving to a lower inflation target will likely have long-term positive consequences for the SA economy, but it will also involve near-dated discomfort. Essentially, the MPC is promising short-term pain for long-term gain.' 'The SA economy is a very frail patient at the moment, and keeping interest rates at current high levels in order to achieve longer-term outcomes is a risky gambit. "We should at least be asking, and this is as much about political calculation as economic policy, whether we should not attempt monetary stimulus first, getting the economy out of its bandages, and attempt the MPC's incisive reforms once the patient is back on its feet. 'The property sector has shown signs of broad-based recovery, with price lines across all the metros trending upwards in Stats SA's latest Residential Property Price Index," he said. The cumulative 75 bps cuts, with a further cut at last week's meeting, have already had the effect of bringing previously pent-up demand spilling into the residential property market. However, while these are green shoots, the market is still under significant strain. According to National Credit Regulator(NCR) statistics, home loan delinquency is up by 35% in the last three years, signifying the tremendous pressure households are experiencing related to their finances.
IOL News
16-05-2025
- Business
- IOL News
Essential estate planning: how property owners can ensure smooth asset transfer after death
Nestled in the quiet, family-oriented Dunbar neighbourhood, this beautiful home redefines contemporary living. Image: Ema Peter Photography Property owners must plan for death and taxes if they want their home and other assets to pass smoothly to those surviving them. Renier Kriek, managing director at Sentinel Homes, says structuring one's estate smartly, or at least having a will in place, will spare those grieving a relative's passing further hardship, both emotional and financial. He said when planning for death, property owners need to consider two main factors. The first is how to structure their estate so they don't directly own anything when they die. This is usually only appropriate for those with large estates and minor dependents, or businesspeople who risk having their assets attached to repay creditors, but may not be the best tax planning advice for most consumers. The second concern is their marital status. Are they single, married in community of property, or married out of community of property, either with or without accrual? He said each marriage model will affect the distribution of an estate differently. Sentinel Homes said any decision a property holder makes in this regard should be guided by advice from a professionally qualified financial and estate advisor. The alternative home financier said without a will, intestate rules apply to the deceased estate, as prescribed by the Intestate Succession Act 81 of 1987. It said these rules determine which surviving relatives will inherit what portion of the estate, from the surviving spouse and descendants down to distant blood relatives. The company said the Act's complex requirements could result in, for example, a spouse losing their family home to ensure they and each child receives an equal inheritance. So, Kriek said, for anyone having assets such as homes or other fixed property and especially those property owners who have dependents, it is always best to have a will professionally drawn up to make sure assets will be distributed in a manner desired by the property owner. 'Again, the marriage model will affect how the will should be structured,' says Kriek. 'Estate planning with a licensed and regulated professional is also likely to include investments and insurance, proper planning of which remains essential.' The MD said that avoiding direct property ownership while still enjoying the benefit of owning property can be accomplished through the use of a trust or company. However, he said the cost of these vehicles makes them best suited to more affluent people who have larger estates and minor dependents, or entrepreneurs. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ He said if property is transferred to or bought through one of these entities, the entity owns the asset. So, dying is of no consequence if one's dependents are the ultimate beneficial owners of the entity, such as through being beneficiaries of a trust. The property held by a trust or company rather than in a person's own name will not be subject to estate tax or capital gains tax at death, and typically cannot be attached by the deceased's creditors. Only income that is earned through that property is taxed at a rate prescribed for the specific type of entity, in addition to capital gains tax if the entity elects to sell the property concerned. 'Which structure is best suited to an individual's needs must be determined with the help of a trusted estate planner or financial manager,' Kriek said. 'Do not assume that the more complicated structure, using entities such as trusts and companies, is 'better' and therefore the most appropriate one.' Sentinel Homes said that unfortunately, structuring cannot save a property that surviving family members are unable to afford, whether it is bond repayments, rates or levies, trust administration fees, corporate accounting fees, or other expenses. It said this could happen if a surviving spouse does not work and cannot raise the required finances to settle existing debt against the family home or other property. The company said an estate might be able to cover its own costs, for example, where income is derived from rental properties or the entity receives cash bequests from the deceased person. Otherwise, a will, trust or company should be backed by some form of insurance that ensures funds are available after the owner's death. 'By following this rough guide and using a properly qualified and licensed financial planner, you will allow your loved ones to continue enjoying the life you worked so hard to provide them with,' Kriek said. According to the Department of Justice and Constitutional Development's website, if one dies without leaving a valid will, their estate will devolve in terms of the rules of intestate succession, as stipulated in the provisions of the Intestate Succession Act (Act 81 of 1987). In case of a marriage in community of property, one half of the estate belongs to the surviving spouse and, although it forms part of the joint estate, will not devolve according to the rules of intestate succession. According to the department, all deceased estates will be distributed in terms of the Intestate Succession Act. This means that the beneficiaries in order of preference are the spouse of the deceased, descendants of the deceased, the parents of the deceased (only if the deceased died without a surviving spouse or descendants, the siblings of the deceased (only if one or both parents are predeceased). The department also says that the Intestate Succession Act should be read in such a way that it can accommodate cases where the deceased was a husband in polygamous customary union when the deceased left only spouses and no descendants, the wives will inherit the estate in equal shares. When the deceased left spouses and descendants, the spouses and descendants will inherit the estate in equal shares, but each wife should inherit at least R250 000. When the estate is not large enough to allow each wife to inherit R250 000, the spouses will inherit the estate in equal shares while the descendants will not receive anything. After the decision, deceased estates will all be administered in terms of the Administration of Estates Act. [Act 66 of 196 (as amended)]. This implies the following changes to current practice: the magistrates will no longer supervise and administer deceased estates; only the Master of the High Court will do so. The Master of the High Court does not have the power to administer estates on behalf of beneficiaries. The Master will appoint a suitable person to administer the estate. Independent Media Property
Zawya
26-03-2025
- Business
- Zawya
South Africa: New court ruling intensifies debate over binding bond approvals
Competing precedents, including a recent court case involving a home buyer who got cold feet, wanted to walk away from the deal but couldn't, have sparked discussions in South Africa's property law circles. The judge ruled in favour of the seller, because both parties had signed a contract that became binding as soon as the buyer's credit provider issued its 'approval in principle'. "Some people misinterpreted the ruling, or disagree with it - saying it wasn't fair,' says Renier Kriek, managing director of Sentinel Homes. Yet the judgement followed centuries of contract law precedent by focusing only on the following question: At what stage did the purchase agreement become binding, before or after the property finance had been accepted by the buyer? 'Obtaining finance is a process, unlike a turning on a light switch, it's not instant and even positive results arrive piecemeal,' says Kriek. 'When you sign an offer to purchase a property and require a home loan, there's usually a condition that your loan must be approved before a certain date. This is called 'suspensive condition' – meaning that only once this condition is fulfilled, the contract will become final and binding. 'Buyers and sellers need to understand the suspensive condition in their contract, especially as they generally have competing interests in terms of the stage at which the deal should become final,' he says. 'It's therefore important to phrase your contract without ambiguity, so it's not open to misinterpretation.' Real-life consequences Contract law may sound academic but it has serious, real-life consequences. Since nobody wants to lose their deposit, Kriek urges buyers to fully grasp the financing process: When a home loan provider assesses your application to buy a house, and is satisfied it can lend you the money, it will first issue an approval in principle (AIP). Then it conducts a valuation, before eventually issuing a prescribed document called pre-agreement statement and quotation. According to the NCA, the buyer has five days to accept the pre-agreement statement and quotation, which then becomes a final offer of finance. 'From the seller's perspective, it would be best if the agreement of sale would likely contain a clause stating that the contract becomes binding as soon as the home loan provider issues the AIP,' says Kriek. 'From the buyer's perspective, however, this clause poses a risk: it means you're bound to the sales agreement, the sale is final, and your deposit could be on the line, even before you have agreed to the interest rate and other finance conditions suggested by the home loan provider.' Ideally, he advises buyers to ensure the sale is only binding once, namely that: a) the bank has issued the pre-agreement statement and quotation, and b) you have accepted it. 'This means you can only lose your deposit or be forced to buy the property once you have agreed to the terms of the credit proposed to you.' Check the nitty-gritty Also watch out for home-loan approvals that require the submission of approved building plans. As a rule, your offer to purchase should require the seller to do so. But if this clause is missing, the seller won't be obliged to provide the building plans, even if your home-loan provider requires these. This makes you as the buyer responsible for obtaining the plans. It's not only time-consuming but if plans can't be approved, due to unauthorised building works, your deposit may once again be at risk. This also applies to any other conditions your home loan provider may have. You have to ensure that these conditions are also in the sale agreement, so that the two documents tie into each other. For these reasons, Kriek urges buyers to get legal advice before signing their offer to purchase. Don't rely only on the property practitioner or others linked to the seller. No-one should take a hig cost and high liability decision like buying a home without expert legal and other professional advice, such as from a registered property practitioner and bond originator. Ultimately, understanding the nitty-gritty of your contract should help you avoid financial losses and enjoy a smoother property transfer. All rights reserved. © 2022. Provided by SyndiGate Media Inc. (
Zawya
13-03-2025
- Business
- Zawya
South Africa's housing crisis: Why 2.2 million homes are needed immediately?
South Africa has a housing supply backlog of at least 2.2 million units, with a significant shortage in the affordable housing or 'gap market', according to a recent study by the Centre for Affordable Housing Finance (CAHF). The gap housing market is generally considered to be households earning too much to qualify for Reconstruction and Development Programme (RDP) housing but too little to obtain traditional bank-financed homes in the open market. Renier Kriek, managing director at Sentinel Homes, says 40% of consumers fall into the RDP housing category (household incomes below R3,500 per month) and the wealthiest 30% of households are well-served by the open housing market. Massive demand The gap market is the middle 30% of consumers where the supply of housing stock is extremely low and even declining despite massive demand. Kriek argues that a market design error is to blame for this high demand going unmet. Adverse market design disincentivises the holders of capital to invest in affordable housing. The biggest hurdle relates to the unnecessarily lengthy, cumbersome, and expensive processes associated with evictions and foreclosures. The cost of restarting the transaction (eviction or foreclosure) is prohibitive in South Africa and does not align with market circumstances. South Africa should adjust their regulatory environment to favour private-sector investment and the expansion of supply. 'We need to reduce the transaction cost for the holders of capital to take their chances on consumers who are not acceptable risks in the unduly high tenure security environment. In this way, some people will move into the formal housing market and fall out again, and perhaps more than once in their lifetime. If we go through enough of these cycles eventually everyone will be housed.' Kriek admits that this solution may sound slightly callous and counterintuitive to the casual listener. 'The alternative, retaining our restrictive policy environment, is even more callous and is currently barring people from ever getting the opportunity to enter the formal housing market. What use is being born free if you will never realise that constitutionally mandated right of access to adequate housing?' Unintended consequences Another prevalent and reasonably fixable market design problem relates to government subsidies. The Department of Human Settlements has been offering the First Home Finance (FHF) subsidy, previously called FliSP to households in the gap housing market. It aims to subsidise affordable first-time home-ownership opportunities for households with income from R3,501 up to R22,000 per month. It is an inverse means-tested subsidy, meaning that the cash grant is lower the higher the household income becomes. 'Millions of rands earmarked for this subsidy have remained unclaimed in the past and continue to remain unclaimed. This is not because people do not know about the incentive or do not desire it. The first challenge is the relative scarcity of gap housing stock, which is driven by poor demand due to incentives that are adverse to the deployment of capital in this segment, whether by landlords or home-loan providers.' Kriek argues that the subsidy design has unintended consequences resulting in market participants, such as estate agents, being unwilling to sell to subsidy recipients. 'Due to overzealous fraud-prevention measures and perhaps also an unwillingness to integrate into the existing market infrastructure, government has traditionally insisted that the registered title deed contains the name of the subsidy recipient before it releases the subsidy amount.' This means that the subsidy portion is usually received months after the transfer, unlike all other funds in a property transaction which are secured by third party payment functionaries such as banks or attorneys. This makes each property transfer involving a subsidy inordinately complex, and everyone involved prefers doing the same transaction with a consumer who does not rely on a subsidy. Usually, it's the estate agent waiting for the subsidy payment to receive their commission, and that is simply an unacceptable adverse incentive if government's intention is to have the subsidy reach its intended recipients.' Subsidy system chaos Though recent developments seem to favour fixing the market design shortcomings of FHF, the administration of the subsidy remains positively byzantine. There is a national subsidy authority, that can approve and pay subsidies, and a separate subsidy authority for each of the provinces, each with a unique set of rules and procedures and a separate application procedure. This is a quagmire for lower income consumers to navigate successfully, especially where those who rely on subsidies are already viewed negatively by market intermediaries such as estate agents and transferring attorneys. It will take significant political capital to implement market design solutions that can solve the problems facing the gap housing market. If we do nothing it may even get worse, says Kriek, who fears that the current government may not have the ability to adequately diagnose the problem, and much less the political will to affect the necessary policy and regulatory changes. If successful, finding solutions to the housing supply problem could significantly contribute to job creation, supporting the government's recent efforts outlined in the President's State of the Nation Address. All rights reserved. © 2022. Provided by SyndiGate Media Inc. (
