Author Archives: Staff Writer

The interest in alternative energy solutions in South Africa has surged in recent years, offering a spectrum of options from basic fixes like Uninterrupted Power Supply (UPS) devices to more comprehensive solutions such as inverters, generators, and solar panel installations, as highlighted by ooba Solar.

Solar energy has emerged as a sustainable option, yet widespread adoption of off-grid power remains limited, notes Dominique dHotman, Head of

ooba Solar

, a platform facilitating solar installation quotes and financing.

He said that doubts persist regarding solar’s accessibility, despite the range of financing options available.

Additionally, solar solutions are tailored to individual power needs, dHotman added.

While the entry barriers for solar financing are low and system acquisition is straightforward, dHotman stresses the importance of comprehensive financial comparisons to determine the most advantageous option for long-term savings.

dHotman underscores the often-overlooked costs associated with solar systems. Homeowners must consider total ownership costs, including monthly financing or rental fees, Eskom’s connection charges, and residual Eskom usage due to peak consumption or low sunlight periods.

Breaking Down Financing Options

Yes

: With a shorter pay-off period, you own the system – in full – after five years.

No

: Monthly instalments are the highest of the various financing options available, due to the shorter financing term and higher interest rate (around Prime +5%).

Yes

: While it operates similarly to asset finance, instalments are capped at a lower rate of Prime +2% and you own the system outright.

No

: This scheme has a short lifespan (the buyer must sign up before 30 August 2024).

Yes

: This option offers the most affordable monthly instalments, as interest rates are often given at a discount to Prime. “For Q3 ’23, ooba Home Loans achieved an average of prime -0.44% for our customers, so the rate discount is significant.”

No

: An extended financing term means that the system will take longer to be paid off (up to 30 years).

Yes

: Low monthly instalments and a reduced barrier to entry.

No

: Monthly rental costs escalate each year, and the solar system remains the property of the provider after the contract ends.

Year-one savings and costs

:

To compare the starting costs of each of the solar financing options on offer, dHotman uses the example of a household with an average monthly spend of R2 250 on municipal electricity (approximately 640 kWh per month).

“Typically, we look at a solar system that can supply around 80% of the household’s monthly power needs. One must however consider the monthly grid connectivity costs, and the remaining20% of the kWh’s still needed from Eskom or the municipality,” he said.

Calculating Costs

To compare the starting costs of each of the solar financing options on offer, dHotman uses the example of a household with an average monthly spend of R2 250 on municipal electricity (approximately 640 kWh per month).

“Typically, we look at a solar system that can supply around 80% of the household’s monthly power needs. One must however consider the monthly grid connectivity costs, and the remaining20% of the kWh’s still needed from Eskom or the municipality,” he said.

Home loan finance offers the greatest monthly savings until year eight, when asset finance takes the lead. This is because asset finance instalments cease after year five, allowing for extra savings during the following three years, dHotman said.

“On the lowest end of the scale is solar rental, which equates to a saving of only R9 286 over 10-years. In comparison to the likes of asset finance, home loan finance and the government buy-back scheme, these savings are low, especially in light of the fact that the solar system doesn’t belong to you.

“Here, you miss out on all the benefits associated with asset ownership. Also consider that over a 10-year period, the amount you’ll spend on renting will be more than double the cost of purchasing the system outright.”

As the 2024 property market unfolds, investors and home buyers seek guidance on promising investment opportunities. Harcourts South Africa shares its predictions and recommendations for the year ahead.

Richard Gray, CEO of Harcourts South Africa, offers expert insights into the trends shaping the market. “2024 presents significant potential for specific regions and property types. Our analysis highlights areas poised for substantial growth, offering appealing prospects for investors,” Gray said.

Key Investment Areas

Harcourts South Africa identifies several regions as key investment hotspots. “We observe a surge in demand in suburban areas, particularly those with excellent connectivity and lifestyle amenities. These areas combine residential appeal with long-term value appreciation,” Gray noted.

Market Predictions for 2024

The 2024 market is forecasted to be dynamic, with evolving buyer preferences and economic factors at play.

“

Affordability, proximity to work centers, and quality of life are driving market dynamics

. We anticipate increasing demand for properties that meet these criteria,” Gray stated.

Regarding interest rates, it is believed that we have reached the peak for this cycle.

Investment Advice

Gray underscores the importance of thorough research and strategic timing. “Successful real estate investment entails understanding market cycles and identifying potential opportunities. We advise investors to consider long-term trends, community development plans, and infrastructure expansion when making decisions,” he said.

“Our objective is to assist investors in making informed decisions that yield significant returns. The 2024 market presents numerous opportunities, and we are dedicated to guiding you towards the most promising investments,” Gray said.

The advantages of enhanced global mobility are undeniable, particularly for individuals with passports that offer limited travel opportunities.

Golden visa programmes worldwide present an enticing avenue to obtain a second passport or residency in exchange for a capital investment.

However, navigating the array of options available can be daunting. Here, professional services firm Sable International explores the top programmes in 2024.

Portugal: Premier Path to European Citizenship

Portugal’s Golden Visa Programme has consistently stood out in the European residency-by-investment landscape, offering an attractive route to Portuguese nationality.

Originally launched to revive the real estate sector post-2008 crisis, the programme has evolved into a global success story.

With Portugal’s real estate market flourishing, the focus has shifted towards attracting investment through private equity funds, targeting key sectors like tourism, agriculture, and green energy.

Despite uncertainties, the Golden Visa landscape offers investors a well-defined roadmap to securing European residency and a second passport.

Greece: Offshore Real-Estate Investment with Greek Residency Permit

Greece presents an enticing option for property investment, offering relatively affordable real estate and the potential to obtain a residency permit.

Property ownership may grant residency, allowing visa-free travel throughout the entire Schengen area for leisure purposes. With Greece experiencing solid economic growth, investors are increasingly capitalizing on its potential.

There are no restrictions on foreigners purchasing property, and qualifying properties for the residency-by-investment programme start at EUR 250,000.

Mauritius: Secure Offshore Property Investment with Permanent Residency

Mauritius offers a robust residency-by-investment programme, attracting investors seeking a strong investment, favourable climate, and secure lifestyle.

The island’s property market has witnessed significant capital growth in recent years, making it an attractive option for investors.

With permanent residency status available for property purchases of $375,000 or more, Mauritius provides a solid hard-currency investment opportunity.

United States: Relocation through the EB-5 Investor Visa

For those seeking to relocate to the USA, the EB-5 Investor Visa offers a direct route to obtaining a US Green Card.

Investors can secure permanent residency, granting them the right to live and work in the US.

The minimum investment is $800,000, and additional qualification parameters apply. The programme offers two timelines: the traditional route, which takes approximately 36 months, and a quicker option for those ready to expedite their relocation process.

Grenada: Citizenship and Global Mobility

Grenada’s citizenship-by-investment programme provides a fast-track route to Grenadian nationality, offering visa-free access to 148 countries.

With a minimum investment of $220,000 in real estate, investors can secure a cost-effective second passport solution.

The programme is flexible, allowing investors to include family members and providing peace of mind for global travel.

United Kingdom: Strong Yielding Investment Property

Although the UK has ended its Tier 1 residence-by-investment programme, investment in UK property remains an attractive option.

The country offers a stable investment environment, with no restrictions on foreign investment in the property market. Savvy investors view UK property as a safe haven, with reliable tenants readily available and competitive rental yields.

These top programmes offer diverse opportunities for investors seeking residency or citizenship through investment. 4

Whether targeting European citizenship, seeking offshore property investments, or pursuing relocation to a new country, these programmes cater to various investment preferences and goals.

In Q4 of 2023, sectional title residential property prices saw a notable increase, outpacing freehold prices for the first time in two decades, according to Dr. Andrew Golding, CEO of the Pam Golding Property group.

Dr. Golding noted that while freehold house prices have typically experienced higher growth rates than sectional title homes, a rebound in the fourth quarter of 2023 resulted in sectional title properties achieving stronger growth (+1.8%) compared to freehold homes (+1.5%).

This marks the first time since 2004 that sectional title house price inflation surpassed that of freehold properties. The trend continued to widen, with sectional title prices growing by +1.9% and freehold prices by 1.1% in December 2023.

The demand for sectional title properties has also risen significantly over the past decade, accounting for over half of all residential property sales in 2023 compared to less than 45% in 2013.

Notably, Tshwane saw the largest percentage of sectional homes sold last year, while Cape Town experienced a notable increase in sectional title sales due to investment purchases and new developments.

Dr. Golding attributed the increasing demand for sectional title properties to factors such as affordability, security, lifestyle preferences, and densification initiatives by municipalities.

Furthermore, data from ooba Home Loans revealed a clear preference for sectional title properties in investment purchases, accounting for 67.4% of all investment properties sold in 2023.

The average purchase price for sectional title units was R1.51 million, significantly lower than freehold properties, with Cape Town being an outlier due to its higher median sales price of R1.7 million.

Overall, while both two and three-bedroom freehold homes registered stronger growth in 2023 than sectional title properties, smaller units in both categories are currently experiencing an acceleration in house prices.

Growthpoint Properties has finalised a significant Power Purchase Agreement (PPA) with Etana Energy, marking a significant step forward in sustainable energy procurement.

Under this agreement, Growthpoint will purchase 195GWh of renewable energy annually from Etana Energy, accounting for 32% of its total current annual electricity consumption (612GWhs in FY23).

195GWh: If generated by rooftop solar power, it would equate to approximately a 130MWp solar installation, assuming a generating yield of 1,500kWh/kWp annually.

However, the PPA generation profile would exhibit relative flatness over a 24-hour period due to the predominant wind generation and smaller hydro component.

In November 2023, Growthpoint signed a PPA with licensed electricity trader Etana Energy to facilitate the delivery of electricity to its commercial properties across various regions in the country.

This groundbreaking deal establishes the nation’s first multi-jurisdiction, multi-building, multi-source renewable energy wheeling arrangement. It will enable Growthpoint’s tenants to access environmentally friendly energy sources and reduce their carbon footprint.

Through this partnership, Etana will supply 70% of the power consumed by Growthpoint’s participating buildings. In certain buildings,

Growthpoint will offer tenants the opportunity to purchase 100% renewable energy, thereby actively contributing to carbon reduction efforts.

“The renewable energy supplied will predominantly come from wind sources, supplemented by hydro and large-scale solar electricity. This diverse generation mix ensures extensive coverage of Growthpoint’s energy needs, as electricity is generated around the clock,” explained Estienne de Klerk, SA CEO of Growthpoint Properties.

As part of the agreement with Etana Energy, Growthpoint has secured exclusive rights to purchase approximately 30GWh of electricity annually from a 5MW hydroelectric power plant developed, owned, and operated by Serengeti Energy.

This project, located on the Ash River within the Lesotho Highlands Water Scheme (LHWS) near Clarens in the Free State, is expected to generate baseload power effectively round the clock.

Growthpoint has also expressed interest in investing in the power plant, as evidenced by the signing of a Memorandum of Understanding with Serengeti Energy.

Serengeti Energy specialises in developing and managing renewable energy projects, primarily hydro, of up to 50MW in sub-Saharan Africa and currently operates nine plants across five countries.

Originally targeted for South Africa’s Renewable Independent Power Producer Programme (REIPPPP), which supplies privately produced electricity to the national grid, Serengeti shifted its focus for this hydro plant towards commercial and industrial sectors.

The hydroelectric power plant, situated within the LHWS water transfer scheme between Lesotho and South Africa, is strategically positioned to provide reliable baseload power. It is also poised to benefit from future expansion plans of LHWS Phase 2.

The project has reached financial close and is currently under construction. Commercial operations are expected to commence on July 1, 2025, with the plant supplying its first electricity to Growthpoint, facilitated through the Eskom grid and traded via Etana.

Subsequently, the commissioning of wind and additional solar power from Etana’s portfolio of renewable energy projects connected to the national electricity grid will begin.

Etana Energy specialises in delivering cost-effective clean energy from new large-scale renewable energy projects connected to the South African grid.

The 10X Investments

Retirement Reality Report 2023/2024

reveals a concerning scenario for South Africa’s retirement landscape, with only 6% of the population on track for a comfortable retirement.

Drawing data from the 2023 Brand Atlas Survey, encompassing 15.4 million economically active South Africans, the report highlights a persistent lack of retirement planning and confidence among citizens.

Despite economic challenges, this year’s survey reflects minimal change in South Africans’ inclination or ability to plan for retirement compared to the previous year.

With 49.2% of the adult population below the poverty line, the report underscores the critical need for informed financial decisions.

Tobie van Heerden, CEO of 10X Investments, notes a slight increase in recognising the importance of retirement planning compared to the previous year.

However, the report emphasises the significant gap between retirement expectations and the challenging realities faced by those nearing retirement.

Key Findings:

The report indicates a decline in the number of people retiring on their own terms, dropping from 70% in 2021 to 60% this year. This trend reflects the challenging economic climate, with employers increasingly compelling older workers to take early-retirement packages.

Despite these challenges, only 35% of retirees who saved for retirement express confidence that their savings will last, underscoring the need for informed financial decisions in these uncertain times.

The report is based on the findings of the 2023 Brand Atlas Survey. Brand Atlas tracks and measures the lifestyles of the universe of 15.4 million economically active South Africans – defined as those living in households with a monthly income of more than R6,000, aged 16+, with internet access through online completion surveys.

In a widely anticipated move, the Federal Open Market Committee (FOMC) opted to keep the federal funds target rate unchanged at 5.25% – 5.50%, echoing concerns about persistently high inflation.

Annabel Bishop, chief economist at Investec, notes that the decision aligns with the acknowledgment that while inflation has eased from its highs, uncertainty persists, and progress in curbing inflation is not guaranteed.

The FOMC emphasised the positive aspect of inflation moderating without a substantial rise in unemployment, hailing it as good news.

However, the committee remains firm in its stance that inflation levels are still too high, emphasising the need to restore price stability.

The committee acknowledged the impact of its restrictive monetary policy on economic activity and inflation.

“Our restrictive stance of monetary policy is putting downward pressure on economic activity and inflation. Over the past two years, we have raised our policy rate by 5-1/4 percentage points.”

The swift tightening of the U.S. interest rate cycle has notably subdued activity levels in the housing market due to elevated mortgage rates, with business fixed investment also hampered by increased borrowing costs, said Bishop.

While indicating that the current policy rate might be at its peak for this tightening cycle, the FOMC adopted a cautious tone, acknowledging the unpredictable nature of the economy since the pandemic.

They hinted at the possibility of easing policy restraint later in the year if economic conditions unfold as expected.

Bishop said that the response in the financial markets was marked by a slight strengthening of the rand to R18.57 against the dollar initially, only to retrace to R18.73.

The economist said that market attention is now focused on May as the potential timeline for the first rate cut, with further analysis of the FOMC statement expected throughout the week.

Despite the speculation, the FOMC cautioned against premature rate cut expectations, expressing a willingness to maintain the current target range for the federal funds rate for an extended period if deemed appropriate.

The committee underscored the potential risks of reducing policy restraint too soon, emphasizing the importance of maintaining progress in inflation containment.

Looking ahead, Bishop said that the likelihood of an FOMC rate cut before May appears low, possibly occurring at the June meeting.

For South Africa, the South African Reserve Bank (SARB) is unlikely to cut rates before July, aligning with the Forward Rate Agreement (FRA) curve, which indicates a potential -25 basis points cut in July.

Market dynamics will continue to hinge on U.S. data releases and evolving economic conditions leading up to the next FOMC meeting, said Bishop.

In an optimistic outlook for the year ahead, Byron Thomas, the founder and CEO of Byron Thomas Properties, foresees 2024 as a promising period for the property market in South Africa.

After facing challenges in recent years, akin to a tide turning, the property market is poised for a positive shift, he says.

Several high-impact factors are expected to shape the property landscape in 2024.

1. Declining Interest Rates

Forecasts indicate a decline in interest rates starting from the first quarter of 2024, extending into the coming year. This downward trend is anticipated to foster positive buyer sentiment, attracting more individuals into the market, according to Thomas.

The shift from the negative buyer sentiment of previous years, attributed to rising interest rates and affordability issues, is expected to drive a resurgence of investor buyers as well, he said.

With easing interest rates, many first-time buyers who have hesitated to enter the market are now expected to afford properties.

The decline in interest rates is seen as a catalyst for these buyers to gain the confidence to purchase homes rather than continue renting, said Thomas.

This shift is anticipated to alleviate the negative impact on demand, particularly affecting the pricing of sectional title units.

3. Geopolitical Landscape

Despite global turmoil, South Africa’s internal issues are becoming less of a deterrent, leading to a slowdown in emigration and semigration movements.

Notably, there is a reverse trend, with buyers returning to South Africa. Joburg, as the financial hub, is gaining prominence, especially around Rosebank, due to its proximity to business nodes, schools, hospitals, and major transport routes, said the property expert.

4. South African Elections

While election outcomes are uncertain, early indicators suggest a decline in support for the ruling party (ANC) in the 2024 National election.

This potential shift signals a desire for positive change from both voters and the private sector. The impact of coalition dynamics remains complex, but there is a prevailing optimism for a positive future, according to Thomas.

5. Infrastructure Developments

Numerous suburbs are undergoing short-term challenges for long-term gains, with ongoing infrastructure upgrades.

Homeowners are investing in backup power solutions, boreholes, and water storage to reduce reliance on municipal services, contributing to a more resilient living environment.

6. Decreasing Stock Levels

Listing numbers in certain areas have decreased, signaling a potential shift towards a seller’s market. As stock levels decline, property prices are expected to benefit from increased demand, said Thomas.

7. Value for Money and Quality of Life

Thomas pointed out that Johannesburg’s property prices are currently at an affordable level, offering excellent value for money and a unique lifestyle.

Community and security initiatives, along with resident participation, are making suburbs safer and more desirable.

In Summary

The outlook for 2024 is optimistic, with positive shifts expected in both freehold and sectional title segments of the property market.

The timing for prospective buyers is crucial, as property prices are projected to climb with decreasing stock levels and favorable interest rates, noted Thomas.

Those prepared to take the leap early may reap the rewards in this evolving real estate landscape, he said.

Rising municipal rates and escalating electricity tariffs, coupled with a decline in service delivery, are prompting homeowners to seek refuge in areas where infrastructure remains intact.

The Western Cape is poised to benefit from this trend, as highlighted in FNB’s 2024 property insights analysis by John Loos, a property strategist in the commercial property finance department.

The report paints a cautiously optimistic picture for a “mildly improved” economic environment in 2024, potentially yielding better results for the commercial property market.

However, Loos anticipates that the positive effects may only materialize in 2025. Property investment could see improvement in 2024 due to various economic factors such as interest rate cuts and lower inflation, providing investors with a potentially better year, although tangible improvements may only manifest in 2025 due to economic cycles and uncertainties.

Key Predictions:

Economic Influences:

Loos predicts a slight improvement in economic growth from 0.8% in 2023 to 1.2% in 2024. The Consumer Price Index (CPI) is expected to drop from 5.9% in 2023 to 5.2% in 2024.

While interest rate cuts are not anticipated in the near term, a mild reduction of 75 basis points is predicted in the second half of the year, bringing the prime rate from 11.75% to 11%.

South Africa’s Commercial Property Outlook:

After a significant interest rate hike cycle in 2023, credit-driven property buying and sales activity is expected to recover in 2024. However, the demand for rental space in commercial property may take longer to improve.

The commercial property market, particularly the rental market component, experienced setbacks during the 2020 Covid lockdown, but there has been a slight improvement since then.

The Property Vacancy Rate is expected to show a small increase in 2024, potentially influenced by delayed financial impacts on tenants from the 2021-2023 interest rate hikes and slower economic growth in 2021.

Loos anticipates a continued “correction” in real commercial property values in 2024, where capital growth may not keep pace with inflation, resulting in a decline in real terms.

This decline is attributed to stagnant economic growth unable to support positive real net operating income growth over the past decade.

Rising interest rates and a rising cost of living are compelling a growing number of South Africans to sell their homes, with nearly 25% of listed properties in the last quarter of 2023 attributed to financial pressures.

This indicates that one in four homes with ‘for sale’ signs is inhabited by distressed families or individuals facing economic challenges, surpassing the historical average of 18% since the end of 2007.

Notably, FNB senior economist Siphamandla Mkhwanazi highlights that the impact of financial pressure-induced sales is even more pronounced in the affordable housing market, where an estimated one-third of volume sales are driven by economic constraints.

This trend aligns with the sharp escalation in living and debt servicing costs, exerting a disproportionate impact on lower-income households.

The breakdown of forced sales across different price brackets in the last quarter of 2023, compared to the previous quarter, is as follows:

Overall: 24.7% (up from 22.8%)

Mkhwanazi notes that sales attributed to domestic relocation (semigration) have stabilised at around 11% of volume sales, compared to the previous 12% and a peak of 14% in Q3:2022.

Instances of home upgrades have slowed from 15% in Q4:2021 to 10% in Q4:2023, with emigration-related sales remaining steady at 8%, significantly lower than the 2019 peak of 18% but in line with the long-term average since the end of 2007.

The reasons for selling in the last quarter of 2023, compared to the previous quarter, are as follows:

Homeowners are anticipating the upcoming Monetary Policy Committee meeting, where the first repo rate decision of 2024 will be determined.

While hopes are high for a rate decrease, experts anticipate that it will remain steady at 8.25%, maintaining the interest rate at 11.75%.