THE CURRENT STATE OF THE PROPERTY & FINANCIAL CRISISPROPERTY & FINANCIAL CRISIS

in RSA and HOW IT AFFECTS YOUHOW IT AFFECTS YOUPlease Please

Buckle Up!Buckle Up!

Purpose of this PresentationPurpose of this Presentation

That You Could Make an Informed Decision of

HOW TO APPROACH THE FUTURE!

Please NoteThis is not financial advice or counselling

What happened over the last few years

• Boom started in 2001• Reached peak in 2007• Downward spiral• October 2008 – Lehmann Brothers• Start of the Worldwide Banking Crises

Reality Check: Property ValuesReality Check: Property Valueso 2008: Turnover R700 Billion

Number of Transfers ± 500 000o 2009: Turnover ± R100 Billion

Number of Transfers ± 150 000o Values for 2010: ± R100 Billion

Number of Transfers ± 130 000o Projected for 2011: ± R90 Billion

Number of Transfers ± 114 000Source SAPTG

o Full Title Transfer Values: Source SAPTG ± 34% Down from 2008 to 2010 Value ± 39% Down - Sectional Title Value in the same period ± 65% Down - of the Value of Vacant land over the same period Projected Average Decline for 2011 over 2010: ± 13% Average value of Property has declined by ± 50% from the peak

of 2007

½

2007 2011

Reality Check: Property IndustryReality Check: Property Industry

o The Values of Property will continue to drop during 2012 Non-performing loans still growing Projected “P I P” for Banks could be astronomically high:

FNB currently alone has more than 90 000 non performing homeloans with less than 10% Market Share

New developments, construction has basically ceased Only 21 out of 100 Building Contractors are positive

Source FNB

Reality Check: Property IndustryReality Check: Property Industry

o Number of agents operating in South Africa 2007: ± 92 000 active agents 2011: ± 15 000 agents renewed their fidelity fund

certificates Personal income of agents has dropped by ± 70% or

more since 2007

Reality Check – Property IndustryReality Check – Property Industry

• The market turnover value has declined in rand terms by 86% since 2007

• To regain the previous peak it has to rise by more than 600%

Reality Check – Property IndustryReality Check – Property Industry

LOW

HIGH

MEDUIM

HISTORY

2002

2003

2004

2005 2007

2008

2009

2010

2012

2014

2017

2019

2021

2023

Current Sellers Expectations

of the market’s future

2011

The Real Estate Market Cycle

EXCESSIVE OPTIMISMEXCESSIVE OPTIMISM

OverBought

OverBought

NE

GA

TIV

E N

EW

S

PO

SIT

IVE

NE

WS

Credit and Cash Dry Up Bulging Inventories Production Slows Prices Slip A Little Worry Buying Dries Up More Lose Confidence Layoffs Begin More Worry Savings Build Put Off Buying Excessive Fear Panic

Some BuyingSmart MoneyBuys/Invests

Bargain Basement= Some Buying

WE ARE HERE

EXCESSIVE PESSIMISM

Recovery?

Recovery has Started only in the minds of the Sellers

o Sluggish o Volatileo Will only see a stable market in 2014 / 2015

Interest Rates

Still further down 0,5% - 1% in 2011 / 2012– Remain low for longer

– International events will have a ongoing impact during 2012 / 2014

2012

20172009

2020

2008 2025↓

↓↓↓

↓

↓

↓ ↑

↑

↑

↑

Another…

-5 %

-10 %

-15 %

-20 %

-25%

-30 %

+

???

The longer you waitto sell your propertythe more its going todecrease and no oneknows when themarket will startturning again.

Current Falling Market

→ → → →

o Engineering Firm – 3 Partner Each drawing a salary of R68 000 per month Medical Aid paid by company Currency Debtors book of R500 000

(One debtor owes R125 000 – application for liquidation) has lodged by outside party R250 000 Overdraft Bank has requested reduction of R20 000 per month as from next month All parties signed surety for overdraft of R250 000 Decision has been made to restructure the company and reduce expenses to meet

obligations

CASE STUDY:CASE STUDY: Background of Johan Visagie’s CompanyBackground of Johan Visagie’s Company

Case Study:Case Study: Balance Sheet Balance SheetMnr. Johan Visagie - Structural EngineerAge: 40Married +2 Children

HOUSE, Somerset West (2006) R 2,000,000.00 BOND R 1,500,000.00FLAT, Hartenbos (2007) R 1,450,000.00 BOND R 1,000,000.00BMW 325 R 325,000.00 HP R 267,000.00VW POLO R 130,000.00 HP R 80,000.00

CREDIT CARD R 50,000.00OVERDRAFT R 150,000.00

TOTAL ASSETS R 3,905,000.00 TOTAL LIABILITIES R 3,047,000.00

EQUITY R 858,000.00(Surety ABSA) R 250,000.00

ASSETS LIABILITIES

Case StudyCase StudyAge: 40Married +2 childrenMember of a Engineering Firm

INCOMEMonthly Income - Salary R 68,000.00Rental of Flat R 7,500.00

GROSS INCOME R 75,500.00

EXPENSESBond on House R 15,000.00Bond on Flat R 10,000.00Levies House & Flat R 1,100.00Rates & Taxes R 1,400.00Water & Electricity House R 3,500.00Motor Payments R 6,500.00Repairs and Maintenance on Property R 1,500.00Short Term Insurance R 2,900.00Tax PAYE R 17,822.00Fuel R 4,800.00Living Expenses (Food ect.) R 6,000.00School Fees R 2,500.00Servant R 2,500.00Overdraft Interest R 1,400.00Credit Card Payment R 1,650.00VacationLife Insurance R 2,000.00

TOTAL EXPENSES R 80,572.00

MONTHLY SHORTFALL -R 5,072.00

Mnr. Johan Visage - Structural Engineer

Case Study:Case Study: Real Value – Balance SheetReal Value – Balance Sheet(Revised after Valuations)(Revised after Valuations)

Mnr. Johan Visagie - Structural EngineerAge: 40Married +2 Children

HOUSE, Somerset West (2011) R 1,400,000.00 BOND R 1,500,000.00FLAT, Hartenbos (2011) R 800,000.00 BOND R 1,000,000.00BMW 325 R 267,000.00 HP R 267,000.00VW POLO R 90,000.00 HP R 80,000.00

CREDIT CARD R 50,000.00OVERDRAFT R 150,000.00

TOTAL ASSETS R 2,557,000.00 TOTAL LIABILITIES R 3,047,000.00

EQUITY (-R490 000.00)(Surety ABSA) R 250,000.00

NEGATIVE EQUITY (-R740 000.00)

ASSETS LIABILITIES

Case StudyCase StudyAfter RestructuringAfter Restructuring

Mnr. Johan Visagie - Structural EngineerAge: 40Married +2 Children

Member of a Engineering FirmAFTER

INCOME RESTRUCTURINGMonthly Income - Salary R 68,000.00 R 60,000.00Rental of Flat R 7,500.00 R 7,500.00

GROSS INCOME R 75,500.00 R 67,500.00

EXPENSESBond on House R 15,000.00 R 15,000.00Bond on Flat R 10,000.00 R 10,000.00Levies House & Flat R 1,100.00 R 1,100.00Rates & Taxes R 1,400.00 R 1,400.00Water & Electricity House R 3,500.00 R 3,500.00Motor Payments R 6,500.00 R 6,500.00Repairs and Maintenance Property R 1,500.00 R 1,500.00Short Term Insurance R 2,900.00 R 2,900.00Tax PAY R 17,822.00 R 15,182.00Fuel R 4,800.00 R 4,800.00Living Expenses (Food ect.) R 6,000.00 R 6,000.00School Fees R 2,500.00 R 2,500.00Servant R 2,500.00 R 2,500.00Overdraft Interest R 1,400.00 R 1,400.00Credit Card Payment R 1,650.00 R 1,650.00Vacation --- ---Life Insurance R 2,000.00 R 2,000.00Medical Aid --- R 3,900.00

TOTAL EXPENSES R 80,572.00 R 81,832.00

MONTHLY SHORTFALL R -5,072.00 R -14,332.00

How does Johan Visagie’s How does Johan Visagie’s Real Financial Position Look?Real Financial Position Look?

Reality Check1. Assets R2 557 000.002. Liabilities - R3 047 000 + R250 000 = R3 297 0003. Equity = (-R740 000)

>> Monthly Shortfall after Restructuring= R14 332.00

The Real Problem• People are in denial of their real financial position

and/or Value of their Property/Balance Sheets• Most people want to ”Trade Out” their ”Negative

Equity” with declining cash flows

• To The Buyers of assets - - Value only gets determined by

- Willing Buyers/Willing Sellers

My name is Debt!My name is Debt!and I create and I create addiction and addiction and fear!fear!

The Real Question

DELEVERAGE? DELEVERAGE? or

DEFAULT?DEFAULT?

Symptoms of Financial StressSymptoms of Financial Stress

o Do not open Bank account statementso Family issues and bad relationship with

your wife / children / business partnerso Thinking of divorceo Change your telephone numberso Short Tempered

Symptoms of Financial StressSymptoms of Financial Stress

o Do not answer “Private Calls” o Increased alcohol consumptiono Do not want to go homeo Feel depressed and “No Worth”o Personal Relationships “break down”

QuestionsQuestions

o Can you still service your Debt and other Commitments? Yes/No

o Do your Liabilities Exceed your assets? Yes/Noo Have you identified with any of the symptoms of

financial stress?If YES; You Need URGENT Help!

Expert Help is Available to Assist and Guide you

• To understand the consequences of your decisions / stress

• Assist you to accept the consequences• Help you to deal with the emotional and psychological effects of these consequences

• Lead you out of bondage and to salvation

The Following Behaviours are NOT a Solution or Option:

• Denial is not an option!• Suicide is not an option!• Hiding is not an option!• Hoping it will disappear is not an option!• Thinking you can do it on your own is not an option!• NOT Telling your wife is not an option!• Using Trust money or SARS money is not an option!

FINAL QUESTION? FINAL QUESTION? Who made the decisions

that resulted in beingthat resulted in beingin the position

where you are today?

GOOD NEWS !! GOOD NEWS !! There are Christian Businessmen

that will assist you toget through this Process

ANDANDThere is a New Better Life Out There!New Better Life Out There!

Just Ask for Help:Just Ask for Help:You are NOT ALONE!

YOU have to make a Choice!

THANKTHANKYOU!YOU!QUESTIONS?QUESTIONS?