HEIBERG ESTATES NEWSLETTER: OCTOBER 2020
Dear Property Partners
Slowly but gradually our property market is again getting into high gear, especially with the traditional busier cycle which repeats itself every year going into the final quarter, as is the norm for this time of the year. With the new energy that Spring brings, this energy is also visible in our property market where our phones started ringing again, there is increased property viewings and there is a heart-warming growing show house attendance, resulting in good sales. This is for sure bringing relief for impatient Sellers that with Covid-19, had delayed sales and also delayed bond approvals resulting from the prolonged lockdown state of affairs. Fortunately our Municipalities are pulling their weight in providing clearance certificates with lessening delays and whilst the approval of building plans, is also picking up speed. All positive signs for our dilapidated property market! Further positive news is that developers are getting back on track again and slowly but gradually starting to break new ground.
Yet, one should still be realistic and cautious as we still do not expect fireworks in the near future for our property market. The prolonged consequences of our recession which is the longest recorded over the past 28 years, our uncertain political and economic state of affairs, ever increasing unemployment with lessening affordability to invest in our property market, as well as the ripple effect of Covid-19 on the medium- and long term still to be determined on our SA property market . It is widely expected that downwards pressure on property prices as well as sales volumes, will continue for most probably the next 12 to18 months.
We are all very much aware of the role that technology has been playing over a broad spectrum of the business world during Covid-19, and where it has become the bridge to the “new normal” that altered traditional ways of working and doing business, forever. And also, the way that in future property developments will be handled where technology has opened new doors and made certain ways of working not relevant anymore. It is especially visible in the new demand amongst so many Buyers that as an additional criterion, are looking for properties with a separate office wing where technology make work-from-home cost effective and very feasible.
The prediction amongst leading economists that it could take 5 years or even longer to get our economy back on the same level as before Covid-19, is alarming all around, especially looking at the statistics for the past 5 years where we had an average economic growth rate of only 0,8% and where we do need a minimum of 2,5% with an average population growth of 1,5% in order to curb our alarming growing unemployment rate. The world is experiencing its worst economic crisis in a hundred years where the world economic growth rate is predicted to decrease by 4,5% – the worst since the Second World War! Also looking at Eskom’s continued disability to provide sustainable electricity to our industries and households. The latter furthermore impacting on our property market, where property Developers has to take this scenario into account and are being forced to make pro-active provision in all their new developments for alternative and costly power provision measures – this also affecting and increasing property prices for already much pressurized potential property buyers.
All the above to be taken into consideration when we look at our own property market and times to come, where it is going to be a challenge to get our economy turned around again and on the road to recovery. Our construction industry, as the biggest industry to provide jobs, will play a huge role in creating new jobs so much needed all around. If only the intimidation in this industry could be stopped where already thousands of jobs were lost with “construction gangs” enter building sites, demanding that their workers to get on site, local “sub- contractors” appointed and that “protection” amounts are being paid over to them. Furthermore as a direct result of country wide land grabs, the calculations and estimates show that R1,3billion worth of new housing opportunities, have been lost in the process.
Some of the latest interesting facts and statistics, as follow:
- In the Commercial Property Market, there was some ray of light during the 3rd quarter where industrial and retail renting properties showed some increasing occupation figures, although vacant office space still showed declining occupation figures. Especially industrial properties are benefitting with the increase of businesses going online and with the resulting growing demand of warehousing- and distribution facilities. A mere estimated 50% of tenants were able to pay their monthly rentals timeously.
• Looking at the bigger picture and for the last 10 month period up to now with overall increasing empty standing commercial space, this will inevitably impact on our commercial property prices and a recent FNB Property Barometer report predicted that commercial property prices could decline with as much as 7% this year.
• Our Construction sector has shown a decline of 30% so far in comparison with last year and according to the Afrimat Construction Index, the value of approved building plans declined with 73,1% and sales of building materials with 43,2% so far this year.
• The return of international tourists to SA is urgently awaited with some of our most prominent Shopping Centres like the V&A Waterfront in Cape Town, showing a loss of income of almost 10% since the beginning of the year in comparison to last year and a 40% decline of feet through their doors. Challenges are ever increasing to make ends meet and also especially in our hospitality industry, there is an outcry to Government to open its borders to overseas tourists again.
• Stimulus in the hospitality property market has been extremely low over the past 18 to 24 months with Covid-19 giving it a final blow with a huge percentage of potential property developments in the pipeline, shelved for the time being. Covid-19 led to a 70% worldwide decrease in international tourism resulting in millions of job opportunities lost all over the world – this impact also clearly visible in South Africa with people losing their jobs and their homes.
• Not to forget that the internet and the effective use of video meeting/conferencing technology will inevitably have a huge influence on events and business/conference travel in future, as well-proven during lockdown. “Zoom Meetings” clearly showed that time and money can be saved and that the internet can effectively play its role in the way that international meetings/conferences are going to be held in future. This hugely impacting on hotel- and conference related future developments as the need will inevitable drop due to lessening demand.
• Growthpoint, South Africa’s leading property investment trust, has recorded and increase in its empty standing property portfolio from 6,8% in 2019 to 9,5% so far this year – shopping centres increasing from 3,9% to 5,1% and office from 10,4% to 15,4%.
• At least on the residential side the lowest interest rates in 47 years and banks that retain their willingness to grant loan applications especially amongst first time buyers, offers some relief and support for residential sales that is picking up speed, especially looking at the lower price- to medium price ranges.
• Furthermore the fact that substantial new less home plans (-48%) were lodged to be approved during the first half of this year, will result on less residential stock available on the market for the next 12 to 18 months and with less supply versus demand, it will result in upwards price pressure in certain price categories, especially in the lower price ranges.
• STATS SA recorded that with all construction coming to a standstill during Covid-19 lockdown, 70% less homes were completed between January and June compared to the same 2019 period, whilst an astonishing 83% less new flats and townhouses were built – also resulting in less properties available to be bought and putting upwards price pressure on certain property sectors.
We all have consensus that 9 years of wasted opportunities and corruption plus the impact of Convid-19, put the final blow and writing on the wall for our rainbow nation and failing economy. In spite of a slight rebound during the 3rd quarter, economists expect output only to recover to pre-virus levels by 2023 – pending constraints on continued electrical shortages, our highest government debt ever recorded with our gross state debt presently at R1 732billion weak confidence levels and ever increasing unemployment which reduces our tax base on a daily basis.
A total collective effort to change things around again, is what is necessary to get things back on track again and inclusive economic growth has to be supported and activated in order to re-establish and activate sustainable job opportunities, as well as international investment trust. May there be visible government intervention and implementation of macro-economic reformation, may the state department milk train derail (55% of our income tax is being paid towards state salaries), and Eskom gets its act together in the provision of sustainable electricity in our country. All of these factors also necessary to provide sustainable growth and ongoing stimulus throughout our SA Real Estate Market!
May the belief and trust in the future of our beloved country and amongst every strand of our Rainbow Nation, also find and break new common ground as we need it like never before. Where there is hope, there is positiveness, creativity and energy that collectively can pick up momentum to carry all of us through these difficult times. May also our SA Property Market as one of the big contributors to our GDP and State coffers, also regain and takes it rightful place in this process where each and every South African, deserves a roof over his/her head!
Please refer to our website www.heibergestates.com for our latest listings, photos and videos and please don’t hesitate to call us on 012 362 4628 / 083 654 3773 for a chat, or to make an appointment to go and view excellent property investment opportunities. There are always good opportunities up for grabs, especially these days – and we are 24/7 there to introduce you to them!
Best and warm regards.
Bambie & Heiberg Estates Team