HEIBERG ESTATES NEWSLETTER: FEBRUARY 2023

Dear Property Partners

We are all aware that a healthy and vibrant property market is dependent on a dynamic and growing economy, sustainable jobs, well-functioning municipal services (including uninterrupted power supply), and stable interest rates – just a few factors necessary also to stimulate our SA Property Market. It is a well-known fact that the performance of our residential market and the property market as a whole, is a good indicator of the general state of affairs of our economy. Unfortunately, the general lack of clear guidelines on key initiatives to stimulate our failing economy as demonstrated during the latest SONA, coupled with the Eskom saga will lead to our property market further being under downwards pressure on both property price increases as well as sale volumes for most of this year to come. It is obvious that our property sector has been somewhat flatlining for some time now and this trend expected to continue for some time to come.

We can never underestimate the importance of Municipal governance and its ability to provide standard services that we are all paying for whilst it is totally unacceptable and deeply alarming, that 163 out of 257 municipalities are either dysfunctional or in distress due to mainly mismanagement. In a recently published article in the Property Professional Magazine, it is acknowledged that “The functioning of municipalities has a direct impact on investment and property values”. We are without any doubt observing a growing trend in selling-to-relocate in search of better utilities and reliable municipal services, especially in areas where such services are deteriorating. No wonder so many people are packing up and moving to the Western Cape – also one of the main reasons of Sellers asking our agents at Heiberg Estates to sell their properties due to semi-migration to the coast. Relocation within SA remain to be elevated around 13.6% as recorded during the last quarter – nearly double the pre-Covid rate. According to a recent FNB report, 16% of properties sold above the R2.6m price range, were attributable to homeowners relocating within SA. No wonder that average house prices continue to be the highest in the Western Cape.

Looking at the year ahead, we are seeing and are well aware that the negative sentiment towards Eskom, coupled with our failing/low growth economy, rising unemployment and continued high interest rates and escalating costs of living and fuel prices, will definitely continue to keep property buyers interest at bay and due to supply exceeding demand, further negatively impact on property prices and sale volumes for the year to come. 

Some of the latest interesting facts and statistics:

•             Looking at the previous quarter, 17% of total sales recorded during Q4 2022 was due to financial pressure and this was especially noticeable in the affordable housing market that was hard hit by rising interest rates and where 30% of sales, were attributable to financial pressure.

•             Emigration-related sales was the highest in the R2.6m to R3.6m price band and recorded at 14.2% of total fourth quarter sales last year.

•             Whilst our GDP is still expected to be way below 1% this year and so also predicted to be for the next 2 years, inflationary pressure is easing with indications that we might hopefully soon move back into the SA Reserve Banks inflation band of between 3% and 6%, assisting it to not radically have further big interest rate increases for the year to come. The inflation rate in January was recorded at 6.9% that is lower than the 7.2% recorded in December and hopefully it is on a decline trajected cycle again, expected to be below the 6% SARB band by May 2023.

•             However based on all relevant factors, it is widely expected that there might be a further .25% interest rate increase announced next month in March, further adding to downwards pressure on our fragile property market.

•             Interesting to note that according to a recent Ooba Home loans report, a total of 1 086 sales were reported in December 2022, the lowest December total since 2014 – clearly demonstrating the pressure that our property market is experiencing. This figure versus the reported total sales of 19 153 in 2022 – which is 14,2% less than was sold in 2021, illustrating the visible slowdown in our property market.

•             Looking at a recent FNB property report, time on the market declined slightly from 71 days in the third quarter to 69 days in the fourth quarter last year, whilst the long term average is 91 days. Looking at price bands, time on the market was shortest (average 62 days) in the R750 000 to R1.6m price bracket and the longest (average 84 days) in the R2.6m to R3.6m price bracket.

•             Further illustrating the slowdown is the fact that 49% of properties were taking three or more months to sell last quarter versus the 33% at the beginning of the year.

•             FNB reports that as much as 50% of sales just in Pretoria as recorded during the last quarter of 2022, were financial pressure-related sales versus e.g. 19.9% in Cape Town.

•             Looking at the Commercial sector, there is still an oversupply related to demand in specific the Retail and Office segments, with still growing demand for Industrial properties. With higher interest rates and our slowing economy, coupled with highly disruptive load shedding having a major negative impact on all commercial property performance, demand is expected to decrease further, whilst a recent Rode Report records that in real terms, rentals fell by an alarming 7% after deducting building-cost inflation (BER BCI)), which was close to 11%.

•             Interesting to note that levels of upgrade-related selling, where people sell to relocate to bigger and better premises, are on the decline as well and was recorded at 22.1% during the previous quarter versus the 22.9% recorded during the third quarter of last year.

•             A strong trend of people relocating in search of more reliable utilities and municipal services, is visible where a FNB report shows it was recorded at 15.2% during a 2022 survey, to increase to between 23% and 24%.

•             Rode reports that capitalisation rates of all directly held non-residential properties, increased during the fourth quarter of 2022 which reflects the riskier property environment resulting from the general weaker global as well as South Africa economic growth to be continued this year.

We are all increasingly aware of escalating uncertain and unstable times not only in our beloved country, but all over the world we are living in. With rising interest rates, our low economic growth rate and rising unemployment, there is little new impetus that can be given to develop our mining-, infrastructure-, construction-, industrial- and other industries as electricity can’t be guaranteed for new developments or expansions. All of these factors will lead to further hesitation amongst property investors to expand their property portfolios and only time will learn when there will be some light at the end of this very long and dark tunnel again. But come, it will come – for sure!

As history has shown over and over again, we remain to be a resilient nation and we shall for sure face the music together in the spirit of ubuntu where the majority of our people want to see this country getting out of the doldrums, and flourish again. Let’s hope that this painful purification process we are presently going through to get rid of corruption and get real leaders with backbone and tenacity to get our country back on track again, will happen sooner than later. Our country deserves it, our rainbow nation deserves it.

Our Heiberg Estates Team are looking forward to be hearing from you soon again, and are here to assist you 24/7 whatever your property related needs may be – to buy, sell or rent – kindly contact us, or scan our Qr code:

Yours truly

Bambie & Heiberg Estates Team