HEIBERG ESTATES NEWSLETTER: FEBRUARY 2024
Dear Property Partners
There is a saying “old news in a new newspaper” and looking at the property trends and statistics as observed over the past six to twelve months, it seems to be the continued state of affairs. There has been very little exciting or changing on the SA Property Market scene for an extended period. One of the biggest factors is affordability pressure which is observed throughout the whole property sector. Increasingly there is a growing trend of property Buyers buying down, where for more than a year now the lower property segments showed more movement than higher-priced property segments. The International Monetary Fund has predicted extremely low economic growth for our beloved country for the year ahead of us which also has a huge impact on our escalating unemployment rate and declining affordability to invest in properties. With an initial expected growth rate of 1.8% for 2024, it has now been reduced to a mere 1% and for next year also a low 1.3%. Whilst the final economic growth rate figure for last year is still outstanding, it is estimated to have been an alarmingly low 0.6%.
The SA Reserve Bank will announce on 27 March 2024 what it has decided to do with our continued high interest rate where the prime rate of 11.75%, has remained unaltered for its past 4 meetings. Cuts in our interest rates are not foreseen in the immediate future, especially not with our continued high inflation rate and the latest deterioration of the rand exchange rand versus the American Dollar, leading to rising costs in fuel- and food prices whilst further diminishing property affordability for a huge percentage of our population, especially in the lower property price segments.
So far, and in taking account of general moderate property inquiries as observed during January and February this year, also looking at lower open show house attendances during these months, a remarkable rebound in our property market for 2024 is not expected to happen. Anything above a very moderate price growth due to limited and moderate demand versus supply, will be welcomed but at this stage seems to be rather unlikely where the subdued house price growth trajectory is expected to continue for most of the remainder of the year. The Heiberg Estates Commercial Division is experiencing mild but ongoing interest, but there are very few potential Commercial Buyers or Tenants at the present moment that are willing to commit and put hand on paper. Hopefully, there will be growing optimism once the SARB starts a series of interest rate cuts that is expected to happen during the second half of this year.
Some of the latest trends and statistics, as follows:
- The latest FNB House Price Index reports that house price increases averaged 0.6% in January – the same as during December and this sideways movement is consistent with house price growth that has stabilized during the 4th quarter of last year.
- Mortgage lending has also declined and is estimated at around 28% less up to date where as mentioned above, affordability is a huge factor with our declining economy, increases in unemployment, the basic costs of living and the continuation of high interest rates.
- FNB predicts a sale volume increase for this year of just 0.8% and well as a low 0.8% for next year – with hopefully a moderate lowering in interest rates around the second half of this year to the end of this year. A sales volume increase of up to 12.7% is expected for 2025 subject to a series of interest rate cuts which should start in the second half of this year.
- The Treasury’s decision not to increase the threshold for transfer duty exemption which presently stands at R1,1m or lower, is a pity as this could lead to new energy amongst especially first-time Buyers where transfer duty is one of the highest additional costs when purchasing a home.
- With hopefully a moderate growing demand for property over the course of this year, prices in general should also increase and the subdued house price growth trajectory that has been persistent for a prolonged time now, will get new impetus to show better price growth and get closer to our inflation rate which was recorded at 5.1% for December last year. Overall FNB predicts an average residential property price increase of 1.4% for 2024 and 3% for next year.
- The Industrial Sector with the strongest demand relative to supply, still outshines the Office and Retail Sectors where with the latter sectors, supply is still exceeding demand and especially very noticeable in the Office Market where selling prices have been under downwards pressure for some time now due to the fact that this segment is nationwide totally overstocked and with vacancy rates ever increasing.
- Sellers are under growing pressure as illustrated by statistics showing that selling under financial pressure during the last quarter of 2023, increased to 30.94%. So also Buyers as illustrated by bank loan approval rates for the past quarter that have dropped to 81.6% where lending conditions have become more strict. Hopefully with awaited interest rate cuts, this environment will become more friendly and supportive again during the second half of this year.
- In spite of so many challenges across the whole SA Property Market, we see that many clever Buyers are making use and taking advantage of the present market where in general lower property prices and excellent investment opportunities are being taken of advantage where for sure in the longer term, great returns on property investments will be made. The Western Cape is still our star performer with investors where more than 30% of ooba’s loan applications for 2024, is expected to come from buy-to-let properties.
- There are small but noticeable positive factors like a decline of time on the market before being sold as monitored throughout our SA Commercial Property Sector, but commercial properties are still overall showing sideways movements due to factors like load shedding and unreliable utility services and where mindsets have been changed since Covid where work-from-home is pretty much still on the increase.
Based on the present status and in specific referral to our uncertain economic- and political state of affairs with also an open election looming on our doorstep, it is difficult to predict with certainty where the property market is heading for the year ahead of us. Hopefully, there will be much more clarity after the elections to indicate and pave the way forward towards more political- and economic stability, especially with renewed and consistent impetus needed to sort out our load shedding and to create more sustainable jobs. So the wait-and-see trend all over our property market, is expected to pretty much be continued for the foreseeable future.
Furthermore, the Buyer’s market with existing low property prices and lots of available stock the present status quo, is expected to be continued for the next few months. Furthermore some existing asking property prices are on par with prices paid 3 years ago and with interest rates expected to come down later this year, bond repayments will also decline. Ensure that you don’t miss excellent investment opportunities as people will always need a roof over their heads! Contact us especially for buy-to-let properties as the Rental Market is blooming with excellent rental anchors present in Pretoria East like the more or less 140 diplomatic institutions, universities that always will need student accommodation, corporate institutions and many South Africans that also opt to rent after they have sold their properties to wait-and-see what the future in our beloved country holds. Your Heiberg Estates Team remains to be on 24/7 standby, so kindly contact us! Please scan the QR-code to visit our website:
With very best wishes
Yours truly
Bambie & Heiberg Estates Team
