HEIBERG ESTATES NEWSLETTER: APRIL 2022

WINTER ON MOST PROPERTY MARKET FRONTS, SHORTAGE OF STOCK – PLEASE CALL US IF YOU WANT TO SELL!!

Dear Property Partners

Renewed challenges are visible across our SA Property Market where among other, there is an increase in the shortage of available residential properties to be sold. All across the board our colleagues are experiencing this same challenge and reporting a growing shortage in all price categories. However, good for the Sellers as demand exceed supply by far at the moment and therefore still contributing to moderate, yet low single figure property price increases. Lately the rise in interest rates and inflation, has visibly taken its toll on property categories and Buyers interest in general especially looking at the lower price ranges, are visibly on the decline.

Heiberg Estates is virtually SOLD OUT and experiencing a huge STOCK SHORTAGE – PLEASE call us or REFER us if you know of somebody wanting to sell! It will truly be appreciated and ACKNOWLEGED! AND WE DO FREE PROPERTY ASSESSMENTS WITH NO OBLIGATIONS!

After an initial upwards curve of excellent selling conditions and good selling prices achieved since the beginning of the year, there are now growing and definite signs of price stabilization.

Regarding the Commercial Property Sector, the operating environment remains to be challenging where an oversupply in all sectors, especially an oversupply in office space, remains to be on the order of the day. The best performer in this sector is still industrial properties that since the outbreak of Covid, saw a rapid growth in demand for logistics and warehousing space to support the growth in online retail.

The war in the Ukraine in addition, is furthermore contributing to growing global awareness to expand on onshore manufacturing capabilities to build more resilience in the supply chain for further/renewed global disruptions that might occur in future. The outbreak of the Ukraine war just as economies worldwide were picking up again after the pandemic, is for sure impacting globally with so many countries that due to higher inflation brought forth by escalating food- and fuel prices, had to increase their interest rates. Our own SA Reserve Bank is expected to announce another few increases this year after the latest .25% increase and with our prime lending rate now standing at 7.75%. Year-on-year inflation is currently at 5.7% according to the latest figures from Stats SA and very close to the 6% upper limit regarded by the SARB as acceptable.

In general there is a definite decline in property investor confidence after all started off so positive this year, mostly due to renewed and all-round uncertainties plus the ripple effects of some factors pointed out above to still play itself out in the months to come. The fact that in our own country our rapid rising consumer price inflation that directly limits disposable income growth, the expectations of an expected further 3 interest rate increases this year, continued and rising unemployment just to name a few, is putting downwards pressure on our SA Property Market and we are more or less back to a general wait-and-see attitude amongst prospective property buyers.

Some of the latest interesting property related facts and statistics, as follows:

• A FNB Report published this month, points out that non-residential building approval of plans passed, are slowing down as well as building activities in all commercial sectors. Building levels have not recovered to those of pre-2020 lockdown times. The m² of total industrial, retail and office space building plans passed, declined by -66.25% year-on-year in February 2022, after an initial +103.85% spike in just the month of January 2022!
• Office plans passed declined by -58.96% year-on-year in February 2022, where this sector remains on track of underperformance and where the national office vacancy rate for 2021 was 18.2% – and this trend expected to continue with so many vacant standing office blocks all over our country, especially with remote work a growing reality. We shall report more with our Heiberg Estates May Newsletter of innovative ways empty standing office blocks are now being revamped as sectional title residential buildings.
• On the retail side and year-on-year to the end of February 2022, the m² of new retail space passed were -20.4% down, and although not as much under pressure as the office sector, it is facing its challenges due to constrained, lessening disposable income coupled with weak consumer confidence, as well as online retail challenging this retail sector.
• Industrial property which outshined the above sectors, is also facing weak macro fundamentals with our country’s continued economic stagnation and growing unemployment. Year-on-year there was a decline of -17.2% in approved plans.
• The Residential Rental market is recovering well and a sharp decline in vacancies point to this market starting to normalise again in the wake of rising interest rates and inflation, curbing people’s ability to buy property. According to the latest TPN Market Strength Index report, this segment is back in positive territory with 52.8 points after an almost three-year period in negative territory. This is especially good for property investors that have been struggling to rent their properties and whom had to opt for lower than average monthly rentals and with subsequent return on investments.
• Interesting to note that in Gauteng, a surplus of rental housing stock is slowing the province’s vacancy rate recovery. According to Stats SA, the formal rental market increased in Gauteng from 40% to 48% in 2020, whilst our national vacancy rate is now estimated at around 8.26%. The national average vacancy rate peaked at 13.31% in the first quarter last year, so there is visible improvement with the latest figure being the lowest level since the start of the pandemic.
• Gauteng is home to nearly 50% of all tenants in SA, and the present vacancy rate is calculated at 8.69%. In comparison the vacancy rate in the Western Cape has been recorded at 2.9% during the first quarter of 2022.
• A recent Rode & Associates report points out that the housing market had a steady start in 2022, with nominal price increases not taking inflation into account for the first two months, was 3.8% year-on-year. This being slightly lower than the 4.2% growth recorded for the whole of 2021.

It is widely expected that the SA Reserve Bank will announce further repo rate increases this year, but even if it does go up another .75% that will give us a prime lending rate of 8.5%, we have seen worse and even had to weather far more than 20% in the past. It will have a further impact on our property market, but expected to be moderate.

Our property market will remain to be resilient and will always be regarded as a sound and solid, long term investment vehicle. Prospective buyers might lower their price ranges in following a more conservative approach for the time being, especially since disposable income is expected to decrease from 5.9% as recorded during last year, to 2.1% this year due to the higher inflation and rising interest rates expectancy.

Please keep in touch, always remember it is never too late to buy or to sell as there are always good opportunities up for grabs! And kindly remember to call us if you know of anybody wanting to sell their properties, it will truly be appreciated!

Please visit our website: www.heibergestates.com or click with your phone camera on our QR Code:

Best and warm regards

Sincerely

Bambie & Heiberg Estates Team