HEIBERG ESTATES NEWSLETTER: JANUARY 2022

Dear Property Partners

Best and sincere 2022 wishes to you all. May we all go from strength to strength in this new and exciting year lying ahead of us!

Looking realistically at the SA Property Market in the year ahead of us, we can expect yet another challenging year with most probably some unexpected surprises, like just demonstrated when the SA Reserve Bank a few days ago increased the repo rate with .25% – much earlier than originally expected. With our increasing inflation creeping towards 6%, recent increases in fuel- and food prices and also so our alarming high unemployment rate, 2 or 3 more .25% interest rate increases could be on the horizon, which together with the overall negative state of our economy and political infights, will inevitably put downwards pressure on all sectors of our property market.

But if we look back at 2021 where still excellent sales were recorded, it was obvious that our Buyers remained to be resilient and still recognizing property as one of the best investments to build longer term, sustainable wealth. We are also positive about the continued commitment of all our financial institutions to support loan applications in their quest to increase market share. We do however expect sales in the lower price ranges in specific referral to first time Buyers, to show a gradual moderation as affordability is once again becoming a mayor issue due to reasons as mentioned above.

Presently a shortage of residential stock is experienced in every price sector, especially in the medium- to higher price ranges that will add pressure on property prices, whilst listing times before properties are sold, have also become shorter. With the property cycle last at its high point during 2016, the next traditional cycle upturn is hopefully expected over the next year or two. Leading property experts predict moderate performances across the board.

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

• Our annual consumer price inflation increased from 5.5% in November to 5.9% as recorded in December 2021, the highest rate since March 2017 when it was recorded at 6.1%, whilst the average recorded during the course of last year was 4.5% vs the 3.3% recorded in 2020.
• As per a recent published FNB Commercial Property market report, it points out that property fireworks is not expected this year and moderate property price growth and sales are to be continued.
• An all-commercial property vacancy rate that has increased form 4.3% in the second half of 2015 to 9.7% during last year. Unfortunately, this could go into double figures this year as our economic-wide production levels and rising unemployment as well as a surge in inflationary pressures, is insufficient to counter rising vacancy rates, coupled with an oversupply in especially office space.
• With further interest rate increases on the horizon this year, and even with a prime lending rate that might go up to 8%, it is still substantially lower than the 2020 10% interest rate level and it should still boost buyers’ confidence with continued interest.
• Covid-19 is still holding the world in its grip, the impact on our Commercial Markets is indisputable and is still playing itself out where across the board. However, we are hoping for a moderate and more positive sales scenario for our commercial market this year, not to underestimate visible changes and in specific referral to the commercial segments as referred to further hereunder.

OFFICES: Companies are continuously re-evaluating and downsizing their office space needs, whilst vacancy rates are still on the increase and this trend expected to moderately continue for the year to come. There is a definite move away from cellular offices to more open spaces. A collaborative serviced and more flexible office space environment is becoming more and more popular. We observe how the mindset of developers have changed dramatically towards a more multi-faceted, versatile office environment and in many cases trending towards much more encompassing lifestyle, multi-functional designs. A continued and hugely over stocked office space environment will continue to put downwards selling price pressure on this property segment.

RETAIL: One of the most directly impacted Covid-19 lockdown victims, is the retail sector. The visible consumer shift from shopping in big urban centre’s towards the more regional and especially lifestyle and the more convenient, doorstep local neighborhood shopping centre’s, is expected to increase over the cause of this year. Furthermore, not to ignore the growing number of consumers taking to convenient online shopping which of lately has become a definite challenge to retail property.

INDUSTRIAL: As recorded during last year, this property segment is expected to continue to outperform the other commercial property segments this year. With online shopping increasing tremendously since the outbreak of Covid-19 and a definite change in consumer behavior, the demand for warehousing, logistics space and distribution centre’s are ongoing and, on the increase, stimulating this property segment. Furthermore, bigger affordability for property investors coupled with the ongoing and growing demand is a huge booster, especially under property developers that in many cases are changing direction and increasingly focusing on this property segment. We just need to look at the countless industrial developments between Pretoria and Midrand as well as towards the Oliver Tambo Airport.

RESIDENTIAL: After the first lock-down surge in residential sales, growth in demand has visibly moderated and sales slowing down. Lower, single figure price increases are expected for 2022, whilst the decrease in approved new building plans as observed during the last part of last year, points to probable and an expected residential building activity slowdown for this year. Developers are very sensitive about our economic prospects, our low economic growth, increasing unemployment and rising inflation, with also considering several expected interest rate increases for the year to come. This will without any doubt impact on affordability and especially in the lower priced property segments with first time buyers being forced to go back to rentals.

It is logic that several expected interest rate hikes this year, our continued very low economic growth rate with ever increasing unemployment, our economic- and political uncertainties, rising inflation and ever increasing fuel-, food- and other basic monthly costs, will play a major role in our SA Property Market activities this year. Buyer’s interest and activities will be as much under pressure as over the past 24 months with no fireworks expected for the foreseeable future.

Whatever the circumstances are always know that we at Heiberg Estates, are there for you whether you want to sell, rent or buy! There are always excellent property investment opportunities that present itself and therefore never hesitate our professional, well-informed and dedicated Heiberg Estates Team to share a collective 50 years of extensive across the board property experience, to guide you, to answer your questions and to open new, exciting doors in building your property portfolio.

Please count on our focused and professional attention to address each individuals’ circumstances and needs to assist you with a mutually discussed and agreed to defined marketing plan and strategic approach. The market needs stock and it is indeed a good time to sell your property before the next interest rate increase which seems to be inevitable.

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Please contact our Heiberg Estates Team that remains to be on 24/7 standby for you whether you want to sell, buy or rent!

With best and warm regards.

Sincerely

Bambie & Heiberg Estates Team