HEIBERG ESTATES NEWSLETTER: NOVEMBER 2021

Dear Property Partners

As we head towards the closure of yet another challenging but exciting year with its unexpected highs and lows, our property market has remained to be resilient and overall performed much better than expected throughout all sectors. Once again proving itself to be an asset class never to be underestimated in the midst of economic storms. Especially since home buying and related activities, remained relatively immune to the pandemic.

Despite average lower property price growth as recorded over the past 12 months, lower single figure property price growth is expected to continue for the year to come and at least should keep on par with our inflation rate.

The announcement of the SA Reserve Bank to increase the repo rate with 25 basic points to 3.75% was imminent but was not what our property market hoped for. However, the slight upwards shift should not hamper the rebound experienced over the past year and at this stage no mayor further increases are expected for next year. The continued relative low interest rate and positive mortgage lending conditions – the best since 2007 – will continue to support the economic recovery after the huge, all-around impact of Covid-19 and so also our property market next year.

Our property market remains to be robust with sustained demand, especially in the lower- to medium price ranges and already property shortages in all residential price segments, have been recorded nationwide.

The latest local municipal election results, will for sure have a direct impact on the value of property where service delivery and the sustainability thereof as expected from a fully functioning municipality, directly influences investor confidence and demand – and therefore also property price increases. We increasingly observe that property investors are extremely hesitant to invest in property or developers to build property, in those areas where there are not sustainable and guaranteed adequate municipal services.

It is also a fact that in specific referral to commercial properties, municipality related investor confidence and sustained service delivery especially the provision of electricity, can reduce the increase in commercial vacancy rates that we all know alarmingly escalated since the outbreak of the Covid-19 pandemic. The latter causing numerous delays in transfer of property transactions – in some instances months lost due to Deeds Office closures and delays in Municipal efficiency in terms of issuing Clearance Certificates as well as frustrating delays in building plans approvals. This causing havoc across the board! Hopefully the New Year will bring new energy and impetus to all property related services, especially with some new officials put in place since the recently held local municipal elections.

Some of the latest interesting facts and statistics:

• A recent FNB Residential Property Barometer report indicated that general property demand nationwide is moderating, but still above 2019 levels.
• However, we at Heiberg Estates are experiencing an acute shortage in property stock in specifically the medium price ranges with an ever-growing demand for properties up to R3.6m in especially the Old East suburbs of Pretoria – this demand also impacting on above the general norm house price increases in some residential areas.
• Ooba recorded lately that first time Buyers accounts for almost 50% of successful bond applications granted to home Buyers. This also contributing to the fact that Lightstone Data shows that lower property price bands and demands, continue to outgrow higher price bands with a positive outlook and continuation of this trend expected for 2022.
• According to the latest PayProp Rental Index, there are less tenants in arrears and at 19.1% as recorded in the previous quarter, it is even lower than the 19.4% recorded during the first quarter 2020 before the first Covid-19 lockdown. This boding well for the buy-to-let market. Sectional title/flat vacancies were recorded at 10.2% during the previous quarter.
• From a commercial point of view, the latest quarterly Rode Report indicated that industrial property remains to top the list of demand and activities, with a 2.6% year-on-year growth and a continued low vacancy rate.
• The office market segment remains to be under pressure with the highest ever average national vacancy rate recorded so far this century of 14%. Office rentals declined by 5% in Pretoria, 6% in Johannesburg and 11% in Cape Town. The traditional way of thinking about office space and the usage thereof, irrevocably changed due to the impact of Covid-19. Alternative, practical measures and working space conditions that were established to conquer this impact, here to stay and Zoom meetings opening a new way of conduction business fast and cost effective.
• The Rode Report also indicated that from a mid-pandemic peak of 5.1% year-on-year growth in April 2021, the national nominal house price growth stood year-on-year at 3.5% as recorded over the last quarter – this taking into account that our unemployment rate is the highest ever and impacting severely on sustaining monthly bond repayments as well as affordability to invest in property!
• Interesting to note that looking at our major metro housing markets and price increases, Ligthstone data shows that the star performer this year was Nelson Mandela Bay with 7.1% recorded in July, followed by Ekurhuleni with 6.6% recorded in October, then Cape Town with 5%, Tshwane with 4.5% and Johannesburg with 3.8%.
• Ooba further reports that the pandemic has drastically changed consumer behaviour as well as banking trends that supported the more active than initially expected, property market. This resulting in continued competition amongst major banks for a bigger share in the home loans market, translating into higher approval rates and better deals offered to home buyers – all to the benefit of prospective home buyers in all property price ranges.
• Our national average price of sectional title properties for the third quarter 2021 was recorded at R1 056.417, freehold homes at R1 352.712 and the average bond granted was R1 287.000 (16% up on Q3 2020) – interesting to note that the average house price in London recently has been recorded at R5.6m!

One needs to be realistic with the immediate future property prospects as we live under continued uncertain times. Especially with the Covid-19 pandemic and with the new Omikron variant causing huge concerns locally as well as internationally. This, coupled with the latest hike in inflation, petrol price, interest rate, Eskom power blackouts and rising unemployment, will undoubtedly put downwards pressure on the momentum and property price inflation for the new year to come. We are definitely not expecting any fireworks.

With continued supportive mortgage lending conditions from all our financial institutions and our still low interest rate with no mayor increases expected for next year, our SA property market should remain to be resilient, hold its own and weather the storms that 2022 will most certainly bring. Many property investors will continue to capitalize on our favourable market conditions and utilise excellent investment opportunities.

With 2021 almost coming to a close now, positive sentiment toward property investments as a proven world class asset and a vehicle to build wealth over a longer period, is expected to be sustained into 2022. But its full acknowledgement of the strange times we live in now and the fact that we are finding ourselves in unchartered waters…Yes – there is a lot of work lying ahead for 2022 to reverse the impact of Covid-19 throughout our economy and property market, but we as a nation have always conquered the elements, found new ways to address challenges and we shall find new ways to do so again.

May the Heiberg Estates Team sincerely thank you for your amazing support that we never took for granted throughout the past challenging year and may we wish you and your loved ones, a blessed and peaceful Festive Season.

We are looking forward to being of 24/7 service to you all again in the New Year whether you are looking to sell, buy, lease or rent – always count on our dedicated, professional and well experienced Heiberg Estates Team to do our best for our clients under all circumstances. Please stay in touch!

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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!

Sincerely and with much gratitude.

Bambie & Heiberg Estates Team