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Posted by Heiberg Estates on September 30, 2021

Dear Property Partners

Seemingly and gradually, all is getting back on track again where most people had to adapt to the new “normal” way of living as instigated by Covid-19. The impact still very visible on our property market where the mindset of living-and-working from home as seen over a broad spectrum, has changed decades of norms how things used to be done in the past. Some of us were forced very fast to move out of our traditional comfort zones and without choice.

It is widely acknowledged that the pandemic has worldwide resulted in the highest all-around commercial vacancy rates in history. In the USA the shift to work from home shows that around 20% of the entire USA workforce, will continue to work from home permanently. In the corporate world with each company protecting its own company culture, the balance between the virtual workplace and the traditional on-site office environment, is still being established in this fast-changing new world order. However, direct human interaction never to be underestimated as one of the vital cornerstones of any business enterprise to build internal as well as external long-term relationships, especially in the property market.

The original much higher than expected positive momentum gained in our property market right after the first lockdown was lifted, is now visibly slowing down. Demand is moderating albeit still above 2019 levels and the positive effect of our continued low interest rates on market activity, still positively reflecting across all property sectors, but also lately visibly slowing down.

The recent general slower growth in house price increases is partially due to the good interest rate effect that now has gradually worked itself out, rising unemployment bringing more stock than demand unto the market. Noticeable is a gradual decline in rental vacancy rates where more people are now again being forced to rent due to the unaffordability/inability to buy their own properties. This clearly playing itself out in the lower- to medium price ranges. Furthermore, we are also observing that demand driven consumer shifts from renting to owning as hugely activated by Covid-19 related circumstances and our continued low interest rates, has peaked and is gradually on the decline.

A recent FNB Property Report also refers to our alarmingly highest and still rising unemployment rate of 34.4%, inevitably impacting on affordability and people’s ability to buy properties. Only 38% of our workforce between the age of 15 to 64 years old, have a job. The average economic growth rate of 1% taken over the period 2014 to 2019, is not sufficient to buffer the growth in our population or to absorb these people in our working force, thus the constant increase in unemployment. Furthermore, we are definitely observing that demand increases are slowing down again relative to supply. This playing its continued role on longer term property demand fundamentals as well as property prices and the market’s ability to recover to pre-pandemic levels.

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

  • According to the FNB house price index, house prices have risen by a cumulative 5.6% since January 2020.
  • SA homeowners are still under financial pressure, clearly demonstrated by a recent TPN Credit Bureau stipulating that an alarming 62.5% of credit applications have been rejected two quarters back. More than half the debt owed by South Africans is used to fund homeownership in the form of mortgages.
  • The real aftereffects of the tragic events of the July uprisings in KZN and Gauteng and its definite impact on the sentiment of homeowners, have become very evident where in a recent Absa Home Loans survey it was recorded that as a direct result of these acts of violence and destruction, homeowners sentiment declined by 4% whilst property investment trust declined by 9%.
  • Our commercial property segments are for sure more sensitive to general economic trends and with the impact of our GDP levels that is remaining below pre-lockdown levels at around 3,2% and below year-on-year 2020 levels, commercial properties and yields remains to be under continuous downwards price pressure.
  • In general, downwards pressure on yields in the commercial sectors are ongoing and landlords are thinking twice before enforcing 12 monthly rental increases in order to keep their existing tenants on site. Industrial properties are still showing the best results with 69% in good standing and not in arrears of their monthly payments.
  • There is still a huge oversupply of properties for sale available in all segments of the commercial market, resulting in a decline in average capital values and expected to continue on this trend for some time to come. The office market is still the weakest link with ever increasing vacant standing office space, heavily impacting on selling prices.
  • The weak and underperforming office market is an international trend where worldwide organisations are adapting to a new working environment and embracing the new culture of remote working versus traditional in-office operations.
  • Also, in South Africa the rollout of the vaccine is a key driver to enable larger companies to resume business and to assess what level of hybrid working is appropriate for their respective circumstances. Many corporates realise the need as well as practicalities, of decentralising to nodal office hubs.
  • Good news is that our economy is performing better than expected and even Fitch Credit Rating predicted a higher-than-expected economic growth rate for this year whilst referring to our robust economic performance of the past few months with a smaller than expected budget deficit, inflationary pressures seemingly manageable (for now) and with a 54% fiscal increase year-on-year as recorded for the first for months. This in turn also having a general positive impact on our real estate market as a whole.
  • The above-mentioned scenario also contributing to the fact that the Reserve Bank last week left our record low repo rate at 3.5% and which was welcomed across all property sectors. The Reserve Bank also increased its economic growth rate expectations for this year from 4,2% to 5,3% which will hopefully also stimulate more sustainable job opportunities and put people in a position to buy properties, especially in the lower to medium price margins.

The good news that our Reserve Bank did not increase the repo rate last week, might be the last time that the property market benefits of our historic 47 year continued lowest interest rate, as the SARB’s prediction model shows that the repo rate could be increased nine times before the end of 2023. The first 25 basis points increase already expected before the end of this year with the next announcement due on 21 November after which a quarterly increase could be announced for some time to come.

So, looking at our total economic state of affairs especially for now where the property market still benefits by the continued low interest rate, whilst for the foreseeable future minor increases are predicted, the time to buy property is still favourable. Should one consider investing in our property market, the time is to move NOW and sooner than later whilst furthermore one will still be able to benefit from lower prices and lots of properties to choose from.

Looking for good property investment opportunities and to look at the latest Heiberg Estates listings, kindly put your phone on camera and click on the QR Code below that will connect you to our website with lots of photographs and videos.

SCAN (put your phone on camera and press white button) TO GO TO OUR WEBSITE:

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

Best and kind greetings.


Bambie & Heiberg Estates Team


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