HEIBERG ESTATES NEWSLETTER: AUGUST 2021
Dear Property Partners
Spring is at last in the air and already one can smell the fragrance of jasmine in the air when walking down the streets, truly a heart-warming experience after all the turmoil of the past few months on so many fronts that our fragile Rainbow Nation, has had to endure. The ripple effect of not only Covid-19 but also with the heart-breaking vandalization and civil unrest incidents in KZN and Gauteng, to have a prolonged negative ripple effect throughout our economy. Also noticeable already the thousands of job losses as a direct result thereof. In the two riot-effected provinces, only 6% of impacted businesses are open for business as usual again and 51% are still closed with billions of rands worth of properties and shopping centres, destroyed forever. These incidents inevitably to impact for times to come on our real estate market where affordability amongst a huge percentage of our population, has taken a huge knock due to job losses, financial insecurities, and not to mention the blow it has caused to local- as well as to international investment trust.
It is shocking that with the latest unemployment statistics released, we are experiencing our highest unemployment rate ever of 34.4%, where one in 3 South Africans are looking for a job and with our economy growing at a very low single rate, new and sustainable job opportunities to be created is hardly on the horizon. Unemployment rose to 7.8million compared to 7.2million recorded during the first quarter. We all realize that it is a huge threat for future stability and that job creation is one of the biggest goals that Government needs to address – also a vital element for continuous growth in all sectors of our real estate market.
On the other side of the coin, it is pleasant to report that at least after the residential market had an uphill battle with Covid-19 lockdowns, the momentum is still slowly but gradually picking up speed. This noted in both sale volumes as well as increasing property prices although in the lower single figures, but more or less on par with our inflation rate. Firstly, increased house sales were very visible amongst first time buyers where our lowest interest rate in 47 years made it possible for first time Buyers to rather buy than to rent and lately sales amongst the middle-aged group is also picking up speed. Many Buyers are relocating to the quieter platteland or seaside areas where the daily costs of living are much cheaper and where the traditional way of working in an office space, has been forever changed with technology opening new doors for people to comfortably live-and-work from home. A trend that is growing in popularity as we at Heiberg Estates are experiencing with more than 60% of our prospective Buyers, are specifically asking for bigger, multi-functional properties with enough private working space. Covid-19 has changed what used to be the standard norms of property environment forever, where our homes are not exclusively a place to live anymore, but it has become a total encompassing living-, socializing-, educating- and working space.
Some of the latest interesting property news and statistics:
- Latest Lightstone data indicates that the housing market is showing consistent growth in sales volumes and prices, driven by low interest rates and with our prime lending rate stable at 7% for more than a year now, whilst banking institutions like e.g., BetterBond reported that there was a 35% increase in bond applications for July year-on-year. The sustained demand driving house prices especially in the lower price ranges.
- In the lower price ranges and up to around R700 000 an average of 6.5% price increase was recorded – 2% above the higher valued price segments. The two provinces that fared the best, were the Western Cape and Gauteng with average house price increases of around 4.8%.
- The rental market is still under pressure with flat vacancy rates of more than 12% and well above the average 5% recorded in the three years from 2017 to 2019. This scenario putting enormous pressure on rentals and expected to be continued for the immediate future as tenants remain to be under financial pressure.
- With lower interest rates, many tenants can afford to rather buy a property than to rent. Especially in the lower price ranges where the monthly bond payments are often lower than the monthly rental amounts – a huge advantage to rather pay off your own bond than that of somebody’s else. This also in turn forcing Landlords to think twice before enforcing the standard 12month rental amount escalations in order to rather keep the existing tenants.
- The most active sector of the Buyers’ market, remains to be first time Buyers, presently representing around 48% of the Buyers’ market versus the 54% highpoint as recorded during the third quarter of 2020 – sustained low interest rates still making it as a decisive factor for them to rather buy than to let.
- Most Buyers activity remains to be in the R1m to R1,5m price segment, whilst the average price for first time Buyers was recorded at around R1,1m – a more or less 10% increase versus the year before.
- The positive momentum in our property market is also reflected in the decreasing of the average time that a realistic priced property is on the market before being sold. More or less a year ago, it was recorded at an average of 14,1 weeks versus the more or less 8,2 weeks recorded during the first/second quarter this year.
- The buy-to-let market segment has also taken a knock due to the oversupply of rental properties, coupled with lower income and decreasing return on investment for the time being. Presently an estimated 10% of property sales are in the buy-to-let segment where e.g., in 2008 it made out 20% of property sales. This scenario is expected to change for the positive again as soon as interest rates are being increased again – expected to be some time next year.
- On the commercial front and with continued challenging times, commercial activities and sales as recorded during the first quarter 2020 during the pre-lockdown levels, has not been achieved yet and all commercial sectors remain to be under immense pressure – the latest spate of violence, vandalization and civil unrest, clearly leaving its mark on these sectors all around.
- Private Property statistics show that the Western Cape still has the highest national median asking price at R2 500 000 and the Free State the lowest at R1 100 000. According to Lightstone data, the current national median price of a freehold home has increased to R1 148 167 which is a 14,3% increase on the median asking price as recorded during the second quarter 2018.
- In comparison to the above, the national median price of a sectional title property increased by just 2,1% to R1 032 045 compared to the second quarter 2018.
- Interesting to note that women are the largest group of property buyers in South Africa where 72 000 residential properties were purchased by single women last year, versus the 62 000 purchased by men and 65 000 purchased by married couples.
So, being more than halfway this year so far, where is the property market heading for? We all are acutely aware of our government’s apparent inability to play a leading role in economic growth, with sustainable job creation being one of the most important goals. This, coupled with corruption and the inexperience of people in leading positions especially looking at our municipal areas where rural areas are being run to the ground with the rapid deterioration of basic services, collectively does have a very negative impact not only on local-, but as well as foreign investment. Some of our Heiberg Estates clients that have been direct victims of the latest spate of violence and vandalization, are without exception questioning the merits of re-building these properties and are sitting on the edge, changing their whole mindset as to whether it is worth the risk to further investing and expanding in our SA Property Market.
Furthermore, the argument is also that it makes no sense to do any property developments at this present point of time when there is limited electricity available, furthermore also the general lack in the provision of basic bulk services. The state coffers are empty and there is no money left to invest in fixed capital developments or much needed infrastructure which could have boosted our fragile economy, employment as well as all sectors of our property market. The basic stagnation of our economy over the past decade with increasing unemployment has been visible in the frustration and lawlessness of the events that played itself off in KZN and Gauteng and this can increase if not soon drastic measures are put into place to give our people a hope and a future again. And especially a roof over the heads as such a huge percentage of our Rainbow Nation are without property which will give them that sense of belonging and a future – not only for them, but also for their progeny.
Please remember that the Heiberg Estates Team is on 24/7 standby for all your property related needs – whether Residential or Commercial, whether selling, buying or renting – it is always a privilege to share our collective more than 50 years of real estate knowledge and expertise with you. Call us 24/7 on 083 654 3773.
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With best and kind regards.
Bambie & Heiberg Estates Team
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