Dear Property Partners

I trust that you are well and that all of us shall conquer this 3^rd Covid-19 wave by following the protocols. Despite all outside influences, property has proven itself and remains to be one of the more stable and dependable investments that prudent investors return to in times of volatility. As one of our leading developers recently stated so perfectly: “In the current economic landscape, well-located property in strong suburbs has proven time and again that property’s yield remains stable over a longer period, offering continued peace of mind to would-be Buyers”. It is never too late to invest in property, whatever the circumstances might be as on the long run it remains to be a worldwide class asset and recognised as such by leaders worldwide with a long-term perspective.

The SA Property Market last year with an unexpected average price increase of 3.05% as recorded by Lightstone in comparison to the under 2% price increase recorded in 2019, has been keeping its positive momentum almost up to date. However, it is now slowly showing signs of declining as was evident over the past two months and unfortunately with the onslaught of this third Covid-19 wave, it is well noticeable how things are slowing down across all property fronts and segments. The damage to our economy and consequent ripple effect throughout the whole property sector, will without any doubt remain for us for many years to come. Especially since the traditional way of living and working regarding fundamental property requirements, has irrevocably changed forever. Covid-19 has not only changed the way that we think, live and work, but has necessitated and encouraged innovation and breaking new grounds across the whole property sector.

With the higher than initial expected economic growth so far this year and coupled with sustained low interest rates, our property market surprised all.  Unfortunately, the fact that inflation has made a turning point and is expected to steadily increase towards the end of the year, this may lead to inevitable repo rate/interest rate increases. We all know that interest rates is a driver of house prices were with our sustained low interest rates over the past years, affordability across the border whether it is first time Buyers or Buyers upgrading, was greatly boosted with good sales recorded and with steady but moderate house price increases.

At least there is good news that our economy prospects are not as bad as it was initially feared to be, this partially due to the worldwide increasing demand for commodities resulting in ongoing commodity price increases and it being one of our huge economic drivers and stimulators, as seen with our higher than expected economic recorded growth rate. A year ago, leading economists predicted economic growth of around 3% for this year and so far, but our economy is well on track towards an unexpected 5% economic growth, also resulting in sustainable job creation and in turn having a positive impact on people’s ability to buy property.

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

• House prices are stabilising again as recorded by the latest FNB Property Barometer which shows year-on-year house price appreciation slowed down in May – this is the first time in 11 months, whilst the volume of mortgage applications also declined over the past two months.
• After 11 months of steadily but lower and single figure house price increases, house prices declined to 4.1% year-on-year as recorded in May versus the 4.6% recorded the previous month, with less sales and declining bond applications recorded. However in comparison it was at a mere 1.2% May last year.
• Interesting to note that 35% more bond applications have been granted than the 27% recorded in the first half of 2020 when Covid-19 hit South Africa. There are around 20% more bond applications being processed in average than a year ago whilst the average value of bond applications has increased by 12%, a definite stimulus for our property market.
• Looking at show house attendance as well as property related enquiries, demand is visibly slowing down and now at a moderate pace in comparison to the first 5 months so far this year. But still heart-warming to note that the housing market is still well reflecting the positive effect of the continued lower interest rates.
• On the rental front vacancies in SA have risen and in general as also experienced amongst our seasoned agents at Heiberg Estates, it takes longer than normal to find new tenants. This partially due to extensive available stock across all price ranges where Sellers who can’t find suitable Buyers, are forced to put their properties up for rentals, resulting in stock exceeding demand. Increasingly people are losing their jobs and price sensitivity and affordability, have become huge factors in rental properties. This in turn forcing many landlords not to do yearly rental amount increases in order to keep their tenants.
• Latest statistics show that nationally, residential vacancy rates have stabilised at 13.15%, with the Western Cape recording the highest vacancy rate of 14.4% – this partially due to short term rentals coming to a standstill with Covid-19 virtually stopping the hospitality/tourism industry in its tracks. Vacancy rates in Gauteng have been recorded at 12.4% during the second quarter – slightly lower than the 13.8% recorded during Q2 2020.
• Vacant Office space is still more than 10%, this also enhanced by people working from home due to Covid-19. SAPOA reported recently that Johannesburg recorded the highest office vacancy rates during the first quarter this year of 15.8%, followed by Durban 15.3%, Cape Town 12.8%, and Pretoria 10.6%. It is interesting to note that we are having increasing developer enquiries looking for vacant office buildings to buy, repurpose it and convert them into sectional title residential units – a welcoming trend across the board.
• Fortunately, there gradually seem to be more activities in our construction industry agian where most municipalities recorded a visible increase in the approval of building plan applications and with government supporting infrastructure developments.

In taking all relevant factors into account, our Property Market has performed well over the past 12-24 months supported by the sustained low interest rate which hugely contributed to this positive state of affairs. Unfortunately with the recent announcement that our inflation rate was recorded at 5.2% last month versus the 2.1% a year ago – it was the first time in 30 months since November 2018 that it exceeded 5% – this joy ride might soon come to an end. Further factors that inevitably will impact with upwards pressure on our inflation rate is the drastic monthly increase in all municipal monthly costs instituted from July, increases in food- and fuel prices as well as predictions that our rand exchange rate will be under increasing pressure. All these combined and other factors that might cause the SA Reserve Bank to gradually start increasing the repo rate whilst the outcome of the SARB’s next meeting on 22 July, should give us an indication what to expect for the rest of the year.

We all are aware of the ups-and-downs of the 8-10 yearly property cycle, many factors having an influence and the latest mayor factor being Covid-19. Property requires confidence and affordability to stimulate demand and for prices to increase on par with demand. Corruption has damaged our Rainbow Nation and country across all borders and at last people are being held accountable for their deeds, hopefully soon  resulting in long awaited local- as well as international confidence and investment in our country again. Of course also under condition that land expropriation without compensation is clarified rather sooner than later, these ongoing uncertainties also a major block in the path of more property investments and developments.

For the latest listings, please visit our website: www.heibergestates.com or click on the QR Code with your phone on camera to view photos and videos of our exciting properties for sale.

We all at Heiberg Estates remain to be on 24/7 standby for you, our much-cherished and highly valued Clients, Friends and Colleagues.

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With warm wishes.

Yours faithfully

Bambie & Heiberg Estates Team