HEIBERG ESTATES NEWSLETTER: MAY 2021
Dear Property Partners
I trust that you are well and that all of us shall conquer this 3rd 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.
Bambie & Heiberg Estates Team
KEEP YOUR PROPERTY INVESTMENTS SAFE WITH US!
Dear Property Partners
With a third wave of Covid-19 on our doorstep, may we all just hope for the best and that our economy and property market will not lose the ongoing momentum that slowly but gradually has been picking up speed in the right direction, with gradual increases in both property prices as well as property sales.
At least we have received some good news a week or two ago that the SA Reserve Bank for the third consecutive time this year, has decided to keep the repo rate unchanged which will be a further positive stimulus for our fragile economy as well as for our challenged property market, especially in the medium- to high price categories. The repo rate will remain to be 3,5% (the lowest in the past 47 years) with the prime rate stable at 7%. However, the chance that there will be a slight increase towards the last quarter of this year, is on the table in reaction to the rapid increasing inflation after its biggest recent increase in 13 years to 4,4% as recorded during April. Fortunately, our stronger than expected rand exchange rate, is to a certain extend a buffer in keeping inflation at bay, but inflation is still widely expected to be an average of 4,2% for 2021, whilst predictions show it to be around 4,4% for 2022 and 4,5% for 2023. Not to underestimate the impact that Covid-19 has on our economy and the extended ripple effect still to be determined plus the fact that we are back to load shedding, adding to concerns.
Pressure is growing on the SA Reserve Bank to take a stronger stance for the protection of fundamental and private property rights in South Africa which as such, is an absolute non-negotiable condition for local- as well as foreign investment and for continued economic growth and sustainable job creation in the wake of rising unemployment. SA Stats reports that a staggering 66 000 professionals lost their jobs during the last quarter of 2020! Especially looking at farming land where it is the breadbasket of our country and one of our country’s economic cornerstones. Years and years of uncertainties surrounding land expropriation without compensation needs to be sorted out for once and all, it needs to be clarified and quantified with clear and specific guidelines to eradicate growing uncertainties as to what the future in property investments hold and in order to be ensured that fundamental property rights will be protected under all circumstances.
We all are aware how important transparent co-operation between the private and public sectors is, also referring to Public Private Partnerships that is vital to ignite economic growth and expansion with the development of agriculture as well as infrastructure – two of the biggest job creators in our economy. Without clear guidelines and guarantees in policies as to the way ahead, these sectors are at risk to become stagnant with more people risking losing their jobs with consequent inability to keep their properties or to invest in properties. Hopefully, somebody will put the lights on somewhere (Eskom willing) that people in leading positions will wake up to realize how a huge factor property ownership and the protection thereof has become in creating ongoing economic growth with local- as well as foreign investment rights and ownership in our property market being safeguarded and guaranteed for the long term. The time to for once and all stop using land expropriation without compensation as a political lever in order to gain votes, is now and not later in order to stop the negative impact on all sectors of our real estate market!
Some of the latest interesting facts and statistics, as follows:
- There is a consensus prediction amongst leading economists, that our economic growth rate for this year should be around 3,7% – a little higher than the 3,5% that was predicted in April which is also positive for our property market and increasing affordability to invest in property, especially since most of them still expect the prime interest rate to remain unchanged at 7% for the foreseeable future.
- Interest rate-induced demand remains strong. For the foreseeable future, we expect the Buyer’s market to continue with our continued low interest rate as a huge stimulus for especially first time Buyer to enter the property market, and especially with banks willing to entertain and approve 100% loan applications. The recent good news received of an unchanged repo rate, provides stability for homeowners with mortgages.
- It is important to note that due to the uncertainties surrounding the extend of a third Covid-19 pandemic wave not only here but also worldwide, its likely impact on the global economy and on our fragile economy (also considering our record high unemployment rate), will inevitable also impact on all sectors of our SA Property Market and people’s ability to invest in properties.
- Furthermore, presently prices are very much negotiable where Buyers are in an ideal position to pick-and-choose from extensive stock in all price ranges, but it is still the ideal scenario to safeguard and buffer yourself against potential future interest rate increases by putting down a 10% deposit which will also enable you to negotiate a lower interest rate as the prime rate.
- At the moment the higher priced property segment with luxury homes continue to experience price deflation whilst the affordable housing market is booming due to government support and grants for first-time home buyers and as mentioned, no transfer duties payable up to R1m property sale prices.
- The buy-to-let market is under consistent pressure with sales in this segment down substantially due to the present uncertain economic climate and impact of Covid-19, especially since more home buyers with our continued historic and continued low interest rates, are realising the benefits and cost-efficiency of a home loan versus that of a rented property.
- The property market is for sure benefitting from the new trend and lifestyle of living and working from home as a direct resulted from the Covid-19 pandemic. We experience on a daily basis that it has become one of the most important requirements amongst prospective buyers to have a private space on the property from where they can operate and work undisturbed.
- It is expected that rental market pressures will persist as vacancy rates are climbing and rental escalations slowing.
- The latest available FNB Barometer house price statistics records a March price increase of 4.5% y/y – a moderate 0.3% increase from the previous month.
- The average time on the market before a property is sold, improved from 9 weeks and 4 days to 8 weeks and 2 days, whilst in the higher price ranges and above R3.6m it was recorded at 11 weeks and 4 days.
- The average difference between asking and selling price, was recorded at 9% – this margin closing and the lowest recorded since the 2Q 2019.
- A further FNB statistic shows that 74% of properties sold during the previous quarter of this year, sold below the initial asking price.
- 21% of transactions recorded during the first quarter of this year, were due to financial pressure whilst 16% of Buyers upgraded in response to the new trend of bigger homes to work-and-live from home.
Carefully monitoring the latest trends, we are positive that in this sensitive and incredibly competitive real estate market, realistically priced properties will sell and attract the right profile buyers. The core of sales continues to remain in specific referral to our medium- and higher priced property ranges, more than ever market related, and correct pricing is of the utmost importance with this persistent and continued price sensitive and competitive property market. Houses are for sure selling but at the correct price where highly informed potential property investors have all information and statistics ready at hand with a mere click of a button, and where they can indeed do their own market related price assessments.
SA Homeowners should also be informed to be prepared for expected increases in basic municipal costs with rates and taxes, water, and electricity costs to increase in average by more than 10% as planned from July onwards and not to forget inflationary pressures that will be visibly seen in the rising costs of basic household goods, food- and fuel prices. Higher than expected inflation has led to leading economists to shift their forecast of the first interest hike from early 2022 to a probable last quarter in 2021.
So, taking all the above factors into account and should you consider investing in property as a first-time buyer or extending your present property portfolio, buy rather sooner than later as in my 30 years of professional property involvement, I have never seen the property market as appealing and lucrative as at the present moment. The time to buy is NOW or as soon as possible where property prices are still on the lower end of the scale and where one can still benefit from our low interest rates.
That is why our HEIBERG ESTATES TEAM remains to be on 24/7 standby to meet all your property enquiries and needs – please do not hesitate to contact us any time! And please visit our website where you can view all our properties on video with individualized QR codes where you just put your cell phone on camera, click and there you go. Call us any time!
SCAN BELOW TO GO TO OUR WEBSITE:
With warm wishes.
Bambie & Heiberg Estates Team