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HEIBERG ESTATES NEWSLETTER: APRIL 2021

Posted by Heiberg Estates on April 30, 2021
0

BE ASSURED YOUR PROPERTY IS SAFE IN OUR HANDS THROUGHOUT ALL SEASONS!

 Dear Property Partners

With winter visibly just around the corner the initial energetic vibe ignited in our property market after the lifting of the first severe Covid-19 lockdown, is visibly subsiding throughout the whole property sector – but this also a normal yearly trend when winter approaches for all property related activities to calm down.

The existing relative low cost of borrowing money with our continued low interest rate and banks willingness to ask for lower or even no deposits in order to approve bond applications, is still creating an ideal buying environment. With property prices hugely under pressure and moving sideways in the medium- to higher price ranges, it has also been a great decisive factor for people positively considering to further invest in secondary properties for letting purposes.

Interesting to note that in a recently published FNB report it is stated that during the 4th quarter of 2020, there was a 46% increase in the number of home buyers that invested in a second property in comparison to the 4th quarter 2019 – a positive sign for continued investment trust in the property market despite the ripple effect of Covid-19, still playing out its full effects across our beloved country.

Although price increases looking over the past year have more or less kept up with inflation (with entry level house prices increasing much more than the interest rate), turnover and volume of property sales have increased way above expectations since the hard lockdown in the middle of 2020. With the lending rate of 7% that was rapidly reduced from 10%, the monthly bond payment in effect actually has been decreased by about 30% which under present strenuous economic circumstances, does make a huge difference in affordability and especially in the lower price ranges.

In a report recently released by ooba home loan services, there has been continued robust growth in the residential property sector despite the past year that was dominated by the Covid-19 pandemic. According to their report for the last quarter of 2020, the average purchase price in specific the lower price ranges increased by 15,1% due to the huge demand – this in comparison to the 3.5% increase recorded in the last quarter of 2020.

Also, interesting to note that prospective Buyers are increasingly changing their criteria for their housing needs, especially since Covid-19 has forced a huge percentage of our workforce to live-and-work from home as well as with students and scholars studying from home. Our agents at Heiberg Estates report back that more and more home Buyers list a private workspace or space to convert, as one of the top priorities leading to bigger homes getting more and more in demand. Also, interesting to note that amongst Sellers, an increasing number due to rapidly changing working circumstances, are selling to move to more quiet, less expensive rural areas with an easier and more peaceful lifestyle whilst being able to work from home. Also taking into account that properties are much cheaper to buy or to let in the rural areas as well as the general day-to-day living costs.

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

  • Looking at the pace that property investors are again buying buy-to-let properties, it is still marginally lower than the earlier years, where e.g., between 2003 and 2006, there were 600 000 registrations in this category per year, versus the 300 000 recorded last year that bought-to-let.
  • Our property market remains to be resilient and healthy even under the most strenuous circumstances! Looking at 2020 as a whole with taking Coviod-19 effects into account, the growth in granted new FNB mortgage loans was an impressive +16,4% year-on-year and much higher than the +3,4% growth recorded in 2019, this despite the huge recession in 2020 and with the GDP declining with -7%! Our low interest rates that with the onset of Covid-19, off-set aggressive interest rate cuts by the SA Reserve Bank and totaling 3 percentage point cuts in 2020.
  • Unfortunately, our Commercial Markets all around suffered and is still under huge pressure with increases in especially vacant office space around South Africa. This is clearly indicated by the value of new commercial mortgage grants that dropped by -39,4% year-on-year in the 2nd quarter last year, but fortunately turning mildly positive to a +14% as recorded during the first quarter this year.
  • More proof of our resilient property market, is data released by StatsSA building reports that indicates that the key driver of new mortgage loans for construction of buildings, is driven mostly by the Residential Building Sector where square meters for residential plans approved over the past quarter, increased, and showed a year/year growth of +24.95%!
  • Looking at the above, by comparison new commercial developments square meters declined when looking at industrial-, office- and retail developments, where year/year -15,8% less square meter plans were approved. This trend expected to continue for the time being where new residential developments will keep outpacing new commercial developments, especially since companies are now seriously re-evaluating their office space needs with the growing number of people that work from home.
  • According to a recent FNB Residential Property Barometer, demand remains to be strong with our consistent low interest rates (the lowest in 47 years), especially in the lower price ranges whilst downscaling to cheaper properties due to financial pressure remains to be elevated. Especially with ever rising unemployment with an expected more than 1,2mil people that could further lose their jobs towards the end of this year due to the harsh impact of Covid-19 across our whole economic spectrum.
  • The FNB report also points out that annual house price appreciation for March rose to 4.5% y/y – up with .3% as recorded in February and all indications are that demand is outpacing supply in the lower price ranges and this despite weak consumer fundamentals.
  • Regarding residential rentals, a recently published Tenant Profile Network annual report points out that vacancies has more than doubled since the beginning of the year from 5% to 11%. We see the growing trend amongst Landlords due to economic pressures on everybody, to be more lenient and to wave the yearly rental amount escalations in order to keep good tenants and not to end up with empty properties.
  • Still on the rental front, it is interesting to note that 4 years ago at the start of 2017, the annual rental increase was above 7% whereafter it reduces and remained to be static around 3% and 4% – until 2020 – where rapidly declining rental figures were recorded at 0.2% in the 4th quarter.
  • In a recent BCG and The Network published research report conducted in 190 countries, it is interesting to note that 44% of South Africans now prefer to work from home on a continuous basis and post Covid-19, whilst 53% indicated that they would like to work at least one to four days per week from home – substantially higher than the worldwide average of 24% that want to work from home five days a week.
  • Before Covid-19 only 7% of people worked from home and since then now only 4% want to work exclusively from an office environment. Worldwide 89% of the people indicated that they would like to work from home sometimes and combine office and homework post Covid-19.

There is a continued and ongoing strong culture of home ownership in South Africa, and we all know that it is ideal to invest in property with a long-term investment approach where property without doubt, is a long-term appreciation asset. The past 6 months offered ideal buying circumstances due to much lower pricing in the medium- to higher price ranges as well as our low interest rate. However – how long the latter will last with an expected limited continued window period, is questionable especially since leading economists are starting to predict gradual interest rate increases towards the end of this year as inflation is rising with ever increasing petrol and food prices, as well as water and electricity and other basic monthly costs. The SA Reserve Bank have recently started making noises of potential small increases maybe during May/June as well as in November, but only the time will show whether it indeed will be necessary to do so. So, should one be thinking of buying, one should however seriously consider moving rather sooner than later with all indications that the prolonged Buyer’s market that we have experienced for a long time now, might soon come to an end taking all relevant factors into account.

May the Heiberg Estates Team wish you just the best for the cold winter months lying ahead and please accept our warm wishes and unconditional 24/7 support to whatever your property needs, or questions might be. We remain to be there for you – always. For the latest listings and excellent property investment opportunities, please go to our website: www.heibergestates.com or just click on the QR code with your camera to view lovely photos and videos of Heiberg Estates listed properties:

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With warm regards sincerely

Bambie & Heiberg Estates Team

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