HEIBERG ESTATES NEWSLETTER: FEBRUARY 2021
Dear Property Partners
The impact of Covid-19 on our SA Real Estate Market is here to stay for the foreseeable future. But despite so many factors counting against our property market, it remained to be resilient and especially in the lower price ranges, good sales have been recorded over the past few months. This mainly due to the fact that the first R1m is exempt from transfer duty and with our present 47year low interest rates, it is cheaper to buy for first time Buyers than to rent – the first time in decades! After all – you are paying off your own bond!
However, taking all relevant factors into account for 2021, it is still widely expected that property prices, especially in the higher price margins, could decline during the course of this year with between 4% and 6% as job losses and an increase in emigration once international borders re-open, will take its toll. At least interest rates are likely to remain low in 2021 with a slight potential increase of up to 0.5 points expected during the course of this year.
Especially worrying is the general and nationwide, escalating increase in vacant office space around the country. One of the leading office park owners, Redefine, reported that they are experiencing the highest vacancy rate of 14,7% in office space ever against our national average vacancy rate of 13,5% recorded in December 2020. Vacant retail space is on the increase as well whilst on the industrial side, the demand for distribution centres and warehousing, is steadily on the increase.
Online house hunting has increased drastically from Covid-19 lockdown and the accelerated move online is a positive sign as both Sellers and Buyers have had to (albeit “forcefully”), adapt quickly to digital means to do their property market research and look for properties for sale or to let. Agents also had to step up their game in formalising new marketing strategies in order to adhere to the strict Covid-19 protocols and ensuring the safety of all involved. It is evident that also agents benefit by this irrevocable new way of doing property business where it has been proven how efficient technology is in listing properties, advertise, respond to enquiries, conduct virtual walk-throughs, presentations and to conclude sales. But also, never to forget the value of personal contact and those agents that has worked hard to earn the respect and trust of loyal customers with the backing of their brand, and that is recognisable through years of dedicated and continued hard work. Physical viewing as one of the last integral steps to make a final decision and personal face-to-face interacting between the agent/seller/buyer, will however and indisputable always remain to be one of the most important steps for the Buyer in concluding a successful sale.
Some of the latest interesting facts and statistics, as follows:
- Resurgence in Buyer’s activity was clearly illustrated where BetterBond recorded its best December in 20 years with a 53% year-on-year growth in bond applications – 70% of these applications were from first time Buyers.
- Looking at sale statistics of sales recorded during the previous quarter, only 28% were sold at asking price, whilst on average homes were sold at 10% less than asking price. The average time on the market before being sold, 9 weeks and 4 days, a little quicker than the 10 weeks and 6 days recorded during the third quarter.
- Business Insider reports that people in distress due to toughening economic times and job losses that were forced to sell and put their properties on auction, showed mixed results where e.g., during recent auctions in Gauteng of 33 distressed properties, an average discounted price of 42% was recorded.
- The growth in demand for bigger homes where more and more people due to Covid-19 starting to work from home and needed more space, visibly increased and outperformed sectional title units. A trend that is being continued as monitored on an ongoing basis by Heiberg Estates. Statistics show that 67% of SA employees in formal jobs, prefer working from home and interesting to note that worldwide research pointed out that in average people working remotely, worked an average of 2,5hours longer per day when working from home.
- One of the top reasons for selling these days where more than a million South Africans have lost their jobs over the past year, is downscaling due to financial pressure (22%). Sales due to emigration fell from 18% towards the end of 2019, to 11% as recorded at the end of last year but expected to increase again once our borders open again. However, FNB reported in January that 24% of Sellers that sold their houses in the higher price ranges (above R3,6m) during the last quarter of 2020, did it due to emigration reasons whilst 21% of Sellers in the R2,6m to R3,6m price ranges sold due to emigration reasons.
- With an oversupply and empty standing rental properties increasing especially looking at sectional title units, downwards price pressure is growing as well. It is estimated that 12,9% of properties presently available to be rented, are standing empty, with the highest vacancies in Gauteng (14,7%) and the lowest in the Eastern Cape (6,3%).
- Interesting to note that the largest portion of sales recorded during the previous quarter was not as historically the trend below R400 000, but this margin increased to between R800 000 and R1,5million, accounting for 28% of all transfers. Below R400 000 now accounted for 22,9% of all sales. Sales between R1,5m and R3m accounted for 19% and those above R3m for 5,6% of the total transfers. The number of transactions transferred between R1,5m to R3m increased by around 33%, this all clearly illustrating that the focus on our real estate market was within the middle to lower income markets.
- FNB reports that data gathered during the 4th quarter 2020, shows that the pace of annual price growth is decelerating, freehold properties outperforming sectional title units and the average value of freehold properties price growth y/y recorded at 3,5% versus 1,3% y/y for sectional title units.
- The statistic for average house price increases as recorded for 2020, was 2,1% in comparison to the 3,5% recorded during 2019.
- On the Commercial front, the Industrial Market is still perceived to show the best results with market strength centred around Cape Town, Nelson Mandela Bay, and eThekwini whilst Gauteng and Johannesburg regions are recorded as being very weak. In all 3 commercial markets (Industrial-, Retail- and Office markets), all showing an oversupply with growing vacant space and a decline in average sale prices and volumes. Also, very visible the trend of corporates disposing of properties to alleviate cash flow and balance sheet pressures.
In general, and in spite of renewed activity and a sooner than initial expected recovery in our SA Real Estate Market, it is widely expected that house price appreciation will remain to be in the low single figures for 2021 due to continues financial pressure on so many fronts as well as escalating economic challenges and uncertainties brought about by the Covid-19 pandemic. Our market will still offer many opportunities but escalating concerns also to be taken into account, especially looking at commercial properties with empty standing office space expected to rise throughout the year as people’s ways of working, has changed drastically and big office parks not that popular and in need anymore. It is also expected that due to increasing unemployment where an estimated 1,2 million people lost their jobs since the outbreak of Covid-19, banks will step up stricter lending criteria to limit risks and deposit requirements are likely to increase.
Real Estate experts are in agreement that investment in properties below R2m will remain to be the focus point this year as Millennials and first-time buyers can afford it at our present (still) low interest rates and huge stock being available on the market to pick and choose from. The higher price ranges are expected to encounter strong headwinds and loose the momentum gained in 2020 due to lessening affordability, economic pressures increase, and general inflation increases with already food-, fuel- electricity- and other day-to-day living costs, escalating and in return leading to lessening demand.
But also, always important to remember that SA property will remain to be a safe investment in uncertain times, as also widely recognised everywhere else in the world. We are known not only locally but also internationally as a global pioneer in estate development and living, setting international standards with some of the world’s best lifestyle estates and excellent investment opportunities area always there to be investigated.
So – it is never too late or too early to invest in properties – do it NOW and make use of our professional Heiberg Estates Team, always there on 24/7 standby to assist and guide you whether you want to sell, buy or rent, whether residential or commercial. For our latest listings, just put your phone on camera, point it on our QR Code and have immediate access to our website with extensive walk-through videos and professional photos. Or call us anytime on 083 654 3773. Your wishes, our demands!
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Please stay healthy and count on us to deliver and go beyond that extra mile to meet your property expectations and needs.
Bambie & Heiberg Estates Team