Your search results

HEIBERG ESTATES NEWSLETTER: JANUARY 2021

Posted by Heiberg Estates on January 29, 2021

SPRING BRINGS NEW LIFE, ALSO IN OUR SA PROPERTY MARKET!

Dear Property Partners

With the latest Covid-19 Level 3 lockdown, the related impact is already visible in our property market and further downwards pressure is expected on property prices and sale volumes for some time to come. A FNB article published less than a week ago, stated that they expect that house prices can fall as much as 6% this year as job losses and other economic factors will play a major role in lessening demand and a growing supply of properties on our market for sale.

The Covid-19 enforced and fast changing traditional working environment with the limitations and restrictions it has brought, has changed people’s minds regarding the way they used to work, especially amongst most corporate- and other professional service-related entities. As an enforced plan B during the lockdown periods, normal day-to-day office activities have been proven possible to be done almost as well from private homes as from a normal office environment, and the demand for bigger homes where space for office(s) can be used, is growing visibly.

Property investments, being a world-wide recognised long term investment haven to ensure wealth portfolio increases, stands central in how businesses will be conducted in the future with new horizons to be broken, this also impacting on the construction industry and the way forward moving away from traditional office buildings and office parks. The whole property scenario is changing, also retail where internet accessibility and online purchases, will undoubtedly change the future development designs of retail centres and shopping malls. Undoubtedly the worldwide traditional way of thinking, living, and working, has been irrevocable changed and so also the worldwide property landscape.

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

Property sale statistics for 2020 clearly show that it was Millennials running the show and with the low interest rates (lowest in 47 years) as well as no transfer duties payable on the first R1m, accounted for more than 40% of all property sales.
A recent FNB HPI report points out that house prices increased by 3.8% y/y in December, up from the 3.5% y/y recorded during November 2020. Interesting to note that price increases from freehold properties which became increasingly popular as people started working from home, performed better than sectional title: 3.5% y/y versus 1.3% y/y for sectional title as recorded during the 4^th quarter 2020.
Due to our continued low interest rates where the prime rate is still 7% (versus e.g., 15.5% in 2008), it is cheaper to buy than to rent in the lower price brackets and as per previous point, clearly illustrated by especially first time Buyers entering the market – as clearly illustrated by some 70% of bond applications were from first time home buyers. But – this led to the escalation of empty standing flats to rent that increased to 13% – more than double than in 2019 where it was recorded as 5,6%. Vacant occupation rates increased to more than 23% in the high price margins of more than R25 000 per month.
Due to increasing political, economic uncertainties and the ripple Covid-19 effect, the SA Property Market will remain to be under pressure this year, especially in the higher price margins.
Due to the impact that Covid-19 had on the normal working environment where millions of people were forced to work from home, people started looking for bigger properties, whilst properties that sold at their asking price increased from 20% at the beginning of last year, to 28% as recorded during the last quarter 2020.
The average time that properties stayed on the market before being sold during the 4^th quarter last year, was 9 weeks and 4 days versus the 10 weeks and 6 days recorded during the 3^rd quarter with demand for bigger homes still growing steadily.
Prospects for this year is rather reserved due to more than a million South Africans that lost their jobs so fat due to Covid-19 and the pandemic putting continued strain on households across the whole spectrum, resulting in many homeowners being forced to downscale due to financial pressure – around 22% of Sellers stating this as their reason for selling. Also, not to forget many Seller being forced to sell due to the struggle to find tenants, this adding to supply in the market and putting downwards pressure on property prices. An estimated 3,7million of households are renting in our country – an increase of 33% over the past 10 years.
Due to so many factors, we are expecting our financial institutions to be less lenient with bond approvals this year and that they will be more cautious due to growing concerns about employment stability and the threatening possibility of extensive retrenchments in the private as well as public sectors. This having a major impact on affordability and consequent lessening property sales in all price ranges. Furthermore, distressed sales expected to increase and putting downwards pressure on property prices.
Regarding our construction industry, 2020 was a challenging year where e.g., in Gauteng only 7 907 residential units were completed between January and October – this in comparison to 25 513 residential houses and flats that were completed during 2019.
A recent FNB report states that the proportion of properties that sold at less than the asking price, narrowed to 72% om the 4^th quarter 2020, from the 80% recorded during the first quarter. Discount on asking prices narrowed marginally to 10%, from 11% in the third quarter and 13% during the first quarter. Downscaling for selling due to financial pressure was the main reason amongst 22% of the Sellers.
Emigration related sales are on the decline – it was recorded at 18% during the 4^th quarter in 2019 and decreased to 11% during the 4^th quarter 2020. This could also lead to more property stock in the higher price ranges becoming available and putting downwards price pressure on this segment.

It is widely expected that interest rates will remain to be low this year, with minor increases later in the year which should not have a major impact on our property market. House price appreciation is expected to be in the low single figures for this year. Property worldwide, especially residential property is an asset that will always have a market, but clearly in a short period of time due to Covid-19, the market has shifted and enforced a new way of thinking and doing over the whole spectrum around the world. Without doubt these days property criteria resolves around a well-defined balancing of price, location, versatility, affordability, lifestyle, maintenance, the availability of a good public transport system and general security. The traditional way of building either residential, office or retail properties, has been changed forever and developers will have to think pro-actively to address rising need changes and the way that people regard investments in properties. We expect most property investors to focus on properties up to the R2m price range where demand will be led by first-time buyers and homeowners forced to down scale due to economic circumstances with a lessened demand in the medium- to higher price ranges in general. With an ever and fast changing world order and environment, it is still to be seen and established how South African homeowners will continue to adjust their lifestyles to adapt to all the changes and where the “normal” has been changed irrevocably and our economy slowly and hopefully recovers from this current ruthless pandemic.

Please make sure that you contact your ever ready and 24/7 on standby well-seasoned, and professional Heiberg Estates Team, whether you want to rent, sell, or buy, whether it is residential or commercial properties – we cover the whole spectrum. It is always a pleasure to share our extensive reference framework and collective property expertise of over 50 years with you! Below you find our QR code that will take you to our Website, also how to scan for those who are not sure – kindly see the steps below: