HEIBERG ESTATES NEWSLETTER: JANUARY 2024

Dear Property Partners

We trust that you had a good and blessed Festive Season. Once again from all of us at Heiberg Estates, our very best wishes for 2024! A year that is expected to be another challenging all around year with so many factors playing a role not only locally, but also in the worldwide economy with increased geopolitical tensions due to the ongoing wars in the Middle East and Ukraine. Not to forget that about 50% of countries like ourselves, are facing elections this year. One can but hope that common sense will prevail, especially in our own country with its uncertain economy- and political state of affairs.

All of the above factors will also influence our Real Estate Market where economic growth, a lower inflation rate, currency stability and cuts in our high interest rates, are important main factors to get our markets back on track and on the go again. The SA Reserve Bank’s announcement last week to keep the repo rate unchanged at 8.25% (the fourth consecutive time this has happened) was widely expected and unfortunately it is not expected that the SARB will lower interest rates before the middle of the year. Key to increased property sales activities this year, and especially with new property developments whether residential or commercial, will be sustained and reliable municipal and utilities services and the ability to deliver bulk services across all sectors for new developments to grow the Real Estate Market.

It was very obvious looking at the trends and statistics last year, that home buying activity levelled out and that most sectors have shown price declines with house price inflation, not keeping up with our high inflation rate. During 2023 the average inflation rate was 6%, it was at its lowest recorded at 4.7% in July and and at its highest 7.1% in March, with the most recent 5.1% recorded during December versus 5.5% in November. Average CPI inflation will hopefully come down to 5.2% after the 5.9% recorded during 2023 and lead to moderate and gradual interest rate cuts from the second quarter onwards. This will stimulate our property market and put credit driven property buying/sales activity back on track.

Fortunately there was more positive seasonality movement during the last quarter of 2023. However affordability, the rising costs of living and decreasing employment will play a major role in property related activities this year.  Hopefully our interest rate which has stayed unchanged since May 2023, will gradually start decreasing some time in the future to stimulate our markets and that the economic environment linked to the property market, will improve.

Some of the latest trends and statistics, are as follows:

• The latest FNB House Price Index shows an average gradual price growth of 0.8% y/y recorded in December, a small improvement on the 0.7% recorded in November with the 2023 annual average house price growth recorded at 1.5%, but not keeping up with our inflation rate.
• It also reports that on the Commercial front, Industrial and Retail properties fared the best during 2023 and this trend is expected to be continued throughout this coming year. The huge vacancy rate in the Office Market segment, where since Covid-19 a hybrid working model is pretty much on the increase, is causing concern and forcing owners to consider and repurpose for alternative usages, like converting office blocks into residential units.
• Recent recorded data by the Deeds Registrar points out how under downwards pressure our Real Estate Market was last year,  where new mortgage volumes have declined by more or less 28% and where the decline was recorded more pronounced in the higher priced segments.
• Semi-gration sales are normalising and was estimated at an average of 11% of sale volumes recorded in 2023 – down from between 12% and 14% recorded during the previous year. Emigration-related sales were constant at 8%, much lower than the 18% recorded in 2019.
• Interesting to note the fluctuations in year-on-year prices where the FNB House Price Index shows that e.g. in December 2004 house prices increased by 35.6%, followed by a 21.7% price increase in 2005. In 2008 prices declined by -5.1% – a huge downfall! In 2020 the average house price increase was recorded at 4.1%, in 2021 3.7%, in 2022 3.1% and in 2023 a very low 0.8%.
• The above statistics illustrate the increasing pressure that our housing market was experiencing last year. Adding to this the fact that the nominal worth of residential bonds granted declined by more or less 22%, whilst property transfers under first-time Buyers, declined by more than 40% last year!
• The FNB House Prive Index points out that the average year-on-year house price decline/growth as recorded during the third quarter last year, was -1.5% in Johannesburg, 1.8% in Tshwane, and a much lower 3% in Cape Town in comparison to previous years. At least the fourth quarter showed mild levels of recovery from the highly depressed levels but it is expected to be short-lived due to the continued high interest rates, not expected to be lowered in the foreseeable future.
• The average time that properties were on the market for sale before being sold, was 11 weeks and 4 days. Most properties take an average of 3 months or longer to sell, especially if the price is not market-related in this ongoing price-sensitive and competitive market, where people shop by comparison much more in order to find the best value for money.
• People are increasingly under financial pressure and 25% of total sale volumes as recorded during the last quarter of 2023, was financial pressure related.
• Estate Agencies around South Africa reported a decline in sale volumes last year of between 25% to 30% and most recorded 2023 as one of the most challenging years over the past 10 years with the Buyers pool much smaller than in previous years. The FNB House Price Index shows that fewer houses were sold last year than before Covid-19. 
• Lightstone reports that more than 100 000 properties less were sold during 2023 than during 2022, further demonstrating the downward financial pressure on prospective home buyers due to the high interest rates coupled with general increases of costs all around due to rising inflation and lessening affordability. The total value of properties sold last year was R257 billion versus the R345 billion sold in 2022 – a major R88 billion decline. This had a huge negative impact on our GDP where the real estate market is regarded as one of the anchors in making huge contributions to the yearly GDP through transfer duties, payable on most transactions.

We are not expecting that 2024 will deliver any fireworks in our property market where the movement in house prices is in correlation to the country’s economy. We are all aware that continued high inflation and a very low economic growth rate for 2024, is expected. Foreign debt is becoming one of our biggest challenges after corruption with unclear general political- and economic policies and strategies, holding our economy back. As mentioned interest rates are expected to only start decreasing during the second quarter and mildly from the current 11.75%, hopefully to around 11% towards the end of the year. There is no major relief on the horizon getting back to the low interest rates we had before Covid-19, soon. But with declining interest rates (how little it might be), and with a low predicted GDP growth at least up from the 0.8% recorded during 2023 to 1.2% in 2024, continued low property sale activities and low price growth, is expected to be the reality for some time to come.   

Depending on the election outcome, improved sustainable electricity supply, sustainable job creation, keeping our inflation at bay just to name a few, we hope that some of these urgently awaited improvements if happening, could be reflected in a more active and stronger South African Real Estate Market. Only time will learn as irrespective of circumstances, the SA Property Market has always proven itself to remain resilient and adaptable. And holding its own as still one of the most important asset classes to build wealth over time.

Whether you are a Buyer or a Seller, whether you want to buy-to-let or merely rent a property and wait to see what is happening, please be assured that your Heiberg Estates Team is on 24/7 standby to assist. We are looking forward to your calls to share our expertise and wide reference framework with you. Don’t hesitate to call us for any and all of your property needs – we are there for you under all circumstances! Please scan the QR-code to visit our website:

Best and kind wishes

Bambie and Heiberg Estates Team