HEIBERG ESTATES NEWSLETTER: JANUARY 2025

Dear Property Partners!

Your Heiberg Estates Team wishes you a very happy and prosperous 2025! There is for sure light at the end of the tunnel, and we all believe that there is hope for a better and more vibrant moving Real Estate Market this year. At least we had excellent news today that the SA Reserve Bank cut the repo rate for the third consecutive time by 0.25% which means that since September 2024, our interest rate was cut by 75 basic points and it will be bringing a wide range relief over a broad economic front and especially for our SA Property Market. Our prime rate is now 11 but still 4% higher than before the Covid-19 pandemic.

Looking at the prospects ahead of us, it can only be a better year after a rather uphill 2024 experience overall but also especially throughout our property market with declining sale volumes and limited, low property price increases. Our lethargic property market was indeed under immense downward pressure due to our very low economic growth rate, rising inflation, high interest rates, escalating unemployment, and a broad front oversupply, coupled with declining property investor sentiment – just to name a few. But market fundamentals are changing for the positive and we are hopeful for sustainable property market recovery this year.

We all acknowledge that our property market is closely linked to long-term economic growth where property interest over time, is directly influenced by the level of economic activity. The virtual economic stagnation over the past years coupled with rising unemployment, had a visible impact as seen with much lower property sale volumes, in some sectors declining property prices as well as increasing commercial property vacancies.

John Loos, the well-known Property Strategist at FNB Commercial Property Finance, reports that low net operating income and capital value growth on average, have not kept pace with general inflation in our economy since 2015. He reports that property net operating income in 2023 was down by -11.8% on the 16-year high reached in 2016, while average capital value declined by -21.7%. We also observed that property sales activities, show house attendance, and sales, were much lower last year than recorded during the two or three years before – this also clearly illustrates the impact of the series of interest rate increases. So there is definite space for improvement this year and for cautious optimism! The fact that load shedding seems to be under control with 300 days without load shedding recorded last week, has direct and positive implications for economic growth and in turn the creation of sustainable jobs. The latter especially needed with our very high unemployment rates in SA.

With lower and contained inflation, better economic growth is expected for 2025 with the Government of National Unity (GNU). The GNU focusing on economic growth, service delivery, and infrastructure improvements as well as taking hands with the private sector, plus the interest rate cut announced yesterday, will for sure stimulate prospective property investors to change their mindset and get rid of the prolonged “wait-and-see” attitude. Already there are positive signs of an uptick in Consumer confidence with increasing property inquiries and much better show house attendances. We also expect that especially looking at the Commercial Sector, there will be some positive improvement by lowering vacancy rates and improving net operating income, stimulating renewed investor demand for property with moderate capital value increases in this field. Industrial property which has been the star performer over the past few years, is still expected to outshine the retail and office sectors this year as there is visible and ongoing movement and demand for warehousing and logistic hubs. Many Office Building owners might opt to repurpose surplus office space to residential buildings as we have already observed this growing trend during the past few years in Pretoria.

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

• ABSA reports that looking back at general statistics over the past year of individuals buying properties, solo female homeownership accounted for 66.6% – there are many more female solo buyers than male buyers.
• Most South Africans applying for home loans, are first-time buyers and this stimulates further growth in the supply of our less expensive category development properties.
• Overall consumer sentiment for property investments is definitely increasing with overall consumer confidence stable at 84%, whilst 80% believing it is the appropriate time to invest.
• Increasing residential demand also stimulates new developments and nationally the number of units of residential building plans approved year-on-year, increased moderately in the 3^rd and 4^th quarters of 2024, after a -22.83% decline recorded the previous quarter – which ended 8 consecutive quarters of decline due to the weakened demand on the back of a series of interest rate hikes.
• The 2025 expectations of economic growth, more sustainable jobs, and lowering interest rates, are also expected to lead to renewed building activities with more units being put on the market where demand will increase over the year to come. FNB reports that building plans passed in KZN during the 3^rd quarter increased by an amazing 90% year-on-year, the Western Cape recorded an increase of 15% but Gauteng remained in negative territory with a further decline of -29%.
• It is widely expected that the demand in the Office Market will remain slow to improve, especially since there was still a high national vacancy rate of 15.2% recorded during the last six months of 2024.
• The latest FNB House Price Index reports a slight increase of 0.9% recorded in December, slightly lower than the 1% increase recorded in November.
• The average annual house price increase for 2024 was 0.8% – much lower than the 1.5% recorded in 2023, this clearly illustrates the ongoing financial pressure throughout our property market for the past few years.
• With increased market activity as already referred to, selling times have been reduced with properties now taking an average of 11 weeks on the market before being sold in comparison to the 11 weeks and 2 days recorded during the 3^rd quarter last year – most activities observed in the R2.6m to R3.6m price segments.
• After an extensive FNB survey, results indicated that financial pressure is still a key driver for property sales – it increased by 3% from 23% recorded in the third quarter to 26% in the fourth quarter of last year – way above the 18% long-term average.
• Life-stage downscaling accounted for 21% of all sales, whilst emigration-related sales declined to 5% and this is well below the long-term average of 9%.

Our resilient SA Property Market will be influenced by global uncertainties on both political- and economic fronts with the new US Government, and ongoing turmoil in the Middle East as well as in Europe, although on a positive note, the global interest rate cycle has turned downwards for 2024 that can contribute to a strengthening in the world economy. These factors could impact our own GNU political- and economic challenges, shifting consumer behaviour and unlocking excellent opportunities for buyers, sellers, and investors. Early signs of recovery as already being referred to above and in specific referral to improving sentiment, shorter selling times, as well as increasing activity in the middle-to-high price segments, especially with easing inflation and with the latest interest rate cut announced today. Since it is widely expected that there will be another two to three interest rate cuts during the course of this year and coupled with a much expected higher but still moderate economic growth rate (expected to be around 1.7%), sustained new job opportunities plus increased service-delivery improvements, it could activate renewed positive Buyer’s sentiment and interest and bring relief for existing property owners. We really need impetus to pull our property market out of the grip of stagnation, and we are hopeful that this new year will bring renewed impetus throughout our property market.

Without doubt and worldwide recognized as such, property remains a sound investment and a significant means to build long-term wealth, especially looking at long-term capital growth. That is where your Heiberg Estates Team can be a valuable starting point to assist in all your property needs, whether buying or selling, whether residential or commercial properties. Please contact us – and always remember – that your Heiberg Estates Team remains to be on 24/7 standby for you, our much-valued and treasured property partners! Please scan the QR-code below to visit our website:

Looking forward to you contacting us soon!

Sincerely

Bambie & Heiberg Estates Team