HEIBERG ESTATES NEWSLETTER: JULY 2025
Dear Property Partners
Fortunately, this month still ends on a high note with the SA Reserve Bank’s announcement a few minutes ago that the repo rate has been reduced by 25 basic points – the fifth rate reduction since September last year with only March with no reduction announced. This brings the prime interest rate to 10.5% after the collective 1.25% reduction since September 2024 and will bring some relief before the final Trump trade war announcement tomorrow regarding the expected 30% tariff rate hike against South Africa. We are observing amongst our clients concerns not only about our economy, increasing political uncertainties as well as the geopolitical tensions within the GNU, but also also looking at South Africa’s future prospects. Especially taking into account the latest spell of wavering diplomatic relationships with key foreign role players in our export/import markets. These are factors having an impact in people’s appetite and willingness to invest in property.
Some factors that could make a major impact on our economic landscape and property investor sentiment in the foreseeable future, are specifically the SA-US diplomatic and economic relationship (although we are already exploring new markets, like BMW now manufacturing and exporting to Canada), muted GDP growth in SA expected for the remainder of this year, as well as upwards pressure on the CPI looking at continuous escalating fuel- and food prices that also lead to our inflation rate again rising to 3% in June where it was below 3% the previous 4 months.
Since the beginning of this year moderate increases were noted in residential sales, whilst we are also witnessing a definite diminishing in the oversupply of vacant office space. There are lessening new office space developments with the continued oversupply for many years now, whilst existing office space upgrades as well as the repurposing thereof for residential- and mixed-use purposes, are very popular. Interesting to note that it is estimated that around 19.3% of office property space so far this year, has been sold for repurposing to residential and mixed-use properties to address house shortages in specifically our country’s CBDs.
FNB reports that a broad multi-year picture shows a significantly improved set of demand-supply balance in all 3 commercial sectors (office-, retail- and industrial properties) since the Covid-19 lockdowns as well as the interest rate hiking cycle challenges. Interest rate cuts since September 2024, further contributed to curbing oversupplies in our commercial markets. However, our fragile economy needs further interest rate cuts as stimulus and to create more sustainable jobs that in turn will also stimulate demand for residential and commercial properties. The well-known economist, Dr Roelof Botha recently stated in referral to our lethargy of building activities: “Unless interest rates start declining at a faster pace, South Africa will continue to experience sub-optimal economic growth, due to the excessively high cost of credit and capital”.
Lightstone reports that women seeking financial independence are transforming the real estate market and already owning almost 60% of residential properties in SA, outnumbering first-time buyers. Single woman already purchases homes at nearly twice the rate of single men in many markets and in the process re-shaping the real estate in our country – but, as FNB reports that it is also a reflection of a global shift. It is predicted that by 2030 women will account for as much as 70% of South African residential purchases.
But the good news is although there is general concern around macro-economic factors, the latest HSI research report concludes that the second-highest confidence and positive sentiment level of 86% in our property market, has been reached since the start of the survey in 2015, clearly indication that respondents continue to see property ownership as a good and solid investment with financial benefits over the long term. A recent S&P Global Rating Report also positively mentioned that they expect local real estate prices to increase moderately in nominal terms, adding to property investors positive sentiment for 2025. The dream of homeownership remains and alive, in spite of consumers’ finances remaining under pressure in the short term with still some hope for further interest rate cuts later this year.
Some of the latest interesting property facts and statistics, as follows:
- HIS survey data shows legal entities (trusts and companies) contributed to a greater share of property transactions over the last quarter and increased from 12.4% to 13.6% of all sales, showing interest of property investors to use legal entities to purchase investment properties and supporting the increasing positive sentiment referred to above.
- Selling sentiment increased to 50% during the 2nd quarter, whilst Gauteng remained the biggest net loser of property owners with a 24% increase in net outward migration.
- Interesting to look at semi-gration reverses from the Cape back to Gauteng where noticeably the “Wise Move 2025 Migration Report”, points out that an estimated 25% of those that previously moved to the Cape, have returned back to Gauteng – some factors contributing to this reversed semi-gration is better and higher paid job possibilities whilst there are more economic opportunities. PayProp points out that affordability plays a huge role where property prices are about 27% lower than in the Cape, whilst rentals are also about 20% lower in average. Gauteng has the biggest rental market with about 37.8% of households renting.
- Our overall economic growth rate has been in broad stagnation since early last decade, limiting sustainable job creation and growth, and this lead to a meteoric rise in national office vacancies, recorded at 9.2% in 2014 and increasing to 18.2% in 2021/2022. As mentioned it is on the decline now and was recorded at 15.8% in 2024. According to a recent Rode Report declining to a national 12.8% as noted during the first quarter of this year. Johannesburg office average vacancies was recorded at 14.1% whilst in Pretoria 13.4% for the first quarter this year.
- Interesting to note that looking at the repurposing sale of office space for residential and mixed-use investments, was recorded at 38.1% in Johannesburg, an estimate of 17.1% for Pretoria, whilst in Cape Town it was much lower at 4.6%.
- Also noteworthy the fact that with economic headwinds and pressure, downsizing and affordability were huge factors for around 26% of homeowners selling as well as for buyers who are prioritizing financial prudence over aspirational purchases.
- One of our main Home Loan Financial Institutions, ooba reports loan application volumes increased by 11% year-on-year with the total value of these applications increasing by 18.5%.
- The average age of a homebuyer has increased to 40 years year-on-year, whilst the average property purchase price nationally increased by 3.9% over the same period to R1 695.257. Regionally the highest price increases were recorded in the Free State 12% and in Gauteng 10.1%. The Western Cape, our country’s most expensive region recorded an unexpected low increase of 3.3% year-on-year increase of the average purchase price.
- FNB reports that national demand for buy-to-let properties remains steady with a slight increase, accounting for 12.6% of total applications. The Western Cape recorded that 31% of all loan applications was for the buy-to-let segment.
- The average first-time buyer is 35 years old and accounted year-on-year for 46% of all sales, 59% of them purchased property without a deposit and 10.5% of them secured financing that also included transfer and bond registration costs.
- The July 25 Bettabond brief highlights the fact that South Africa’s home buying activity during the second quarter of this year, could not match the property market performance recorded during the first quarter despite the decline in the prime lending rate, and has still a long say to go before reaching the levels of activity experienced at the beginning of 2021. The Index for the 12-month period ending in May, was 28% lower than 4 years ago, but fortunately there has been an uptick in activities with the latest index reading 4.5% higher than 2 years ago.
- Interesting to note the overall value of houses and flats built in the provinces recorded year-on-year so far: KZN recorded an increase of 53.6%, the Eastern Cape declined by 46.5%, the Western Cape showed a 32% increase, whilst in Gauteng it declined by 20%.
The proposed 1 August 30% US tariffs hikes on South African goods if indeed implemented, could have a far-reaching ripple effect on multiple sectors as well as our property market that does not operate in an isolated vacuum – especially with potential job losses especially in agriculture and in the manufacturing segment of our commercial properties as well as logistics and warehousing to follow. This cause of events if indeed it is followed through, will most likely dampen consumer confidence and property buyers financial abilities to invest in property. There is also a broader risk involved as manufacturing is well interconnected with most segments of our economy, unemployment can further rise and therefore also impact on our total real estate market. People’s income stability is very closely linked for residential property demand – whether buying or renting and expected job losses with such a tariff hike, will without doubt put further strain on both our residential as well as commercial property segments. Inflation is again on the rise and due to our rand exchange rate potentially weakening which is expected should the US carries through with its 30% tariffs threat, the SA Reserve Bank is expected to have to keep the repo rate higher for longer.
Property ownership is recognised as a critical form of empowerment as well as of financial independence, securing your future. We are all well aware that the residential property market remains a cornerstone of economic stability and is worldwide recognized as a safe haven during uncertain times. Our property market has repeatedly shown its resilience and remains to be a well-founded and sought-after asset class, it attracts savvy investors that are considering merited long-term property investment fundamentals whilst being well-informed and realistic in the present high-interest rate and lower-growth environment. Especially also in making use of professional and well-experienced Real Estate Agent that can guide them to make the right decisions – so that is also where your Heiberg Estate Team is on 24/7 standby to guide and to lead you into sound property investments in the right areas.
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Wishing you all the best – as well as also looking forward to your calls!
Yours faithfully
Bambie & Heiberg Estates Team
