HEIBERG ESTATES NEWSLETTER: JUNE 2024

Dear Property Partners

With a successful election behind us, our political- and economic state of affairs can hopefully get back on track soon again in order for the new Government to focus on all-around stability and the utmost need to create sustainable jobs. Amid the existing unchartered waters with the new government of unity lying ahead of us, there is already tangible post-election cautious optimism in our property market and hope that stable governance will be established amongst the new political structures and spheres as soon as possible. Especially with renewed hope that expected new investments and momentum will be created across the full economic spectrum and also give our lethargic property market new impetus in both selling volumes as well as price growth.

In spite of facing strong headwinds for some time now, a higher level of consumer optimism is arising relating to the outlook for the property market for the second half of this year. Property investors are starting to gear up for better times, especially with our latest lower recorded CPI of 5.2%, hopefully opening the door for the SA Reserve Bank to start to cut interest rates later this year. This will undoubtedly create new momentum and energy to flow into our property market as a whole.

We trust that with some interest cuts expected during the second half of this year, macroeconomic forces will further stimulate the latest impetus and renewed energy in our property sector. With more movement and Buyers interest across all sectors, increased activity will take some time to translate into better price growth, so it is expected that the Buyer’s market will continue for some time to come.

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

• According to Lightstone, fewer South Africans are buying properties than six years ago. Especially looking at first-time buyers where our continued high interest rate (the highest in almost 15 years), coupled with high inflation is having a huge impact on affordability. Since 2018 the total property purchase rate has fallen by 13%. The people in the 26- to 35-year age group which accounted for 31% of purchases in 2018, decreased to 27% last year.
• Looking at our construction sector, it is clear that the downward pressure is continuing where the Afrimat Index reported a further 1.3% decline in comparison to the same period last year. The worth of completed residential-, office- and industrial properties in the bigger cities year-on-year, declined by 23% as recorded during the last quarter.  Unfortunately, the presence of the construction Mafia is not to be underestimated in this state of affairs.
• Interesting to note that the downwards trend is also visible in bond applications, where BetterBond just published a report stating that bond applications in May reduced by 30% since the third quarter of 2021.
• At this stage it is still unexpected that the SA Reserve Bank will lower the interest rate next month at its next meeting on 18 July and our repo rate is most likely to remain at 6.5% and the prime rate at 11.75% – this in comparison to the interest rates of between 3% and 4% in the USA (depending on the loan period), whilst in some European countries it is very close to 0%.
• With the property market expected to be facing challenges for some time to come, it is interesting that a huge percentage of prospective Buyers lately have opted to stay and renovate their existing property. The renovate sentiment increased by 79% since the beginning of last year, with homeowners rather opting to add value to their existing properties and stay.
• Buyer sentiment also increased moderately in low single figures by 8% compared to the last quarter of last year, whilst by 11% compared to the first quarter of last year.
• The buy-to-rent sentiment increased by 6% as recorded during the first quarter this year in comparison to the last quarter of 2023.
• The investment sentiment increased by 6% compared to the last quarter of 2023 – all showing positive and growing signs towards a higher level of consumer optimism for 2024.
• Our rental market is outperforming all other property sectors. The TPN Credit Buro reports that since 2016 vacancies of rental houses and flats, are at their lowest level recorded at a low 4.42%, versus the 6.69% recorded during the previous quarter. The continued high interest rate coupled with high unemployment, has a huge impact on the rental market and this trend that people prefer to rent rather than buy, is expected to continue for the foreseeable future. This in turn a positive peace of mind factor for the buy-to-let property investor buying in well-established areas within good accessibility and within close proximity to good schools, shopping centre and hospitals.
• StatsSA reports that people living in and owning their properties, declined from 64.4% in 2022 to 62.9% in 2023, whilst families renting their homes increased from 22.5% to 23.9% over the same period.
• The Western Cape has the lowest vacancy figure of rental properties recorded at 1.51% whilst 49.2% of home owners stay in paid-off properties. In KZN 74.6% of households are owed and 17.3% are renting. Gauteng 37.8% of people are tenants whilst 35.9% stay in paid-off properties.

With the Buyers market expected to continue for some time to come and house prices unlikely to increase substantially until the broader economic state of affairs turns more positive, excellent property investment opportunities still present themselves for the serious Buyer, so don’t miss the bus and contact your Heiberg Estates Team without hesitation! We remain to be on 24/7 standby for you and kindly visit our website: www.heibergestates.com or scan the QR-code below:

Hopefully, stability will prevail in the emerging coalitions to be established in the immediate future. Our collective future is at stake and we know that where there is hope for the future, there is indeed power in the presence!

Best and warm regards

Sincerely

Bambie & Heiberg Estates Team