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Posted by Heiberg Estates on May 31, 2023

Dear Property Partners

When will all the challenges coming our way stop as we all – and especially our fragile economy – needs a break! Although widely expected the announcement last Thursday by the SA Reserve Bank that interest rates will yet again be increased by 0.5 basic point, still came as a huge shock! It is the 10th consecutive increase in the past 18 months since November 2021, and our repo rate since has increased by 4.75%, our prime home loan lending rate now standing at 11.75%. This is also in the wake of a higher-than-initially expected average inflation rate that is now estimated to be an average of 6.2% this year. The latest interest rate increase will without any doubt, put further downwards pressure on both property sale volumes and property price increases for the foreseeable future to come and declining Buyer’s sentiment and activity across all property sectors, visibly on the increase.

In this exceptional cold front economy of our beloved country, there was at least some good and heartwarming news in that Standard & Poor’s Global Ratings (S&P) didn’t further downgrade our credit rating to negative when it decided to keep our credit grading existing “stable” rating. SA has already been downgraded to junk status in 2017 by all three leading credit rating agencies: S&P, Moody’s Investor Services, and Fitch Ratings. S&P already warned in March that load shedding was the culprit in our lower-than-expected economic growth rate and rising unemployment as we can’t grow our industries. Construction-, mining- and infrastructure developments, playing such a huge role to create sustainable job opportunities, can’t be expanded when there is such limited electricity capacity. This scenario also negatively influences our decreasing tax base and our government’s overall ability to pay back international debt and fulfill its financial obligations. The broad-spectrum knock-on effects clearly impacting on our fragile property market for some time now.

It is increasingly noticeable that a huge percentage of Sellers contacting Heiberg Estates, are putting their properties on the market to be sold as they are relocating to the Cape Coastal Regions. A trend that has visibly escalated after Covid, where people’s minds and perspectives as to the old traditional way of working in a corporate environment has forever been changed, and new trends established. The internet also contributes to changed old habits whilst a huge percentage of prospective Buyers are opting to work and live from home and specifically looking for properties that can accommodate and meet these dual needs. Furthermore, many people are commuting  – working in Pretoria during the week and going home to their coastal homes on the weekends.

Some of the latest interesting property news and statistics:

  • A recent FNB House Price Index points out that the annual house price increase averaged 2.7% year-on-year as recorded during April – much less than the inflation rate. This also illustrates the decline in market activity due to high borrowing costs and weakening consumer fundamentals, whilst year-to-date mortgage applications are down by 13.1% in comparison to the same period last year.
  • In this recessionary economic environment, the latest interest rate increase will severely hit first-time buyers due to lessened affordability (23% fewer mortgage applications by first-time Buyers were noted so far this year), whilst we expect a further decline in overall sales volumes in all sectors of our property market.
  • One of our biggest Commercial Property Owners, Redefine, had to lower its yearly expected profit margin estimates due to the drastic impact of the series of interest rate hikes and the fact that with escalating load shedding, it needs to buy a monthly average of 800 000 liters of diesel in order to keep the lights on!  
  • Despite all the challenges, Cape Town stands head and shoulders above any other area in South Africa regarding property sales and price increases – semigration playing a noticeable role in this state of affairs. A house that was bought 12 years ago in Cape Town has increased in value by almost 140%, according to Stats SA, whilst a metro like Johannesburg showed much lower property price increases of around 71% since 2010.
  • Lightstone reports that by the end of last year, 59% of Buyers in the Western Cape came from Gauteng, and 62% of them bought houses for more than R1 million. The quarterly worth of houses sold last year in the Western Cape was more or less on par with those sold in Gauteng – the first time this trend was recorded where sale volumes in the Western Cape were still much lower but the total sale price of those properties, more or less the same as in Gauteng.
  • The renowned international property agency Seville, place Cape Town fifth on its World Class Cities Prime Residential Index, whilst the New World Wealth Report states that Cape Town offers better value than virtually any other city compared to it, in the world. In Monaco ±R20million will buy you only 15m², in London 31m², in New York 34m² and in Cape Town 202m²!
  • The three most prominent and popular areas to invest in property in South Africa, is the Western Cape, Gauteng and KZN, representing 66% of all property volumes and 80% of all property value.
  • Interesting to note the impact that women has on our property market where 60% of South Africa’s residential stock, belongs to women in their personal capacity or as co-owners.
  • The well-known and acknowledged Property Consultation Group, Rode & Associates, predicts that house price growth will further decline in the wake of the series of interest rate hikes and the all-around challenging economic state of affairs. It is also not expected to keep close to our inflation rate for some time to come. It reports that as measured in February this year, the house price increase in the R1.5m+ price range, was a mere 1% whilst properties between R250 000 to R700 000 showed a 3.5% price increase.
  • A further indicator of the downwards pressure on our property market, is the period that a property remains on the market before being sold. It was recorded during the first quarter this year that it took an average of 10.5 weeks to sell a property – up from the average 8 weeks as recorded during the end of 2021. This underlining the consistent weakening demand-supply balance with less properties being sold and at lower-than-normal prices.
  • A recent published FNB Commercial Property Report, predicts a continued uphill struggle in the Commercial Sector where it states that for the 1st quarter of 2023, all three major property classes (Office, Retail and Industrial), showed lower sales activities compared to the precious quarter, with the Office and Retail sectors still under the most economic pressure. The value of commercial mortgage loans granted decreased by -5.67% also illustrating the pressure felt in the Commercial Property Sector. All Property capital growth as well as vacancy rates/net operating income, is forecasted to return to negative growth figures for this year due to so many factors already referred to.

It is widely expected that all round market activity in all property sectors will further decline in the latest wake of the further .5 interest rate increase as just announced, coupled with increasing challenges across our whole economic- and property spectrum with weakening consumer fundamentals like continuous rising employment, lessening affordability, escalating electricity challenges, and the escalating basic costs of living. Not to forget the rapid deteriorating exchange rate where the SA Rand exchange rate versus the US Dollar, has recently reached its highest levels ever. 

However, every dark cloud has a silver lining whatever the circumstances might be. It is indeed a Buyer’s market and extremely well-priced properties to invest in either to occupy yourself or to buy-to-let, are available on the market. Pretoria has a guaranteed rental market, anchored by the high presence of so many Embassies and Diplomatic Institutions, Corporates, Universities and others, offering lucrative rentals and with long term rental contracts. Heiberg Estates has a well-established Diplomatic/Corporate Rental Division where a sound foundation with most of the EU and USA countries have been established for well more than 20 years now, so please feel free should you need to discuss or get more information on diplomatic, high profile and local client rentals – or have potential properties to be rented to high profile clients. It will be a privilege to share our extensive database and expertise with you!

Wishing you all well, please keep in touch – our doors are always open for a cup of coffee should you wish to pop in and get an update. We all at Heiberg Estates remain on 24/7 standby for you whatever your property needs may be! Please scan the QR-code to visit our website:

Best and warm regards.

Bambie & Heiberg Estates Team

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