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Posted by Heiberg Estates on May 31, 2024

Dear Property Partners

With some way to go before all the vote counting and election results are finalised, we all know that our beloved country is at a crossroads and that a coalition government seems to be inevitable. With growing uncertainties surrounding the compilation of a new coalition government, nervousness is also escalating into our financial markets. It is already very visible in especially our volatile rand exchange rate over the past few days which is deteriorating as investors don’t like change, especially since the political- and economic future at this stage is rather unpredictable. A deteriorating exchange rate can further lead to a higher inflation rate which the SA Reserve Bank is watching very closely, and in its bid to anchor the exchange rate at the ideal 4.5%, before lowering the repo rate. The fact that the SA Reserve Bank left the repo rate for the sixth executive time unchanged yesterday, is also not good for our economy where growth to create new jobs, is desperately needed. Extended unemployment increased to 41,9% during the first quarter and more than 30 million people in our country are living under the breadline. In the hopeful creation of more jobs under a new coalition government, our property market will also benefit and get new impetus in both price growth as well as selling volumes.

We all know that demand/supply plays a huge role in our property market and with all the downward pressures as monitored especially over the past 12 to 18 months, both supply and demand have been declining, especially with our continued high interest rates and other factors lending to the rather unfavourable real estate market conditions. Inflation plays a major role in all of this but we are still hopeful that interest rate cuts will happen during the latter part of this year. High borrowing costs and political/economic uncertainty not only locally but also internationally, coupled with war situations in the Middle East and in Oekraine, have been discouraging factors to potential property investors. Transaction activity is noticeably under pressure whilst continued unfavourable selling conditions disincentivised some Sellers from listing their properties.

Most emerging countries reports similar real estate patterns with property prices moving sideways and with decreasing Buyers activities. But for buy-to-let property owners, these conditions are indeed favourable where the rental market is benefitting as people that can’t afford to buy, has no other option than to rent. This market segment has indeed been very active for the past few years and great buy-to-let properties are still up for grabs. In countries where interest rates have lately been decreased e.g. Brazil and Colombia, a recent FNB report points out a resurgence in property prices and hopefully once our own SARB starts lowering interest rates again, the same pattern will be followed locally. The delay in cutting our interest rate directly has a negative impact on a much hoped for recovery in our Real Estate Market.

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

  • The latest FNB House Price Index reports price growth averaged 0.8% in the first quarter 2024 – unchanged from the previous quarter. Again the influence of our constant high interest rate is not to be underestimated as well as our high inflation rate averaging 5.2% so far this year – directly contributing to continued delays in real estate recovery throughout all sectors.
  • Homeowners caught unexpectedly with the series of interest rate increases that are behind in monthly loan repayments for three or more months, are on the increase. It collectively amounts to about R98 billion as recorded amongst the four big national financial institutions. On a typical 20-year bond repayment term, a monthly repayment is presently 42% higher than in November 2021 and some homeowners can simply not afford it anymore, forcing them to sell under pressure!
  • Lately the financial institutions have been tightening their lending criteria. Increasingly Buyers are considering to pay a bigger deposit in order to negotiate a better and lower interest rate with their financial institution as the latter are then also in a better position to lower their own risks and to negotiate on their interest rates.
  • The average recorded declining percentage in home loan applications also points to the downwards economic pressure that the man on the street is experiencing with lessening affordability recorded in every house price segment. Ooba reports that during the first quarter of this year the volume of home loan applications were down 9% year-on-year and down 25% from the previous year in 2022.
  • Interesting to note that of all the bond applications Ooba processed during the first quarter of this year, 62% of the value fell within the greater R1.5m purchase band which is an increase from the first quarter of 2023 where this segment recorded 59% of all loan applications. Showing also that affordability took a nock and people are buying down rather than up.
  • The highest house price increase year-on-year was recorded in the Western Cape and Mpumalanga as recorded by ooba Loans, showing a robust +9.4% and 9.5% respectively. This demonstrating the ongoing semi-gration trend to the high-demand Western Cape region as observed for the past few years now.
  • As mentioned before the rental market is doing well with increasing and ongoing buy-to-let transactions taking place – 13% of home loan application volumes nationally was recorded from buy-to-let buyers at ooba – an increase from 5% from the previous 12 month period. Western Cape again being the most active in this segment with 31.1% applications processed by investors.
  • In spite of so many economic challenges, bank loan approval rates are remaining fairly steady and during the first quarter of this year, the approval rate was 83.4%.
  • A recent Lighstone report points out to the fact that affordable housing is outperforming the other segments. Sales data of 2023 points out that almost 50 000 transfers took place in this segment, which accounted for a third of all real estate sales.

The next few weeks in the formation of a coalition government whether it is to the left or to the right, is not only going to have a huge impact on the future of the people of our beloved country, but also especially on our economic front where we urgently need more foreign investment to get our economy back on track. Investors don’t look kindly on unstable coalitions which could create ongoing negativity in our financial markets and an outflow of capital. We can but hope and pray that all will work out well to get all back on track again as we desperately need it on all fronts. The property market will remain to be a Buyer’s market for some time to come and excellent property investment opportunities are still up for grabs in each property sector.

Our Heiberg Estates Team is ready to address all your property-related questions and needs and we shall remain to be on 24/7 standby for you – don’t hesitate to contact us for residential or commercial sales and rentals. Kindly scan the QR-code below to visit our website:

Best and warm regards


Bambie & Heiberg Estates Team.

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