HEIBERG ESTATES NEWSLETTER: MAY 2025
Dear Property Partners
There are several positive factors that lately put a smile on many property owners faces, especially the much-awaited announcement on Thursday that the SA Reserve Bank lowered the repo rate by .25 basic points, lowering our prime rate now to 10.75%. This is the fourth interest rate cut since September last year. This has been awaited for some time now to create new momentum in our stagnating economy, but especially also so in stimulating the SA Property Market to increase sale volumes as well as property prices. Hopefully and ideally more interest rate cuts will follow in the next few months! Especially since our country has the highest unemployment rates recorded worldwide and where the latest statistics made public for the first quarter this year, showed an increase from 31.9% to 32.9% – and it could even be more as on the expanded definition it stands on 12.7 million people which is 43.1%! With our inflation rate recorded at 2.7% in March and it being well and constantly contained within the SA Reserve ideal inflation rate band of 3% to 6% for a prolonged period now, it will be widely welcomed if a less conservative stance is being followed and much needed further interest rate cuts announced in order to get some momentum in our economy and to stimulate sustainable employment opportunities. The gap between the inflation rate and the interest rate in SA is extremely high which puts downward pressure on our economy to grow – and this in turn also negatively impacts on our fragile SA Property Market.
We are all further relieved, especially amongst the SA Real Estate fraternity, that common sense prevailed when it was announced that 0.5% VAT hike announcement, was reversed and that this renewed potential challenge across the economic spectrum, could be avoided. A tax hike would have had negative effect on the positive momentum that has been created by several interest rate cuts over the past year and looking at our property market, it would have had a broad front challenging impact where VAT applies to several aspects of property transactions, like new developments, building costs, legal and agent fees, municipal costs as well as monthly operating costs. However, we need to remain realistic where ongoing challenges can hold real momentum in our property market back, like the latest revised GDP forecast by the SA Reserve Bank of a mere 1.2% which is .5% lower than previous projections in March. This will inevitably impact on consumer- and investor confidence which combined with rising unemployment, will remain to be some of the biggest challenges overall for our Real Estate Market as a whole.
In spite of our SA Real Estate being under constant macroeconomic challenges, it always shows resilience and solid medium- to long term capital growth. A recent Standard Bank report, it is estimated that the value of our SA Commercial Real Estate sector is currently valued at around R1.9m trillion which is a noticeable increase from the R1.3 trillion estimate in 2015, illustrating an excellent sector growth over the past decade. The current estimated combined value of our Residential Real Estate sector, is R6.9 trillion that gives us an estimated total SA Real Estate market value of around R8.8 trillion!
A recent Standard Bank interestingly made note of the after Covid-19 gradual shift back to physical workplaces, and which is gathering momentum to such an extent that office vacancies decreased to 12.6% versus the 14.4% noted the previous year, whilst encouragingly the residential market is also showing less vacancy rates, increased investment in built-to-rent as well as built-to-sell properties with a steady rise in rental yields.
The Building Sector is also showing signs of increased activity where for the first two months so far this year, the value of approved new building plans in the Western Cape, was R5.3 billion which is 21% higher than the first two months of last year. In contrast Gauteng is lacking far behind with the value of new building plans approved over the first two months this year was a mere R3.7 billion – a decline of 26% in comparison to last year. One of the most important factors contributing to this scenario the semigration to the Western Cape with its better Municipal and Provincial service deliveries and the ongoing need for residential properties there. Furthermore as per a recent report of the well-known economist, Dr Roelof Botha, sustainable job creation in the Western Cape is a huge factor where unemployment is recorded at less than 20%, versus the 34% in Gauteng and the 41% recorded in the Northwest Provinces.
We are well aware that seasonal market fluctuations play a role in the real estate landscape and we already see with the onset of autumn the decrease in market activity, general enquiries and show house attendances. But in turn, this also offers positive opportunities with lessening competition for prospective Buyers and Property Investors as demand and supply have a huge influence on property prices and lead to more stable pricing in the quieter seasons of the year.
Some more of the latest interesting facts and statistics, as follows:
- Interesting to note that demographics in home ownership is still shifting with more woman than ever recorded before, entering the property market. Standard Bank reports that in 2024, 55% of mortgage loans approved for affordable housing went to women – an increase of 4% from the previous year.
- FNB reports that property prices increased by an average of 2.2% year-on-year in April which is 0.2% than March, the best recorded over the past two years. Their projections is a moderate but steady growth expected to reach the 3% mark in 2026.
- Market outcomes are still moderate as reflected in slow transaction growth volumes and slightly longer selling times where on average it took 11 weeks in the last quarter of 2024 which now has increased to 12 weeks and a day as recorded during the first quarter of this year.
- One of a recent FNB property reports points out that sale volumes are still well below pre-Covid 19 levels which also demonstrated the stagnating property market for a prolonged time now as also indicated by the Deeds Office where transaction volumes are about 16% lower than was recorded before the Covid-19 pandemic.
- Fortunately the 3rd Budget has retained the 10% increase in the threshold for transfer duties where properties selling for up to R1.21million are exempt that will also be a further motivation for especially first time buyers to enter the property market in the lower price ranges.
- A recent published Lighstone report points out that Gauteng continues to be the largest residential market in SA, accounting for almost 35% of the country’s almost 7million homes and 38% of the total R6.9 trillion in value.
- Amongst Commercial Sector Properties, it was once indicated that Industrial properties remain to be the star performer where this asset class is benefitting from growing e-commerce, growing demands for warehousing and distribution centres, offering wide-based investment opportunities for both developers as well as property investors. Vacancy rates dropped to a mere 2.1% while rental growth has exceeded 5% year-on-year.
- As per our last month report in our Heiberg Estates newsletter, the retail sector is still showing positive signs of recovery where footfall and occupancy rates are exceeding pre-pandemic levels with lessening vacancies recorded – presently around 5% to 5.5%.
The noticeable decline of property investor confidence and caution as recorded lately is a combination of several factors, including but not limited to heightened global as well as local uncertainty, the ongoing impact of pandemic-induced rising costs of monthly living costs, especially looking at fundamental and alarming increases in monthly municipal services. In spite of entering the quieter time of the traditional annual property cycle with all its seasonal fluctuations, the underlying demand for homes and good property investments persists and there are always excellent property opportunities. Buyers and Sellers are well informed about market trends and the current real estate landscape, whilst there are always good opportunities up for grabs.
Home-ownership represents financial stability, medium- and long term capital growth, fundamental security and a sense of belonging. And that is where your well-seasoned Heiberg Estates Team comes in to assist you in finding a home-sweet-home or assist you with any other property-related needs like rentals or commercial, properties. Contact us 24/7 and let us share 50 years of collective property expertise and a wide range database with you and to your advantage – whether you are a SELLER or a BUYER! It is always an honour and a privilege to share our expertise and wide reference framework with you, our highly Heiberg Estates treasured and valued clients and friends!
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WE ARE VIRTUALLY SOLD OUT AND URGENTLY NEED RESIDENTIAL AS WELL AS COMMERCIAL PROPERTIES TO SELL OR TO RENT! PLEASE REFER OR MAKE CONTACT WITH US ASAP SHOULD YOU BE AWARE OF ANY PROPERTIES AVAILABLE IN OUR AREAS! IT TRULY WILL BE DEEPLY APPRECIATED!!
Best and warm regards.
Bambie & your Heiberg Estates Team
