HEIBERG ESTATES NEWSLETTER: OCTOBER 2023

Dear Property Partners

With the end of the year looming around the corner, many of us are looking forward to this unexpected broad front challenging year, to gradually start winding down.

On the positive side, it is pure joy to live in our most beautiful administrative capital city Pretoria, where the streets are lined with 70 000 Jacaranda trees in full bloom creating a sea of purple flowers wherever you look. Furthermore, it has lately been announced by the US financial services firm Net Credit which has analysed over 800,000 property listings in 73 capital cities, that Pretoria is the most affordable capital city to live in the world! In a recently published article in Property Professional Magazine, Pretoria has also been pointed out as one of our better-performing metros with prices growing 91% between 2010 and 2022 in comparison to the 71% recorded for Johannesburg. Waterkloof in Pretoria East has reportedly overtaken Sandton as Gauteng’s most prestigious and expensive area.

The SA Property Market in total is still facing headwinds but remains resilient under our uncertain and difficult economic state of affairs, whilst the market has been shifting in favor of Buyers for some time now. Inflation has again lately increased to very close to the upper 6% target band of the SA Reserve Bank – fuelling expectations that the interest rate will once again be increased at the next SARB meeting to be held on 23 November. Our present interest rate of 11.75% is of the highest in the world, and at this stage, economists are not expecting it to decrease before mid-2024. Since their previous meeting in July, the price of Brent oil increased by 18% whilst the rand exchange rate deteriorated by 5.6% against the Dollar. The crisis in Israel inevitably also has a ripple effect on the worldwide economy in times to come.

Some of the latest interesting facts and statistics:

• Lightstone data reveals that Pretoria which as pointed out above, is the most affordable capital city in the world, illustrating the balanced demand and supply dynamic by offering a broad variety of residential choices with myriad lifestyle experiences and convenient amenities. Pretoria recorded just below 30 000 transfers last year with an average selling price of R1.2m. About 75% of all transactions were below R1.5m, whilst prices of R3m and more accounted for just under 6% of the market – thus illustrating the downward pressure on affordability and our very price-sensitive and competitive real estate market, especially brought about by our high-interest rates and the increased cost of living across the board.
• StatsSA reports in its census report that the two most popular areas for semi-gration in SA, are the Western Cape and Gauteng. Since the last 2011 census, the population in Gauteng grew by almost 400,000 people and the Western Cape by almost 300,000 people.
• First-time Buyers are feeling the brunt of economic pressure and interesting to note that the number of bond applications recorded during the third quarter of this year, was 38% lower than in 2021 and 26% lower than the first quarter of 2020 (before Covid).
• Looking at our Commercial Sector, a recent FNB report points out that for the 3^rd quarter the key drivers of movement and sales activity in owner-occupied properties, were selling to relocate in search of better utilities and municipal services, i.e., 44% of selling.
• The second biggest selling driver for commercial properties, was financial pressure at 30.15% of commercial selling, slightly declining from the previous quarter’s recorded 32,3%. The small increase in GDP to 1.6% year-on-year with reduced electricity load shedding at a stage during the second quarter, probably added to a little more business confidence.
• Interesting to note that the percentage of people selling to relocate to bigger and better commercial premises, also increased from 16.4% as recorded during the previous quarter to 17.4% in the third quarter, also pointing to small improvements in business confidence.
• Our Office market is still the worst-performing commercial sector where the latest released Rode Property Report for the third quarter, points out that the average vacancy rate is 14.4% – higher than the pre-Covid average of 10.5%. This state of affairs is expected not to get better soon and especially not before our low economic growth rate of 0.9% as recorded during the first six months of this year, increases.
• The Residential Sector remains under pressure due to ongoing and lessening affordability. Buying activity is declining nationwide with sale volumes now recorded at pre-pandemic levels. The National Credit Regulator data to date this year shows that the volume of new mortgage transactions has declined by 18% in comparison to last year, whilst in comparison to the last quarter of 2021, it declined by around 24% – underlining the gradual decline in market activity and in sale volumes for some years now.
• The FNB House Price Index growth slowed to 0.6% year-on-year in September – down from the 0.8% recorded in August. It shows that the average house price growth recorded during the third quarter of this year was 0.9% and down from the 2.1% recorded during the second quarter of 2023.
• Interesting to note that around 67% of listed properties now on average take three months or more to sell – up from the 56% recorded during the second quarter.
• FNH reports that year-to-date (January to August), house price increases averaged 1.8%, versus 3.5% recorded last year and it is expected to reach a maximum average of 1.7% for this year.
• Reasons for residential selling during the 3^rd quarter this year show that financial pressure caused 23% of total sales volumes, 12% of sales were due to relocation, upgrading reduced to 9%, and emigration-related sales recorded at 9% (versus the peak of 18% recorded in 2019).

In spite of headwinds on all property fronts, the market fundamentally remains resilient, but no major fireworks can be expected for the foreseeable future. Especially not with interest not being expected to decrease soon and if, with great moderation during the course of next year. But there is always movement this time of the year with people re-locating and the residential market is showing some movement with inquiries and show house attendances expected to pick up towards the end of the year.

As mentioned above Pretoria presenting itself at its best at the moment, it is a vibrant city and it can guarantee excellent property investment opportunities and returns, especially with some major anchors based in Jacaranda City. Healthy and ongoing property interests over such a broad spectrum also lead to continuous property demand, as well as good and steady turnovers. This was brought about through the high presence of diplomatic and government institutions, highly rated schools and universities, and excellent hospitals and medical services, supported by good public transport service and highways.

Please contact our Heiberg Estates Team, waiting for your call regarding any properties or information you may need. Our 24/7 contact number is +27 83 654 3773. Also, visit our website at www.heibergestates.com or scan our QR Code:

Always a pleasure to be of assistance, looking forward to speaking to you soon!

Yours faithfully

Bambie & Heiberg Estates Team.