HEIBERG ESTATES NEWSLETTER: OCTOBER 2024

Dear Property Partners

At the end of the most beautiful month of the year, one can hardly imagine that Christmas is a mere 7 weeks away. So far, this has been a difficult year across the economic spectrum, also with property investors being challenged by the highest prime lending rate in 14 years. This is clearly illustrated by the fact that an institution like BetterBond announced that the number of home loan applications has declined by 31% since the third quarter of 2021. Due to ever-increasing debt costs it is noticeable that in the current environment, not only homeowners in the lower price ranges have been struggling, but also increasingly distressed sellers in more affluent areas that just can’t keep up with monthly repayments. Heiberg Estates has been approached by several Sellers these past few months to market their properties where they simply can’t keep up with bond repayments anymore. For a R2 million home loan, the monthly increase in payments went up with R6 100 – and we all know that salary increases didn’t closely keep up with rising costs across the board.

For most homeowners who have been struggling to make ends meet with the high interest rates for a prolonged period now, we all hope that soon there will be more relief when another SARB interest rate cut announcement is widely expected on 21 November. We have all reason to believe that we have entered a new downward interest rate cut cycle with more hope that there is a series of interest rate cuts to be within the foreseeable future. At the present level of 11.5%, the benchmark lending rate is still a full 450 basis points higher than 3 years ago when a series of interest rate hikes was started by the SA Reserve Bank. The fact that there is a global interest rate-cutting cycle underway with the strengthening of the global economy, can also support our SA economic recovery via improved demand for SA exports.

Last week exciting news was received regarding our inflation rate that was lower than expected and was recorded at 3.8% for September – down .6% from the recorded 4.4% in August which is positive news and mainly due to the lower fuel price and the strengthening Rand exchange rate. This is the lowest inflation rate recorded since March 2021 when the inflation rate was 3.2%, as well as the first time since then that it is lower than 4% – well down from the 5.6% recorded in February this year.

At least our Commercial Market is showing some positive signs of improvement and strengthening where a year-on-year report in the SARB Leading Business Cycle Indicator, shows somewhat moderate strengthening. The improvement of electricity performance with noticeably less load shedding recorded so far this year, coupled with the May 2024 general election outcome and the subsequent formation of a Government of National Unity, is seen as a business and investor-friendly outcome that slowly is improving all-round property investment sentiment again.

Some of the latest property facts and statistics:

• Rentals – TPN Credit Bureau reports that the vacancy rate for residential rentals across SA, is on the increase. With the decline in tenant demand, average rental vacancies rose from 4.42% in the first quarter to 6.72% in the second quarter – figures for the third quarter still to be announced. Unemployment is a major contributing factor where official unemployment in our country was recorded at 33.5% during the second quarter. People looking for a job is presently being estimated at a heartbreaking 8.4 million people. The luxury rental market for properties between R12 000 and R25 000 per month, showed the lowest vacancy rate of 4.5%, largely due to a reduction in supply and a strong demand.
• Office Market – this segment is still heavily oversupplied relative to demand and is not expected to show fireworks in the near future. Prices are very competitive and basic yearly rental escalations are kept to a bare minimum or waved by owners in order to keep their tenants as long as possible. Large companies are still downscaling due to economic pressure and work-from-home is becoming increasingly popular.
• Industrial and Warehouse Market – this is still the star performer in our Commercial Market where stock shortages remain the key constraint as recorded by a recent Commercial Property Report published by FNB.
• Retail Market – with more general optimism and business confidence emerging, coupled with a more positive view on mild economic improvement, more retail property activity and sales are expected for the near future.
• South Africa’s national urban development policy estimates that over 71% of the country’s population will live in urban areas within the next 6 years and that there will be a growing demand for mixed-use precincts – a great opportunity for property developers to consider and to pro-actively look at well located development opportunities. Investors also should take note of where buy-to-let property demand will increase on an ongoing basis, especially in the lower price ranges, but also not to forget where semigration plays a huge role in demand for rental properties. Scan the following perfect opportunity of development land for developers with a spot-on address and virtually opposite the University of Pretoria, lending itself 100% for student and/or Yuppie housing: https://heibergestates.co.za/properties/men335-new-release-sole-mandate-perfect-address-development-land-bordering-lynnwood-road-opposite-tuks-hostels-excellent-location/ .

Our property owners and property sellers are facing the effects of a sustained period of rising costs and increased debt repayment, putting them in positions where some are struggling to keep up monthly home loan repayments. It is alarming to note that aside from the rising basic living costs, interest rates increased by 67% from 7% in October 2021 to the current 11.5%!  Property prices all over our beloved country have been under pressure for a prolonged period, and it is not a good time to sell if forced to do so. On the other side of the coin, the time is still here for prospective property investors to take advantage of the current Buyer’s market and in anticipation of price increases where a much-awaited series of interest rate cuts, are expected over the next 6 to 9 months which will lead to increased demand as well as increases in property sale volumes and prices.  

There is light in the tunnel where we are observing a moderate and renewed sense of optimism notwithstanding the sustained high interest rates and the still challenging geopolitical environment. There is however all reason to believe that this year will end on a more positive and better note than it started. Also to take note of leading economists as well as the International Monetary Fund being optimistic that there will be stronger economic growth in 2025, estimated at between 1.5% to 3% against the less than 1% recorded last year.

With excellent property investment opportunities still presenting itself as a valuable asset and tool to build long-term wealth and to provide financial security, please contact your Heiberg Estates Team to guide and assist you should you consider to buy, let or sell! Count on us as we remain to be on 24/7 standby for you! Kindly scan the QR-code to visit our website:

With best and sincere regards.

Bambie & Heiberg Estates Team