HEIBERG ESTATES NEWSLETTER: SEPTEMBER 2023

Dear Property Partners!

Challenges on all property fronts are still very much visible, though never to forget that every dark cloud has a silver lining. We just need to look hard enough and with spring in the air, hopefully, the property market will regain its energy and pick up momentum! At least Statistics SA announced it has recorded a higher economic growth rate which expanded by 5.2% between April and June in nominal terms compared to the first quarter this year, which should stimulate growth in formal sector employment. Gradually this could put more people in a position to afford property. Recent macroeconomic data shows a level of resilience in domestic economic activities despite constraints over a broad front.

At least we didn’t get another interest rate increase when the repo rate and prime lending rate was left unchanged at respectively 8.25% and 11.75% but it still being at a 15-year high. Hopefully, we are entering a period of more interest rate stability and that we have seen the last of interest rate hikes for the time being, although decreases are not expected to happen this year taking all relevant factors into account.

The biggest challenge to our property market are shifts in disposable income with the continuation of very high interest rates, the rising cost of credit and lessening access to it as banks are tightening their bond approval criteria. Our municipalities are being challenged with illegal strikes resulting in vital services disruptions amidst continued load shedding, rising labour- and basic costs of living, escalating inflation with more fuel price increases expected and our rand exchange rate facing new lows. Collectively and for a prolonged period now, so many factors have been causing immense pressure on our fragile property market and we expect this year to remain to be a challenging year all around.

The house price growth trajectory across all price ranges and segments is muted and it is flattening visibly, overall demand for residential property has been slowing down since 2022 with our present status quo showing supply exceeds demand – further putting downward pressure on property prices and declining sales volumes.

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

• Loadshedding has had an enormous all-around impact on our SA Property Market, not only due to supply interruptions and unavailability especially when it comes to new developments, but also looking at price increases. Shocking to note that electricity price increases for the past 35 years, has been more than 3,000% cumulatively – yes, more than three thousand percent! Taking inflation over the same period into account and that was recorded at 1 029.8%, this means that we are paying more than twenty times more than what the norm should be taking inflation-related prices into account!
• There is a continued trend of declining approved building plans as private owners and developers are putting construction on hold under the present challenging economic times. The latest StatsSA residential building plans data is showing a -55.96 year-on-year decline in the number of units plans passed versus the -38.51% to the prior month. Looking at the second quarter this year, the year-on-year decline was -40.19% versus the -18.08% decline recorded during the first quarter.
• The FNB House Price Index growth slowed to 0.8% year-on-year in August down from 1.2% recorded in July – underlying the declining levels of demand due to downward pressure on both property prices and property sales.
• The average time for a property being on the market before being sold, is also on the increase namely from an average of 7 weeks and 6 days recorded during the 3^rd quarter of 2021, to 12 weeks and 1 day as recorded during the 2^nd quarter this year. This further illustrates the downward pressure on our residential market.
• Although lifting their lending criteria, the Banks are still supportive of potential Buyers and ooba reports that from January 2023 to August 2023, and average approval rate of 83% was achieved despite the current economic climate.
• On the rental front PayProp records that quarterly year-on-year rental growth continues to accelerate in South Africa where it has reached its highest level since Q4 2017 where the residential rental growth is almost on par with our consumer price inflation. This trend was recorded in all provinces and with a national average of 4.4%.
• The above is also stimulating the buy-to-let investment property market segment and ooba bond applications for this segment increased to 10.9% as recorded in June 2023 – a level last recorded in the late 2009’s.
• The average residential purchase price has declined from a record high recorded in March 2023 of R1.47m to R1.43m recorded in August 2023.
• Interesting to note that more women as home buyers are entering our property market. In the decade 2010 to 2020, bond approvals for women increased from 14% to 41%, with 60% being single women. Between 2015 and 2020, more women bought property on their own than men or married couples. Lightstone reports that an estimated 60% of SA’s residential property is owned by single women.
• First-time buyers are paying an average of 10.9% deposit of the purchase price. With increasing interest rates, so has deposits also been on the gradual increase since April this year in order to keep monthly payments as manageable as possible.
• Looking at our Commercial Properties, the Office segment is under continued pressure and increasing vacancies. SAPOA reports that where better office space occupation is noted, this is the direct result of property owners that decrease their monthly rental payment expectations in order to fill vacant space. Present deflated rates are compared to those last seen in 2007! In comparison to Cape Town, where the vacancy office space rate was recorded at around 10.7%, the vacancy rate in Johannesburg was 19.1%.  

Looking at the remainder of this year, it is going to be some time before Sellers will see an uptick in property price growth, also due to stock supply well-exceeding demand nationwide. With noticeably fewer buyers active in the property market and with so much supply where well-priced properties are competing with one another, buyers are setting the pace and we observe a substantially longer sales period before properties get sold. Property prices are still under pressure with declining sales volumes recorded across the board. With motivated Sellers and well-priced stock, exceptional good property investments presents itself and the Buyers market is expected to continue for some time to come. So please contact Heiberg Estates for existing excellent property investment opportunities presenting itself. Our website as referral: www.heibergestates.com and QR Code:

Our Heiberg Estates Team on 24/7 standby to assist with all your property needs, whether you want to buy, sell or rent – please contact us!

Best and sincere regards

Bambie & Heiberg Estates Team