HEIBERG ESTATES NEWSLETTER: AUGUST 2020
SPRING BRINGS NEW LIFE, HOPEFULLY ALSO IN OUR DISTRESSED PROPERTY MARKET!
Dear Property Partners
Lately, our “rollercoaster” property market has been showing signs of getting out of its deep and prolonged winter hibernation, but if this seemingly light at the end of the tunnel is going to last, needs to be seen. The ripple effect and prolonged impact of Covid-19 on our economy, will only become visible within the next 6 to 12 months, especially with expectations that millions of South Africans will or are about to lose their jobs this year. This possible scenario will of course impact people’s ability to either keep their existing properties or to buy new properties in a major way.
Observing trends over the past two months when lockdown restrictions were eased, there was visibly increased property viewing activity. This most probably due to “delayed” property Buyer visits and pent-up demand due to the Covid-19 lockdown period, but for sure also gaining momentum due to a series of interest rate decreases this year, creating more demand. Furthermore, the market is extremely price competitive with so many available properties for sale, bargain hunters can really pick and choose where supply remains to be stronger than demand. One can only hope that it will continue to pick up further momentum amidst our fast changing and challenging macro-economic environment.
Some of the latest interesting facts and statistics:
• The SA Reserve Bank’s fifth decrease this year of the repo rate to 3,5% with our interest rate now at 7%, brings the total decrease to 3% so far this year – the lowest in almost 50 years, and for sure a welcoming stimulus for our struggling property market. Our lowest interest rate ever was recorded at 3,15% in September 1973.
• In spite of our lowest inflation rate the past 15 years, our increasing unemployment rate estimated to be around 38%, is the highest in 10 years with an expected further 7million people in the process of losing their jobs this year due to Covid-19. A prediction of Eurostat is that worldwide as much as a 100million people can lose their jobs where the resulting effect is also already visible in property markets around the world with declining sale volumes and property prices. The IMF predicts a worldwide negative economic growth rate of around -4,9% with 93% countries expected to show negative economic growth rates. Britain for example showed an economic decline of -20,4% during the second quarter and had its first recession since 2009 whilst Spain showed a GDP drop of -18,5% and the US -9,5%.
• In a recently published FNB House Price Index, statistics showed a July 12 month year-on-year basis unexpected house price increase of 1,4%, but we do expect that this scenario will look different on a year-on-year basis when monitored towards the end of this year due to the continued negative impact of Covid-19 and to be continued to 2021.
• However, it is also mentioned that should our economic growth rate decline by -6% this year, which at this stage seems likely to be even higher, leading property research group “Lightstone” predicts a decline in house prices of up to -8.8%.
• It is interesting to note that increasingly Buyers are contacting Heiberg Estates for bigger properties with an additional demand for office space or conversion potential to enable them to live and work from home, also to mention a growing demand for conducive space to allow home-schooling. Covid-19 undisputedly changed the way people think about “official” office space and now recognise the huge advantage on a broad front, to have offices from home. This sentiment also mirrored increasingly in other countries and big cities as well, where for example it was recorded in London that 82% of property enquiries, included a request for an office component.
• Foreign Buyers are benefitting two-fold with price decreases in the higher price ranges as well as the declining rand exchange rate. They are especially buying properties along our coastal areas where properties now due to the lower exchange rate, cost an average of 11,9% less for European Buyers,16,8% less for UK Buyers and 15,7% less for USA Buyers. Interesting to note that relative to all property sales in our country, foreign Buyers don’t even represent 1% of total property sales.
• The present statistics show that the price difference between asking and selling price, is around 12% and 79% of properties sell for less than the asking price.
• It is noticeable that especially first time Buyers are make full use of the ideal property buying circumstances at the moment, just to mention a few factors: the lower mortgage rate and banks willingness to be less strict on lending criteria, ample stock available, lower prices, and also the fact that the first million rand of the purchase price is exempt from transfer duties, saving them a substantial amount on the short and long term as well.
• The property industry is still experiencing very frustrating and huge property transfer delays due to the on-and-off Covid-19 closures of deeds- and municipal offices, causing enormous backlogs across the board. As directly experienced and due to prolonged delays, Buyers can lose their bank approval status and banks can ask for a rework of the original bond approval – resulting in virtually completed deals, to collapse due to the delays. The recent government interventions announced to ease these processes, will hopefully get things back on track again.
The fact that our SA Property Market in spite of so many hammerings on both political- as well as economic fronts could hold its head above water when looking over a broad spectrum, with much lower than initial expected price declines and slower sale volumes in spite of the additional huge Covid-19 blow to the state of affairs, just demonstrate that long term investments in our property market makes sense and is the right thing to do. Furthermore, the historically low interest rate and lower transfer duties will without doubt support house prices for the time being. Owning your own home has definite advantages over renting where you pay off your own bond, where you have capital growth and increase your net worth over the long term, and where you build fond memories and a stable environment for your family.
We are happy to announce that Heiberg Estates is now back again in full force for property marketing, including SATURDAY (11:00-14:30) show houses – of course in full support and adherence to all the standard Covid-19 rules and regulations. We all hope to welcome you with open arms to our Saturday show houses which is announced on our website every week at www.heibergestates.com, so please come and visit us and share thoughts and ideas about our property market, expected trends and the way ahead. Or simply call us any time on 083 654 3773 as it is always an honour and privilege to share 3 decades of property experiences and expertise with each and every one of you, our much cherished property partners and friends!
Please be safe and healthy and keep in touch!
Bambie & Heiberg Estates Team