HEIBERG ESTATES NEWSLETTER: SEPTEMBER 2020
SPRING BRINGS NEW LIFE, ALSO IN OUR SA PROPERTY MARKET!
Dear Property Partners
With the long awaited Covid-19 Phase 1 here, there is noticeably new impetus in our economy that is expected to rub off on our Property Market, especially since we are also gradually moving into the most busy term of the traditional yearly property cycle. We also experience with the new energy that Spring ignites, new energy in our Property Market with visible more enquiries and an increase in Buyers attending the Heiberg Estates Saturday Showhouses, resulting in good and solid sale transactions. We are also happy to report back to you that the Deeds Office is picking up speed with the huge Covid-19 transfer backlog, whilst our City Councils are issuing clearance certificates much quicker now – all positive signs for our property market.
It is estimated that our economy can take 5 years or even longer to regain all that was lost just to get to the same economic levels recorded at the end of last year. The reality however is that our economy needs to grow by 2,5% per annum where our population growth is around 1,5% per annum in order to make a difference and to curb our escalating unemployment rate, the latter confirmed yesterday to have increased with an alarming 2,2million job opportunities lost as recorded during the 2nd Quarter. An alarming report released by the Old Mutual Investment Group stated that over the past 5 years, our average growth was a mere 0.8% per annum. The role that Eskom plays in this state of affairs should not be underestimated and to a certain extent erasing the stimulus that all the interest rate cuts this year on the economy, should have brought forth. The negative impact of Eskom’s unreliability on our property market, is a given where both Commercial- as well as Residential Developers, pro-actively must adjust and make provision in their new developments for power cuts. This leading to additional construction- as well as property costs for which the end consumer becomes liable, also impacting on affordability for a huge percentage of our population, especially amongst first time buyers.
Alarmingly our Construction Sector remains to be under severe downwards pressure where as measured during the second quarter this year, it showed the worst results of all the sub-sectors of our economy and declined by more than 30% in comparison to last year. According to Afrimat Construction Index, concluded building plans worth declined by 90%, approved building plans by 73,1% and the sale of building materials by 43,2%. This also has a huge impact on the selling of building materials and also leads to even more construction workers losing their jobs. Construction provides the most job opportunities in our economy and fortunately with Phase 1 now, will give a new incentive to the construction of affordable housing. Unfortunately, the escalating illegal countrywide land grabs, has led to more or less R1,3 billion of new housing opportunities, going down the drain.
Looking at our Commercial Markets, the Office market is still suffering the most where there is less and less interest with escalating empty office space all over our country. Covid-19 has given people a new outlook on the principle of working from home that with technology, it has really become possible, practical and cost effective, not to forget the “ZOOM BOOM” communication platform where people worldwide can have a face-to-face meeting whilst staying at home. Industrial properties had the best record so far this year where popularity and demand is still growing, since traditional business entities are going on line much more cost effectively. Demand for Industrial Warehousing and Distribution Centres are also on the increase.
As can be expected during recessionary periods and in specific referral to our Commercial Sector, the average time that a property was on the market before being sold, increased during the 3rd quarter in comparison to the 2nd quarter, whilst there is still more stock than demand – causing continued oppression on property prices and sales volumes. On the other hand, it is noticeable that our housing market is slowly but gradually picking up momentum whilst the average time on the market before being sold, is decreasing.
Some of the latest interesting facts and statistics:
- Consumer confidence is extremely low with the ripple effect from Covid-19 still to be established in our economy and our property market. The lockdowns have impacted on a major part of the global economy and dampens economies worldwide, inevitably also further putting downwards pressure on our economy as a whole and declining demand for SA’s exports, further resulting in potential job losses and less affordability to invest in our property market.
- Interest in our Office Property Market is still on the decline with companies re-evaluating and downscaling their office space needs and with increasing stock of available open standing office space on offer all over our country – this at the moment the worst buyer-seller performing sector in our Commercial Property Markets as monitored over the past 6 months. According to SAPOA, office vacancies around our country is presently 12,9% – the highest recorded over the past 16 years.
- The Retail Market is slowly but gradually showing more positive movement although a lot of businesses are opting to go on line and do business over the internet much more cost effectively. Resulting in renewed interest in Warehousing and Distribution Centre properties. Over the past few months, a monthly average of 45% of retail tenants have been in good standing whilst not that long ago in March it was 73%, clearly illustrating the escalating pressure under which our retail outlets have been so far this year.
- Of the three commercial segments, Industrial properties were the leader in demand, there are less available stock, whilst more successful transactions have been concluded this year than recorded in the other two segments. It also sold within the fastest period of an average of 21.89 weeks compared to retail space 25.92 and 29.09 for office space – statistics provided by a recent FNB survey.
- With an oversupply in all 3 major commercial property markets, economists anticipate overall negative capital growth of between -5% to -10%, considering all the challenges and to be continued until the end of 2020. A recent TPN report shows that overall, 50% of commercial tenants were in good standing by the end of July with 36% paying on time and 14% receiving a grace period. Gauteng was the worst hit with less than 40% commercial tenants in good standing.
- According to a recent released Tenant Profile Network report, the demand for rental property is now the lowest on record while supply is at a historic high, resulting in the number of empty standing rental properties, increasing by more than 50% since the beginning of this year! In order to draw new tenants or to keep existing tenants, landlords are offering discounts or no increases for some time in order to secure existing as well as new tenants. The most affected areas are recorded as Gauteng and the Western Cape.
- The latest FNB House Price Index shows an unexpected annual price increases of 2,8% where it remains to be a Buyers’ market, supported by lots of property stock, a 47 year low interest rate and the first R1m of the purchase price exempt from transfer duties.
- The average time before a property is sold, improved from the last quarter’s 14 weeks and 1 day, to just 10 weeks and 6 days as recorded so far this quarter.
- Interesting to note that the percentage of women buyers in the residential market, is on the steady increase and already more women are first time home buyers than men. Recent Leadhome released data shows that woman account for 45% of all property registrations whilst 7% are joint registrations. Clearly underlining the investment value and recognition of property in building wealth.
We are in the midst of the longest recession recorded over the past 28 years, whilst the ripple effect of Covid-19, increasing unemployment and wide front economic uncertainties will remain to be a long time with us and still to be seen what the overall outcome of all these factors, on our economy and property market will be. Continued downwards pressure on property sales volumes and prices, are expected to be continued for some time to come, especially in the medium- to the higher price ranges. Fortunately, there is slow but gradual movement in the right direction and it is heart-warming to see that property developers are again showing interest to break ground!
No fireworks are expected for the foreseeable future with so many uncertainties on so many levels throughout our economic spectrum especially looking at ever increasing unemployment with weakening labour market conditions and decreasing affordability. This inevitably will continue to put downwards pressure on most property sectors for times to come, and will we follow the trends with cautious optimism in the hope for continued positive price- and sales graphics, even if ever so slightly.
To answer a question that I have to face virtually every day: “when is the right time to buy?” NOW – as every day offers great opportunities whether we are in an up- or downwards economic spiral – it is never too late! Having a well-seasoned and professional Agent at your side that can guide you with hard earned knowledge and experience towards a solid property investment decision, is always the right starting point and having a medium-/long term property investment approach, is for sure the way to build wealth and to secure a safe retirement.
Our Heiberg Estates Team is on 24/7 standby to advise you, please contact us any time on our 24/7 number 083 654 3773, or merely click your phone camera on the QR CODE on my signature as below for immediate and direct access to our website with photos and videos of our properties.
With our very best and kind regards!
Bambie & Heiberg Estates Team