HEIBERG ESTATES NEWSLETTER : SEPTEMBER 2019

Dear Property Partners

NEWSLETTER 10

We are all tired of being bombarded by so much negativism and uncertainties that has been confronting our rainbow nation for a prolonged period of time now. Our biggest threat to the stability of our economy being ESKOM generating more than 90% of our nation’s electricity, and where a recent World Bank report stated that the potential overstaffing, is around 66% of its approximately 49 000 workforces. Our country still has so much potential, so much to offer irrespective of the immense losses experienced over a wide spectrum over the past 9 years, economically taking us back substantially with many years to come needed, just to try to get back on track again. However, we are a nation of survivors and with time we shall gain momentum in solving our problems.

After all it remains the decision of us as individuals to decide whether the glass is half full or half empty and to focus on those things that still make our beloved country unique and special. Looking at the bigger picture, it is a fact that South Africa has become a fundamentally better place as time progressed. Despite all the challenges, a recent report by Adrian Gore, co-founder of Discovery, reports that our GDP is 2.5 times the size it was in 1994 on a dollar basis whilst formal housing has increased by 131% from 1996 to 2016. Looking at the history and our economy despite all our challenges, there is a definite gap between perceived risk and real risk. Just think where we could have stood today if it was not for the looting and corruption by a small percentage of our population in leading positions, that had an immense impact on our state coffers for almost the last decade! The Buro for Economic Research puts the cost of the last 10 years at 500 billion rand and the opportunity cost at 2.5million additional jobs!! What an immense loss to all our people!

The latest alarming spate of xenophobia is not South Africa only limited, but a worldwide increasing state of affairs where foreign nationals leave their countries of birth because of dysfunctioning governments, corruption, economic conditions, unemployment and other factors. Them trying to find a future in other countries in search of better jobs and business opportunities, competing and creating tension with local citizens also trying to survive due to socio-economic conditions and challenges. The impact of escalating fighting in our country, is also a sign of the increased frustration amongst our unemployed citizens where for the past 25 years the socio-economic “new dawn” promised by government since 1994, has barely materialized.

Increasingly homeowners are knocking on the doors of Heiberg Estates to sell their properties as they are emigrating. Interesting to note that for every 8 professional South Africans leaving our country, there is only one immigrating and this is a huge loss to our economy! Our government should try all in their power to stop this loss of intellectual capital and expertise leaving our country, they have to ensure and undertake to guarantee the future of its citizens through creating sustainable jobs, personal and economic growth prospects as well as protect individual property rights – and for once and all clarify all the uncertainties surrounding land expropriation without compensation! The latter still causing a lot of concern across all sectors of the SA Property Market.

Some of the latest interesting property related facts and statistics:

  • A little silver lining is that Statistics SA announced that at least we avoided a recession and stabilised economic conditions by an unexpected much higher second quarter economic growth rate of 3,1% – our real estate market also mentioned as one of the positive contributors, in spite of the fact that Construction went down -1,6%.
  • The construction of sectional title developments is outpacing freehold titles due to more affordability – about 57,7% of residential buildings completed during the first quarter of this year, was sectional title properties and putting pricing in this sector under pressure. This also leading to an oversupply on the market, units not selling and an abundance of units to let at much lower prices presently than the norm due to the surplus of available units.
  • An index recently published by Pay Prop, indicates that the rental growth rate was very mild, and year-on-year recorded at a mere 3,86% and below our inflation rate of around 4%. It is expected that the rental market will remain favourable to tenants for the time being.
  • Also, interesting that on the selling side, house price increases year-on-year was 3,6%.
  • Good news is that sales are gradually picking up, especially looking at the lower and middle price segments where during the last quarter 14% more properties sold in comparison to the previous quarter.
  • The Reserve Bank’s decision not to give an interest rate cut and choose to be conservative due to several factors, especially taking into account the Saudi Arabia oil crisis, our fluctuating rand exchange rate and political unrest spreading over our country, is a pity for the property market that desperately needs a morale booster. Our bank lending rate thus remaining on 10% – but at least looking at the past few years, there has been basic interest rate stability for a prolonged time now.
  • With business confidence plummeting to a 20-year low, it is interesting to note that during a similar period during the 1998/99 emerging market debt crisis where the spill over effect drastically weakened the rand exchange rate, the prime lending rate as a result shot up to 25.5%! All recognition to the SARB keeping our inflation rate well between its 3% to 6% band at an average of around 4.3% to 4.5% – the latest inflation rate recorded at an increase of 0.3% to 4.3% over the last quarter.
  • Empty standing offices increased by 10% over the past year, so also looking at industrial space and shopping malls, owners are becoming more lenient not to escalate yearly rentals in order to keep tenants. In South Africa this total vacant space figure has increased from 5,4% to 6,8% recorded for this book year.

Mr Tito Mboweni’s recent published Treasury document pointing to deregulation and liberalisation of the economy, is supported over a broad spectrum. It is observed as a rescue plan that is a reality check on ideology and points out that the starting point is to boost economic growth and address unemployment in the creation of a supportive business environment, the securing of property rights and acknowledgement for art. 25 of our Constitution, competitiveness and increasing productivity.

We need vision-based and goal orientated leadership, acknowledging our problems but at the same time addressing the source and not the consequences with clear guidelines for the way ahead, identifying our economic role and leading role not only on the African Continent, but beyond its borders. Creating hope and a future for our kids and their kids to follow in this most amazing country of ours, implementing clear policies within set periods to achieve economic growth and job creation, in turn also stimulating our fragile property market.

We all know that fortune favours the brave and that there are ample opportunities available for investors to snap up excellent and below market related priced properties. Kindly refer to our website: www.heibergestates.com to view great property investment opportunities and/or call our Heiberg Estates professional team that remains to be on 24/7standby for any information you might need!

Best and kind regards.

Yours truly

Bambie & Heiberg Estates Team

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