HEIBERG ESTATES NEWSLETTER FEBRUARY 2019.

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SILVER LINING GRADUALLY APPEARING AGAIN…

Dear Property Partners

With our property market directly influenced by our political and economic state of affairs, the general sentiment and hope expressed so far for the first two months of this year, is that the business climate should improve gradually. This in comparison to the short lived “Ramaphoria” that boosted business confidence for a limited time a year ago in January 2018. But on the other hand, Pres Ramaphosa is widely acknowledged and supported in his commitment to rebuild the continent’s most industrialised economy.

Fortunately the focus on restoring confidence and credibility, and getting foreign investors back into our fragile country to support our frail economy, seems to have paid off with a successful Davos outcome and billions of overseas funding, promised as investments and in the creation of sustainable jobs in SA. These financial injections will pay off in the long run in that improved and hopefully sustained investor confidence in SA, will contribute to higher economic growth that we need so desperately. Overall this in turn also having a positive impact on property buyer’s ability to buy properties, especially in the lower and medium income brackets. Of course one of the most important factors is that strong and secure property ownership rights, has to be guaranteed.

Good news was also the fact that Minister Tito Mboweni during his 2019 Budget Speech, did not increase transfer duties on property sales, and property sales up to R900 000, are exempt from transfer duty.

Also well-received was the initiatives to boost the economy as mentioned by President Ramaphosa during his State of the Nation Address, which will also impact on the entire real estate sector and have a knock-on effect throughout the industry. There was emphasis on reducing the social housing shortage with specific referral to release state-owned land for urban housing development, building 500 000 houses over the next 5 years, as well as expanding the People’s Housing Programme and the establishment of a Human Settlement Bank.

However, we have to remain to be realistic and economic recovery won’t happen overnight whereby more people will be put in a position to buy property. The wider reserved opinion is that the property market will continue to trade moderately, with continued, low single figure price increases expected for the rest of this year.

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

  •  The International Monetary Fund forecasts that SA’s long term growth will be about 2% – far less than the around 6% growth rate needed to create new, sustainable jobs and to reduce our ever growing unemployment rate that was recorded at 27,1% during the last quarter of 2018. Alarmingly presently more than 6 million people are looking for jobs. These statistics not boding well for the long term SA Property Market in general which also will impact on property demand and price growth in general, and affordability limited.
  • One of the statistics as published by well-known property economists, Erwin Rode, points to the fact that nationally house price growth in SA is currently at about 4% year-on-year. He points out that where property is to be regarded as a long-term investment. The property cycle is in its downward trend, especially where house prices in SA are still very high in real terms and price correction, inevitable.
  • Home buyers in SA are getting older as reported by the Property Professional Magazine. In SA younger people have been feeling the impact of our weak economic performance over the last decade. Interesting to note that the 30-39 year old age group share of total home buying, declined from a 37, 61% high after the pre-2008 boom, to around 29% as recorded last year. Our ageing middle class population are also as recorded over the past decade or two, participating longer in the housing market, even after retirement. The 50-58 year age group was e.g. involved in around 19% of house transactions last year.
  • John Loos, property sector strategist at FNB Property Finance, predicts that 2019 will be the fourth consecutive year of average price growth slowdown. He predicts that the nominal average house price growth for this year will be 3.7%, and predicts an economic growth rate of 1, 4% compared to the 0.7% recorded for 2018. But, looking at the longer run performance of the SA House Price Index in real terms, it was still at relatively high levels – 88, 9% up on the January 2001 pre-boom index level.
  • Interesting to note that about 20% of all foreign Buyers of residential property in SA, are from the rest of Africa – the most popular price ranges being between R2m and R5m. SA property remains to be a popular asset class to investor from Africa especially luxury apartments, residential estates and beachfront properties. According to the 2018 African Wealth Report, Johannesburg, Cape Town, Durban and Pretoria are all included in the top 10 wealthiest cities on the continent, but also dominate the list of the most expensive cities for prime residential property in Africa.
  • It is quite obvious that especially in the present economic climate, affordability is the key driver in the now-constraint housing market and therefore smaller properties are selling and sectional title transactions outpacing freehold. Also interesting to note that non-traditional areas with lower property prices, becoming more attractive to prospective, cash stricken buyers. Also renting down rather than buying down, is on the increase where many prospective Buyers are opting to wait-and-see till after the elections. It is especially the higher priced properties taking a knock where lately, e.g. at the Atlantic Seaboard in some cases, properties are selling for as much as 20% less than the asking price.
  • However – Cape Town is still the top-performing market and the second-fastest-growing luxury residential property market globally!
  • Regarding price per square meter, the most expensive property is in Monaco where an average price of around R678 000/m² is achieved, followed by New York at about R470 000/m², and London at about R456 000/m². No reason than to complain if we look at average prices between R65 000/m² to R100 000/m² for properties around the Atlantic Seaboard!
  • Interesting to note that the percentage of those selling due to financial pressure that will now rent down rather to buy down, has increased to 65.6% according to FNB reports, and worrying the rising level of emigration now being recorded of 8.6% of total selling, and against the 2% recorded about 5 years ago!
  • We are also observing that prospective Buyers are going smaller and sacrificing space for price with a definite trend to go sectional title and move away from freehold – in 2003 8% of all properties sold was sectional title against the 80% freehold sales and last year 28% of all sales were sectional title.
  • A downwards prolonged trend in the construction industry is also very visible whereby e.g. 65, 5% less new approved building plans were approved last year than 10 years ago. Only 3% more building projects were concluded last year than the year before, and the average building price per m² for smaller homes increased with 19,5% in 2018.

There is a lot at stake and resting on the outcome of the General Elections to be held on 8 May this year. The stability in our land and the hopeful restoration of our fragile political and economic state of affairs to once again draw back foreign investors that will create more sustainable jobs and have a positive knock-on effect on our real estate market, is at stake.

Through all the turmoil so many South Africans chose to remain resilient and conquer the elements, but still the influence of all of this uncertainty was very, very visible in our real estate. The SA Property Market has been due to negative sentiment, basically in a recession for at least the past 2+ years with mostly sideways price movements with nominal price increases recorded. Greater stability and more clarity on land expropriation without compensation, will motivate potential Property Investors to come back after a prolonged wait-and-see period – and we all are for sure looking forward to that day!

We all are aware that improved investor confidence in SA remains to be the panacea to higher economic growth and rebuilding the continent’s most-industrialised economy. Hopefully the foreseen implementation of more investor-friendly policies, will do just that, and the long awaited Silver Lining once again reappears on the horizon!

Please contact us any time for advice, a free property assessment or assisting you in selling or renting your property! It always is a privilege for our well accomplished and seasoned Heiberg Estates Team, to share 26 years of experience over a broad front and with a wide reference framework, with you and to your advantage – whether you are a Seller or a Buyer!

For the latest good property investment opportunities, please visit our website:

www.heibergestates.com and look at the photos and videos.

Best and warm regards

Bambie & Heiberg Estates Team