2020.1 newsletter             2020.1 newsletter          2020.1 newsletter

Dear Property Partners

Best 2020 wishes to you all and May 2020 be a year of exciting new beginnings to all of us! But especially for our still very quiet and price competitive SA Real Estate market. The fact that it is widely expected that our economic growth rate for 2020 will be less than 1% is for sure not the news we want to hear. This further impacting on our sky-high unemployment rate that filters across our whole economic spectrum, but especially also visible in our flat property market where disposable income is becoming less and less. Eskom of course playing a mayor role where the continued power cuts contribute in a mayor way to our economy being stuck in the longest downward cycle since 1945 – and not have been expanding more than 2% since 2013! The latest forecast is also much lower than the expected average worldwide economic growth rate of around 3%.

Fortunately, and unexpectedly the SA Reserve Bank did lower the repo rate by 0.25% a week or two ago, bringing the interest rate to 9.75% – the first time below 10% since November 2015. This is welcomed across a broad front and hopefully will create new movement in the residential market, especially in the lower to medium price ranges. Hopefully the pledge by local and international investors who undertook investments in SA over the next 3 to 5 years of around R600billion and where some of it already has been implemented, will also have a positive effect on our flat real estate market. Hopefully ESKOM will be able to keep the lights on!

Looking at the year ahead, we are expecting property prices to move sideways and increases to be very mild and in the lower single digits around 3-4% for the year to come. Crucial is February for the Budget Speech and soon thereafter Moody’s grading decisions that will be definite indicators for the way ahead for the year to come. We can just hope and pray that we will not be downgraded to Junk Status by Moody’s which if indeed, will have an immense economic impact on our fragile economic state of affairs across all borders.

We are observing that a big percentage of potential buyers are still moving to smaller properties in safe and secure environments. However, there is a continued oversupply of properties on the market all across our country which directly impacts on and result in lower property prices, whilst properties stay on the market longer before being sold.

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

  • 2019 was a Buyers’ market where 95% of Sellers last year had to drop their asking prices before their properties could be sold.
  • Market related priced houses in the lower-income brackets took around 6 weeks to sell and in the more conventional market more than 15 weeks in average to sell.
  • The latest FNB House Price Index indicates that prices increased y/y December by 3,5%, and also puts the annual house price growth y/y at 3,6% for 2019 – up 0,1% from the average recorded during 2018.
  • The above index also points out that during 2019 higher-priced area prices declined by 0.5% y/y whilst in the low-income areas prices increased by average 16,7% y/y, supported by the very active buy-to-let demand which made out 25% of total transactions.
  • On the latest Knight Frank Prime Global House Price Index, monitoring house price trend in 56 countries, SA ranked 24th, following the worldwide average trend of the majority of these countries showing annual house price growth of less than 4%.
  • The highest house price recorded increase in the above Index was Hungary (15,4%), followed by Luxembourg (11,4%), and Croatia(10,4%) whilst the lowest was Australia with an alarming average price drop of -7,4%.
  • The recent .25% repo rate cut by the SA Reserve Bank (SARB), will hopefully blow new energy into our lethargic real estate market, lower borrowing costs and boost more favourable mortgage lending conditions. Especially first-time buyers will benefit where many banks will lend up to 105% to also assist with transfer costs.
  • Our inflation rate that has a huge impact on the SARB decisions to cut or not cut the repo rate, has recently been predicted by the SARB to be around 4,7% for the coming year (lower than the initial predicted 5,1%) and for 2021 to be around 4,6%. So, all in all good news staying around the 4,5% mark as has been for the past few years. The SARB predicts our economic growth rate at 1,2% – a little higher than the recent IMF’s predicted 0,8%.
  • We do expect a continuation from 2019 where the market will remain to be oversupplied, very price sensitive and with a continued trend where prospective buyers are moving towards smaller and more affordable properties in security estates. Properties in the high-priced end of the property spectrum, will continue to be under price stress and take considerably longer to sell.
  • On the Commercial front, the economic growth rate predicted of less than 1% for 2020, is not enough to curb the growing office and retail vacancy rate or substantial rental increases. It is expected that the real capital depreciation trend, will continue into this year with low single digit total returns.

South Africa needs a leadership and a president to bring our country back on track and re-establish us as a political and economic force and a leader at the southern point of the African Continent. We desperately need to bring back substantial economic growth to curb our alarming rising unemployment rate and to give hope and a future to our nation. It will mean unpopular, decisive and visionary actions to be taken and followed through as soon as possible as enough meetings, talks and promises has been made for too many years now. We need free market solutions without political interference, and courage to do what is best for South Africa as a whole – especially looking at the latest alarming news re. land expropriation without compensation that still needs clear guidelines, causing a lot of hesitancy amongst prospective property investors across the board!

We expect that due to general frustration with the slow pace of reforms, Eskom’s continued load shedding dampening general business confidence levels, a depressed labour market limiting people’s spending power and affordability, coupled with the continued uncertainties and taking all other relevant factors into account, the more affordable (especially sectional title units), value-for-money and up to medium price range properties will be the focus where property movement will be for 2020.

With unique and many lower than market related valued priced properties up for grabs in some of Pretoria’s best and most sought-after areas, the time to buy now is extremely favourable for property investors and that is where the Heiberg Estates Team are on 24/7 standby to guide, assist and identify excellent property opportunities for you  – whether on the Residential, Commercial or Rental front! Don’t hesitate to contact us to make use of these amazing opportunities!

PLEASE LOOK AT OUR WEBSITE: www.heibergestates.com

Best and kind regards

Bambie & Heiberg Estates Team