HEIBERG ESTATES NEWSLETTER: JUNE 2019

Dear Property Partners

june newsletter

Wow, we all hoped for light in the tunnel after the recent successful elections. Unfortunately, this once again to be radically dimmed, by another roller coaster ride where the shocking news came earlier this month, that our economy is weakening much more quickly than even the most pessimistic critics anticipated. Our GDP declined with a shocking 3,2% during the first quarter, the biggest quarterly fall in economic activity since the first quarter of 2009, with a huge slump in manufacturing, agriculture, marketing, mining and construction. It will be a miracle if Moody’s does not downgrade us to junk status, this resulting in SA’s hope to see a renewed growth in status as a viable international investment destination, vanishing into thin air. SA’s state coffer is under severe pressure especially with ESKOM and the “dysfunctional” SAA, plus several other state-owned enterprises under duress, adding to our nosediving economy. The track record and independence of our SA Reserve Bank is under siege that compromises its credibility, a further factor that could leave Moody no option than to downgrade us to junk status.

Looking at the past 40 quarters, Mike Schussler wrote that GDP showed a decline 20% of the time and these declines increased in percentage and frequency – 3 out of 5 quarters our GDP recorded declined under President Ramaphosa – the worst record of any SA leader since around 1945. We are all in agreement that SA needs active leadership, liberalized labour laws, policy certainty, sustainable job creation, a reliable ESKOM (one of the main negative forces with its inability to supply affordable and enough electricity), and not more endless and time-consuming investigations and commissions!

After the general well-received announcement of our new Cabinet, everybody held the expectations that it would yield a positive capital inflow of foreign investment that could stimulate economic growth. Hopefully in turn also result in more visible movement and gradual price increases in our fragile property sector.

However, with this latest shock announcement, this process will inevitably be hugely slowed down and prolonged, especially since job creation, increasing downwards pressure on household disposable income and affordability will also be negatively influenced. Furthermore, the construction sector, which is one of our main employment providers, recorded a quarterly decline of 2,2% with thousands of job losses.

So, it is widely expected that the prolonged and price competitive Buyer’s market, will continue where demand exceeds supply by far, whilst very moderate and low single price increases will most probably continue for the second half of this year, as was the case during the first half of 2019.

On a more positive note, we at Heiberg Estates are fortunately experiencing a moderate uptick in property activities after the elections, with more property enquirers, more show house attendances and fortunately a definite increase in Buyers willingness to put hand on paper again resulting in good and successful sales, which we are very grateful for. This tendency on par with the fact that after each of the five general elections held in our country since 1994, the SA Housing Market experienced a gradual rebound during the 12 months to follow.

Interesting facts and statistics, as follows:

  • The Western Cape as always, remains to be the top performing region in our country with an average 6.75% property price increase.
  • The FNB House Price Index shows that national house prices moved more or less sideways last month, recording 3.3% y/y from 3.4% y/y in April – a downwards movement in line with subdued economic activity and lower disposable income levels.
  • Regarding recorded property sales for the first quarter, more houses in the lower price ranges than in the higher price ranges were sold, especially with much more demand recorded in the lower ranges.
  • Newly built flats and sectional title units, accounted for around 60% of new stock on the market to be sold, up from 29% in 2015 and 13% in 2000 – a significant increase and pointing to the rising densification in our metros and our increasing urbanizing population.
  • In spite of all the economic uncertainties, there are still positive commercial developers that continue to develop of which a good example is the new phased R1,2 billion Capital Shopping Mall Development on the outskirts of Pretoria that has just been given the green light and is expected to open towards the end of 2021. Whilst Pretoria’s Menlyn Park Shopping Mall is presently the largest in Africa at a recorded 169 000m², Johannesburg Fourways Mall is soon to steal this honour with work in progress to extend it to 178 000m² on completion, and worth around R9 billion.
  • Interesting to note according to a report released by MSCI last year, that the SA Market has 418m² of shopping centre lettable area for every 1 000 people, whilst the USA which has the most shopping centres relative to its population, has 2 196m² for every 1 000 people, followed by Canada, Australia and Norway.
  • On the Technology side, Woodmead on the outskirts of Johannesburg, is increasingly becoming the hotspot for technology companies, where the latest big giant Altron is set to join neighbours like Huawei, Ericsson, Accenture, SAP and Sage and others like Vodacom and Cell C.
  • The FTSE-JSE SA Listed Property Index has also recorded its worst performance in more than 20 years.
  • The General Household Survey of 2018 by Stats SA shows that 35.3% of South Africans own a house and 5.4% own land. 18.3% of dwellings owned by households is owned by one person and 17% is jointly owned. Regarding land, 2.3% of South Africans individuals own land, while 3.1% are joint owners.
  • It also found that 5.5% of men owned land compared to 5.4% of women, but 37.6% of women owned dwellings compared to 32.8% of men. Women are also the biggest group of property buyers in SA – larger than couples or single men.
  • The 10 most expensive streets in Gauteng has just been named, with nine of them located in one suburb, namely Sandhurst. The most expensive street in Gauteng is Killarney Road where properties are valued at an average of R26m, to be followed by Coronation Road (R25.3m) and Trafalgar Place (R24.6m).

Before there is not a visible increase in consumer confidence in general, an increase in residential market sales and property prices, is unlikely to happen. One of our biggest challenges remain to be the continued uncertainties regarding the land reform question and land expropriation without compensation and it is still to be determined how it will play out in terms of policy amendments.

For generations and times to come, we shall all pay the high price for the mismanagement of our country by the government over the past nine years. Without foreign investment, sustainable job creation will be highly impeded as very little money is left in our state coffers to address this vital issue in our stagnant economy where no growth year-on-year, has been recorded.

With all the renewed shocks experienced the past month, with yet more fuel-, water-, electricity-, rates and taxes- and basic cost of living increases, it is widely expected that household income will remain under pressure and affordability to buy property, even more restricted.

The lower end of the property market is likely to continue to hold up well relative to the other sectors of the property market. Once again, the focus in general, especially looking at new entrants or down-scalers to the property market whether it is to rent or to buy, is expected to be on less expensive sectional title properties.

Despite the once again growing rather negative sentiment, excellent buying opportunities are plentiful in the current market. Especially for investors for great buy-to-let opportunities in new developments, capitalising on the medium- and long-term benefits offered with these new developments which includes the latest upmarket features, finishes, lifestyle, wi-fi, energy saving features, excellent security and especially with VAT included. One of these amazing, ultra-luxury developments that Heiberg Estates in co-operation with Amafu Developments have just launched, is” PECAN PLACE” with a great and central location, just off Brooklyn Mall at 210 Giovanetti Street West, Nieuw Muckleneuk. Please visit us during our show days on Fridays 2.30pm to 5pm and Saturdays from 11am to 2.30pm!  Website and videos:    : https://youtu.be/fTf27T15tkk or  http://www.heibergestate.co.za

I trust that you all will have a well-deserved “half year breather” and enjoy a few days off with your loved ones.

Please don’t hesitate to contact your Heiberg Estates Team should there be any property related questions, free assessments or help needed. We remain to be on 24/7 standby for our much-valued clients!

Best and warm regards

Sincerely

Bambie & Heiberg Estates Team

 

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