HEIBERG ESTATES NEWSLETTER: OCTOBER 2019

Dear Property Partners

 NEWSLETTER 10.5

RENEWED HEADWINDS BLOWING FROM ALL DIRECTIONS!

Just as the glimmer of hope and more positiveness entered our fragile economy at last, out of the blue comes Eskom and starts with load shedding again after the last load shedding took place in March. This is spite of undertakings given that no load shedding was planned for the foreseeable future. The timing of one of the biggest influencing factors on our people and our economy in introducing load shedding again, couldn’t’ have been worse. Costs are ever increasing with electricity costs that escalated by an estimated 350% over the past 10 years!

All the hard work of so many people across the economic and political spectrum to get back foreign investment and trust in order to get our economy on the go and to create the much-needed sustainable jobs, could take a severe blow. Especially since one of the last three leading international credit rating agencies, Moody’s, is due to make an announcement on 1 November whether it is going to lower SA’s credit rating – presently rated by them as Baa3 with neutral prospects – the other two big companies Fitch Ratings and Standard & Poor Global Ratings already classifying SA as Junk Status. Moody’s have said all along that our new credit rating can’t be considered without keeping track of what is happening at Eskom – the load shedding costing our economy an enormous estimated R1billion per day – and Eskom still not even able to earn enough to service the interest on his debt account! President Ramaphosa has given everything in his power to avoid SA being downgraded by Moody’s as well, and hopefully this tremendous blow does not push them over the edge to follow suit with the other two agencies and downgrade us to junk status.

Should this happen, we are guaranteed to go through even more difficult times, our rand exchange rate will take a terrible blow, it will become much more expensive to borrow money from overseas, out interest rates will escalate, and billions of rands taken overseas. This impact will without any doubt also be felt on our fragile property market where disposable income will lessen, unemployment escalate and less people will be in a position to buy properties. For sure a vicious circle and this impact on our property market will further have an effect on our state coffers, taking into account the huge contribution real estate makes to the GDP. For the past few years it is calculated that property sales in average per year, contributed R190billion to the GDP and a further R46billion in taxes! One can but hope and pray that the expected downgrade, will not happen.

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

  • All around, SA’s economic growth prospects are revised downwards due to continued political and economic uncertainties, low business confidence, and not to forget Eskom! The latest economic growth prospects for the remainder of this year by the World Bank, is a mere 0,8% – the same as recorded during 2018. Moody’s lowered its growth rate forecast from 1% in June to a recent 0.7%.
  • The latest FNB property barometer shows that there is increasing movement in our property market (typical also for this time of the yearly property cycle), with more home loans being granted on a year-on-year basis, presently standing on 4,3% versus the 3,4% recorded over the same period last year.
  • On a quarterly basis, house prices increased from the 2nd quarter to the 3rd quarter with 0,3% to a 3,7% quarterly price increase.
  • The interest rate was as expected not lowered by the SA Reserve Bank (SARB) this month and if so, it would indeed have brought welcome relief for so many home owners, struggling to service their bonds with ongoing monthly escalating costs and the buying power of the rand decreasing all the time. At least the SARB lowered its inflation forecast for this year to 4,2% whilst it is forecasted that the inflation rate for next year, will be around 5,1% – the latter triggered by our weakening rand exchange rate and the ongoing increase of electricity, food and fuel prices. Hopefully our more or less stable interest rate will be continued next year with little upwards movement that will assist in financial planning for homeowners and prospective new Buyers, especially in the lower price ranges.
  • On the commercial front, the ever decreasing buying power of our rand as well as salary increases not keeping up with the inflation rate, petrol and food price increases, soaring electricity fees and coupled with low business trust, is having a major impact on both retail as well as office vacant spaces. Looking at Regional Shopping Centres the most support recorded, was for supermarket-, home-, personal care- and pharmacy related shops, whilst especially books- and jewellery related shops, are under continued pressure.
  • Just as a matter of interest, not only our beloved country is under severe economic strain, but also virtually every other country is experiencing political and economic challenges where for example in the USA over the past year, more than 8 600 stores have been closed or are in the process of closing as the retail apocalypse drags on.
  • Sapoa reports that as recorded during the third quarter, 11% of Office space in SA is standing vacant, with Sandton with the highest vacancy recorded at 17,1%, Rosebank at 7,65 and followed by Waterfall on 4,7%. New office developments are on the decline with so many negative and challenging factors impeding on the construction industry and ROI’s coming down with the slowing demand for office space. It is expected that the office vacancy rate will remain to be around 10% for the foreseeable future and slowing finance, real estate and business services sector employment growth, could exert further upward pressure on existing office vacancies as well as downward pressure on new office space building levels. Increasing vacant office space can in turn also lead to stagnant rental growth, higher tenant bargaining power in lease negotiations and increased landlord incentives to fill empty standing office space.
  • Important to note that in general office takers are looking for smaller office spaces and shorter lease periods and due to the over-supply and empty standing factor, big office spaces are indeed being divided into smaller entities to accommodate more people that have limited budgets.
  • The average age of first-time homeowners as recently recorded is 35 years and the average age of all home buyers is 38 years. Also, interesting to note that Banks are more inclined to give 100% bonds to first time buyers whilst home loan applicants are expected to put down a 10% or more deposit.
  • Property sales to foreigners due to mostly our uncertain political and economic state of affairs, has dropped 15% so far in comparison to the last year-on-year and 30% less than the yearly average taken over the past 5 years.

NOTE: Some interesting new developments to look at should you consider buying for yourself or as a buy-to-let with great locations and very good rental returns as investment properties, please click on the following and don’t hesitate to contact us for more information:

  • Pecan Place: https://amafu.net/pecan-place2/
  • Brookwood: http://www.brookwood.co.za/
  • Waterkloof on Main: https://waterkloofonmain.co.za
  • NEW RELEASE: MAURITIUS OPPORTUNITIES – DIVERSIFY YOUR PROPERTY INVESTMENT PORTFOLIO:   More about the developers: Trimetys Ltd, is a leading real estate developer in particular Cap Tamarin. We are innovative in the development and planning of residential properties and areas in Mauritius, introducing the concept ‘Smart Happy Village . It is a vision to stay responsive and flexible while cultivating a passion for the development and sale of sustainable real estate, modular apartments, lofts, retirement homes, villas, etc., with all the necessary amenities attached. As well as a health center, a sports center, schools, shops, business centers, offices will be deployed and the living heart of the Happy Village, with our Agora which will consist of many centers of interest for the most demanding. L’Ofis – 2 units from R3,5 million remaining for sale ; Freedom Hill – Units from R2,6 million for sale ; Les Jardin Du Barachois – Units from R4,1 million for sale.   24/7 Available for any further MAURITIUS assistance you may need, call: Robyn Capendale 079 881 5140.

And for excellent other investment opportunities or just to get the look-and-feel of the present real estate scene, please visit our website at www.heibergestates.com. Wishing you all lots of energy and focus for this last stretch of 2019. I am sure we are all looking forward to the much awaited December Holidays!

May the 18-person members of the new Presidential Economic Advisory Council as announced earlier this month, actively help and guide South Africa to kickstart the much awaited economic development plan for sustained economic growth, new and sustainable job creation and new hope for an all-inclusive future of prosperity for all our people and their children to follow. We need action and not more forums and commissions. We need role models to guide and set our moral compass on the right track again. Our rainbow nation and our country need it more than ever before – and before it is too late. And may Moody’s not downgrade us to Junk Status and keep the status quo of its much needed lifeline to our increasingly fragile economy.

Best and kind regards

Your sincerely

Bambie & Heiberg Estates Team

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