Capitalise on over-stocked new homes

Property buyers, buoyed by the more positive mood in the market, are finding that there is something of a stock shortage in some respects, even at this early stage of the recovery cycle.

Gerhard Kotzé, CEO of the ERA South Africa property group, says this is due to large numbers of sellers now withdrawing their properties from the market in anticipation of receiving a higher price “down the road”.

By contrast he says, buyers can find ample stock, wide choice and value in recently completed sectional title and cluster developments.

“While we have what amounts to something of a shortage of pre-owned freehold properties we have precisely the opposite in the case of cluster and sectional title projects where developers with long lead times were hard hit by the recent property market recession.

“Whereas property supply and demand usually works in tandem across all categories, there is now a divergence which works to the advantage of buyers” he adds.

Nor is the situation likely to change in the short term, he believes in that the supply of cluster and sectional title units is likely to remain in surplus for the immediate future, despite a lack of plans passed and new building activity.

“There is therefore a brief window of opportunity for buyers to acquire such properties, probably at good prices, before supply moves into general equilibrium across the board once more.

“On the other hand as far as freehold properties are concerned, sellers may be over-optimistic about the likelihood of obtaining higher prices later, particularly if they make the mistake of returning to the market in say, six to nine months time, expecting to see a significant increase in the general level of prices.

“The joker in the pack on this scenario is what is likely to happen to the market post-World Cup when the euphoria dies down and the country’s economy has to re-invent itself.

“Then of course there is the ever-present possibility that interest rates may increase again. There are already hints in the media that the current low levels of interest rates may not last much longer as the economy recovers.

“Finally of course there is the old property adage that if you sell at a particular stage of the market cycle, you will also be buying into prevailing market levels and that, all things being equal, there is no particular advantage to be had from delay.”

Article by: www.era.co.za