Cool off - it's good for you
Cooling house prices are forcing sellers to lower their prices, which could be a very good thing, not only for buyers and the property market as a whole, but also sellers...

A dip in property price growth throughout the country is forcing sellers to moderate both their initial expectations and their final selling prices.

"Up to 70 percent of sales in all sectors are currently being concluded at lower-than-asking prices," says Mike Bester, CEO of Realty 1. But this is not a reason to worry, as the lower prices will create "a more sustainable market going forward", he adds.

Reality check

"The key to ongoing market sustainability is the acceptance by sellers that while their property values will continue to rise, the growth will not be in line with that experienced during the country’s boom conditions of 2004 and 2005."

Many sellers are therefore unrealistic as they still have their eye on the record gains of the past. As a result, they're resisting current pricing advice — which in turn is making up to 80 percent of properties in today’s market overpriced.

The tendency by sellers and unscrupulous or inexperienced agents to inflate asking prices has long been a problem in the country’s real estate sector.

Slowing down the process

This also creates a selling problem as buyers are not necessarily willing to pay these amounts, or simply cannot afford them.

Adjusting the price to a more realistic one means that sellers are bound to benefit from having their properties on the market for a shorter time, as buyers are more willing to accept 'reasonable' prices.

Says Bester, "overpricing invariably means sellers’ homes remain on the market for lengthy periods before being sold, and they are then far more inclined to accept negotiated selling prices than they were six months ago.

"Restrained value growth also gives buyers a much-needed opportunity to improve their affordability levels and come to terms with any further interest rate and petrol price increases," he adds.

Common ground

Increased flexibility is thus, to a degree, countering the negative effects of overpricing, since there is a greater likelihood of the buyer and seller finding a common meeting ground.

"Serious sellers are far more prone to accepting market-related offers now than they were a year ago. This indicates a growing awareness on their parts that control of the market is increasingly in the hands of buyers who have no intention of overpaying," he says.

A piece of the good pie

Although property price growth has slowed, interest in property as a means of wealth creation is growing — not only among emergent market buyers — but also those who have been on the receiving end of disappointing capital gains from other sources.

"South Africans from all walks of life are increasingly measuring their personal financial worth according to the properties they own," Bester says.

"This belief is particularly strong among those who have enjoyed rapid and substantial equity growth in the last couple of years, allowing them to finance renovations, vehicles, education and even overseas holidays as well as consolidate debt using their accumulated value growth as collateral.

"They have also been able to invest in second properties as a result of the growth in value of their primary residences."

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