South Africa: Prices Swing the Way of Buyers
THERE are signs that the residential property market may be shifting back in favour of the buyer.
For about three years sellers have called the shots as South Africans scrambled to secure properties with prices surging on the back of slashed interest rates and a stable economy.
But now there seems to be buyers' resistance in certain price categories to high asking prices.
Since nominal house price growth peaked at an astonishing 35,5% in September and October 2004, the rate has been slowing.
Mike Bester, CEO of Realty 1 International Property Group, says SA's residential real estate market has entered a new phase in which properties are not only taking longer to sell than they did a year ago, but are also selling for "tens, if not hundreds, of thousands of rand less than asking price".
According to figures recently released by Jigsaw Holdings that tracked not only the length of time that properties spent on the market but also the disparity between asking and selling prices, properties are now spending an average of 51 days on the market -- as opposed to the 39 days reflected during the second half of 2004.
The group says properties are also selling for 4,8% below asking price -- as opposed to the 3,7% less recorded in late 2004.
Bester says this reflects a changed market that is now being driven by affordability.
"Buyers are no longer snatching up properties as soon as they are listed, as was the case when stock levels were at an all-time low. They are shopping around until they find something within their price range and that offers them value for their money."
Bester says with the number of lower-than-asking-price offers rising steadily, sellers must accept that the "halcyon days of spiralling price growth had ended".
Christo van der Schyff, financial manager of real estate group Aida, says the residential property market has changed dramatically over the last three years. Three years ago the average residential property was priced at R300000; now it is more than R700000.
Van der Schyff says that buyers are in a much stronger position today than six months ago. But he says a buyer looking for a property in the R1m-R2m price range is in a much stronger position than one looking in the R400000-R700000 price range because the market activity is in the R400000-R700000 sector.
There is a lot of demand for properties in that range, which is driving prices upwards, whereas there is not as much demand in R1m-R2m category, where buyers are in a better position to negotiate better deals for themselves.
"I think in general it is fair to say that the residential property market is shifting from a seller's market to more of a buyer's market," he says.
But Barry Davies, franchising director for real estate group Chas Everitt International, says there is still a lot of activity in the residential property market.
"If you take the market of R600000-R700000, that stock is moving at a major rate. And in the R1m-R1,5m category we still have a lot of activity and we still have a tremendous amount of demand for property up to R2m," he says.
Davies says Chas Everitt's figures reflect a "very strong market". But he thinks sellers should look at their pricing more carefully and that the industry has to take responsibility for this.
"Agents have to be able to be in a position to put together accurate comparative marketing analyses together."
He says that in certain markets, buyers are in a better position and that a lot of this is driven by poor pricing policy.
"Sellers are sometimes deceived. They see a property advertised for R3m and their assumption is that is selling for R3m and it could be selling 10% to 20% below that. The majority of estate agents are not giving their clients accurate information."
Davies says an agent will tell a seller that he will be able to obtain R3m for the property without justifying this just so he can obtain the sole mandate to sell the property.
"That is why properties are on the market longer. The seller's dilemma in this is that best activity on a property coming new onto the market is in the first two to three weeks. If they overprice during this period they are putting people off and people are going to look somewhere else."
He says the market is still is "still very good for sellers" if they obtain proper advice and if they take the advice.
"Don't grant an agent a mandate based on price alone."
Article By Nick Wilson - www.businessday.co.za