Cooling property prices throughout the country are forcing sellers to moderate both their initial expectations and their final selling prices, says Mike Bester, CEO of Realty 1 International Property Group.
Bester says feedback from group franchises suggest that up to 70 percent of sales in all sectors are currently being concluded at lower-than-asking prices. His assertions are supported by Absa’s most recent property price index in which economist Jacques du Toit predicts that house prices, excluding inflationary effects, will rise by only 7,.2 percent during the year.
Rather than being concerned, however, Bester believes this will ensure a more sustainable market going forward.
“Restrained value growth will give buyers a much-needed opportunity to improve their affordability levels and come to terms with any further interest rate and petrol price increases.”
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, he says. “Many sellers still have their eye on the record gains of the past and are accordingly resisting current pricing advice, which is a lot more conservative. As a result, we’re finding that up to 80 percent of properties are over-priced by today’s market standards.”
The tendency by sellers and unscrupulous or inexperienced agents to inflate asking prices has long been a national problem. “What is changing, however, is that home owners are becoming aware of the fact that they are pushing the limits. As a result of this and knowing that over-pricing invariably means their homes will remain on the market for lengthy periods before being sold, they are far more inclined to accept negotiated selling prices than they were six months ago.”
This increased flexibility is, to some degree, countering the negative effects of over-pricing, he adds, since there is a greater likelihood of buyer and seller finding a common meeting point.
“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 over-paying.”
Bester also notes that while property price growth has slowed, interest in property as a wealth creator 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,” he 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.”