Is the housing market slowing or merely shifting into another phase? Recent property sales figures suggest that the market is currently in a transition phase with demand for property seeing a decrease during the first half of this year.
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, while the market has favoured sellers for some time, the dynamics are changing and scales are tipping the scales in homebuyers’ favour.
He adds the property market follows a cyclical predictable pattern where there are periods of growth, following by a slowdown before recovering. Understanding the dynamics of the ebb and flow of the market will be a distinct advantage to buyers when looking to get their foot in the door.
"For a while there has been high buyer demand and low levels of inventory available on the market. This situation has favoured sellers and driven the price of property up over the last few years. Although there is no shortage of buyers in the market, many have decided to sit out for the time being due to factors such as the possible downgrade, rising interest rates, the country’s political situation and inflated prices set by sellers in the current market," says Goslett. "If demand for housing continues to wane, property inventory will increase and the market will become far more competitive among sellers. In a more buyer-slanted market, sellers will need to ensure that they price their homes correctly in order to sell faster than the neighbour they will be competing with."
According to the FNB Property Barometer published on 3 June this year, while there is currently a good supply and demand balance in the property market, which resulted in positive house price growth in real terms, there are perceived signs of weakening. According to the report there has been an increase of residential supply on the market on a monthly basis. Although the number of properties on the market remains constrained, there has recently been a noticeable rise, with supply seeing positive growth for the last five months consecutively.
"With more homes entering the market and the pool of potential buyers decreasing, sellers will have to ensure that their homes are priced correctly. Over-inflated prices will only serve to chase away buyers, with the property remaining on the market for longer than necessary. This is especially true if there are other homes in the same area offering similar features, but at market related prices. The fact is that an asking price that is market related will appeal to a far larger range of buyers, than one that isn’t," advices Goslett.
He adds that a property that is inflated by around 10% above its market related value is much less likely to sell within 30 days of it being on the market, compared to one that is priced within 5% of its market value. The reason it is important to sell a home within a certain time frame is because potential buyers start to question why is hasn’t sold yet.
"There is often a negative association with a property that has been on the market for longer than the average time, which can lead to it eventually selling for below its actual value," says Goslett.
He notes that a reputable real estate agent with specific area knowledge is a good resource that sellers can use to determine what buyers have recently paid for properties within an area.
"Estate agents will have records of how much properties with similar offering to the seller’s home have recently sold for in the last three to six months. While the asking price of the home is still ultimately the seller’s decision, an agent will be able to provide guidance in correctly pricing the home for the current market conditions," says Goslett.
He concludes by saying that working with a reputable, experienced real estate agent and making sure the asking price is correct from the outset, will ultimately make all the difference in achieving the seller’s goal in a challenging market.