Fewer properties have been coming to the market in recent months but this slowdown is not enough to curb the over-supply. There are more homes for sale than buyers and this is not only putting pressure on selling prices but also contributing to already subdued market activity.
The latest FNB House Price Index shows house price growth is still “flat” at 3.8% year-on-year in March from 3.7% in February. This takes the first quarter nominal house price growth to 3.8% year-on-year, which FNB economist Siphamandla Mkhwanazi says is “slightly softer” than in the final quarter of 2018 but stronger than the 3.1% seen in the first quarter of last year.
“This means house price appreciation still languishes below inflation, reflective of the enduring pressure on household incomes amid a depressed macro-economic environment.”
Although FNB’s valuers rate current residential housing demand as weakening and supply strengthening, Mkhwanazi says the pace at which properties are entering the market has slowed noticeably in recent months.
“This, however, has not been enough to prevent a modest shift in the balance of demand and supply. These trends explain the declining real house prices and suggest the market remains slightly in favour of buyers.”
In addition, Mkhwanazi says results from the FNB Estate Agents Survey show that between 2016 and last year, an average of 91% of properties sold below their asking prices. This is compared to the 85.2% average three years earlier. Sellers have to try to balance their asking prices with the state of the market.
Prices have also slowed as a result of the run-up to the elections, which property experts say was expected. Effective marketing of properties is now, more than ever, crucial for sellers, and not representing them adequately through listing photos “will negatively affect the sale of your property”, says Mike Greeff, chief executive Greeff Christie’s International Real Estate.
This includes ensuring photos of the property are up to standard and capture the essence of the home both inside and outside. Sellers also need to take the emotion out of negotiations with potential buyers.
“When the owner of the property allows themselves to be immersed in the process, they run the risk of putting emotional price tags on the property and take it personally when a buyer makes an offer lower than they might expect.”
Data from Q4 2018 reveals
◆Average time on market: This has eased to 15 weeks and six days, from 17 weeks and six days during the previous quarter.
◆Realised prices: 94% of properties sold below asking price and sellers had to drop their prices by an average of 9%.
◆Reasons for selling: Downscaling because of life stage was still the most prominent reason for selling a property in South Africa, with such sales accounting for 23% of all sales. However, downscaling due to financial pressure was increasingly becoming prominent, averaging 19% of sales in 4Q18.
Source: FNB House Price Index