Unrealistic selling prices are fuelling the problem in KZN, say agents
Statistics may show that the gap between property supply and demand in South Africa is closing slightly, but in some parts of KwaZulu-Natal, this is far from the case. Morningside has a large supply of stock on the market with “very few” buyers out there, says Kim Woods, Tyson Properties’ branch manager in the area.
“The last time we experienced this gap was in 2007.” Sellers holding on to unrealistic prices are fuelling the problem, insisting on keeping their properties listed at these high prices.
“Sellers are taking properties off the market at our instruction only once the property has become stale. We suggest taking them off for two to three months and then hitting the market again with a refreshed narrative and some new pictures – and hopefully a reduced price.”
In Pietermaritzburg, Just Property’s Shaun Dubois says owners who have insisted on over-pricing their properties eventually either drop the price or remove their homes from the market. “Selling fatigue sets in after six to nine months.” In the Zululand and Richards Bay area, the market is “flooded” with properties for sale, and has been for a while, says Laura Kennedy of Just Property in the region.
There is also an increase of properties on the market due to emigration. Woods says many emigrating sellers do not realise it takes on average more than 157 days to sell, and as a result are putting their properties on the market just three months before they are due to leave.
“This puts them under pressure and forces them to find tenants for their homes.” Dubois says the number of owners selling due to emigration is higher than it has been for many years as a result of “unwarranted panicking”.
“Normally they want to extract their wealth as quickly as possible and do not wish to let their properties but rather to sell, which means they often sell at a discounted price.” But non-emigrants who are selling their homes don’t have a deadline and are unwilling to take price advice.
Kennedy says some even withdraw their properties from the market rather than reduce the price. “Approximately 20% to 25% of properties are taken off the market after being for sale for between eight months and a year. Others will let their properties rather than sell for a lower price.”
Buyers are generally offering 10% to 15% less than the asking prices. Nationally, FNB’s Residential Property Barometer for September stated that there has been a narrowing of the demand-supply gap in the market over the past few months.
This is on the back of both the mild improvement in demand, and the persistently slowing pace at which properties enter the market for resale, says economist Siphamandla Mkhwanazi.
“This is countered somewhat by the surge in the supply of new stock (particularly flats and townhouses), as well as the rising emigration-related sales…”
Development of new residential properties, in a market where supply is outstripping demand, is all about getting the product mix right, says FWJK chief executive David Williams-Jones. Otherwise they will fail, which has been the case for some recently launched developments in Cape Town that were priced too high and had too many large and unaffordable units in their mix.
“There is a price point at which sales take place regardless of the state of the economy.” In Durban, development potential is still focused on Umhlanga and northwards, he says, adding that FWJK will be breaking ground in January with a development in Umdloti, 8 on Bellamont, which is sold out.
Property development in Pietermaritzburg is “picking up again”, Dubois says. “Developments that offer value are selling. “There is more movement in the under R1.5 million segment but some premium properties are also selling.”
In the north of KZN, most new developments are sold out very soon after launch, Kennedy says. The area could do with more new developments, especially in Meerensee. Looking ahead, Woods predicts that the demand and supply gap will widen before the end of the year.
“We need to see some positive action being taken by the ANC to combat crime, load shedding and corruption to improve overall sentiment.”
Echoing this, Dubois says while an interest rate cut will help increase property demand, the economy needs to show real growth for there to be meaningful growth in the property sector.
“In some areas there is excess stock which will be purchased once the economy turns around.”