Home sales are down and taking longer to complete as recession bites, but the figures improve when sellers price their properties appropriately
Affordability is always the key consideration when buying a home, and almost the sole reason potential homeowners reluctantly resist taking that first step. And in today’s economic climate the gap between what sellers want and what buyers can afford is widening.
While major Gauteng residential regions are generally showing improvements in affordability, homeownership is still out of reach for many.
The most recent FNB Property Barometer reveals that both the Joburg – including Ekurhuleni – and Tshwane regions continue to show that estimated levels of first-time buyers are well above the national average.
FNB’s household and property sector strategist, John Loos, says that in the first half of this year, first-time buyers were estimated to account for 28.58% of all home buying in greater Joburg, and 21.8% in Tshwane.
Gauteng’s Estate Agent Survey sample also estimated the average time of homes on the market prior to sale to be around 12 weeks, which is similar to levels through most of 2016/2017.
However, estate agents say improved levels are not uniform across all regions and suburbs, with some seeing particularly tough times.
“The affluent suburbs like Bryanston, Sandhurst and Hyde Park tend to weather recessionary periods better,” says Jonathan Davies, regional director of Tyson Properties Gauteng.
“The more affluent are able to hold off on reducing their prices and, in most instances, this results in the property remaining on the market for much longer. Sellers can afford to hold on to properties until pricing improves and their price is realised.”
He says the lower income markets are feeling the effects of the struggling economy more.
“Sellers often do not have the time or financial means to hold out for a better market and as a result are more receptive to reducing their prices in line with current trading conditions.
“This creates the scenario where certain suburbs continue to show sales while others remain quiet.”
Historically, Davies says the gap between asking and selling prices has always hovered between 12% and 15%, but in today’s tighter market some properties are selling for 20% less than the asking price.
He says good markets generally outrun bad markets so it is only a matter of time before there is a correction and improvement.
“Johannesburg remains a good investment. One only has to look at a horizon dotted with cranes to realise property is growing and confidence is there, even if it’s a tough market.”
As with the rest of Johannesburg, the greater Randburg area is now a buyer’s market, says Chris Hajec, managing director at Seeff Randburg.
However buyers are still facing economic headwinds.
“The flat interest rate is good for the market, but the weak economy is driving up prices and living costs, and making it increasingly difficult for buyers to take advantage of what the market offers right now.”
He agrees that the lower and middle-income areas are generally feeling the pinch the most.
“The effects of the credit downgrades and poor economic climate have definitely put a dampener on the market, with market trading volume down by more than 20% over the past three months, and this will no doubt decline further.”
However, Hajec says if properties are properly and aggressively priced and are offered on a sole mandate, they remain on the market for an average of about 32 days.
Higher-priced properties can remain on the market for 60 to 90 days. Properties on an open mandate will add an additional 20 days to these averages.
In Johannesburg south, correctly priced properties are selling within about five to eight weeks, says Trevor Sturgess, principal at Seeff Kibler Park. Overpriced properties are not selling.
“Sellers are wasting their time if they are unrealistic with the asking prices.”
Similarly, in the upper areas of Pretoria East, well-priced properties are also selling well, particularly those below the R5 million to R8m price range, says Gerhard van der Linde, managing director at Seeff in this region.
Sometimes, this time frame can be as short as a month.
“On the whole though, the time on the market is lengthening and the higher your price expectation, the longer it will sit on the market.”
There is no doubt the deteriorating economic outlook is also affecting people’s affordability levels in the Centurion area, says Steve van Wyk, managing director at Seeff Centurion.
The number of buyer inquiries has dropped by 40%, and sales activity over the past six months has decreased by 35%.
“Although the interest rate remains flat, home buyers are facing challenging economic times with rising living expenses. That means fewer people can buy homes.”
Stock levels have also increased notably over the past two years, he says.
“In the Centurion area, there are currently in excess of 9 000 properties for sale. This is a stock level 50% higher than the norm for the area, and properties are therefore taking much longer to sell.”
Van Wyk says many of the listed properties are being sold by people who want to move to the Cape, and this has further worsened the stock level situation.
Thanks to high levels of stock and overpricing, most properties are on the market for more than five months.
He recommends that sellers wait until September/October before they start marketing their properties.
Although property sales in higher priced areas of Gauteng are seeing slowed levels of activity, Cameron Jansen, group broker/manager at Re/Max Central, does not believe this is only due to affordability.
Rather, he says, consumers are wary about the current political and economic conditions and are waiting to see how things go.
He says buyers are aware that the market is in their favour so they are offering lower prices.
“Unfortunately, in many cases, sellers went to market at bullish prices and due to circumstances already mentioned, buyers have adopted a wait-and-see attitude.
“It must be said that most of the banks’ lending rates have increased significantly since the end of March, so obviously this will also affect the spending power of property buyers.”
Despite houses taking longer to sell, Jansen says homes offering real value are still receiving multiple offers.
“The average times on the market do vary dependent on price range. Without a doubt, properties below R2m are still attracting good offers, while those that have a sticker price above R3m are taking a lot longer to sell.
“Sellers who don’t adjust their pricing to be more competitive can expect their properties to be on the market for six months and longer.”