by Myles Wakefield
THE latest First National Bank (FNB) statistics reveal an intriguing story for the property industry, not least of which is the reassurance that the levels of activity remain firmly nudging the positive bracket and that agents are seeing an improvement in the balance between supply and demand.
The Second Quarter 2014 FNB Estate Agent survey highlights the concerns with a lack of housing stock, specifically in the lower to middle-price ranges where demand is substantially outstripping supply. The laws of economics indicate this will boost prices in the medium-term.
The survey samples agents predominantly in the country’s major metropolitan regions with the opening question gauging their perceptions of the market in the current climate. The 6.33/10 rating is not far off the positive bracket between seven and eight and, while market activity has flattened on a year-on-year basis, agents have continued to experience strengthening in the balance between supply and demand.
This is evident in the responses to stock constraints, average time properties spent on the market and questions relating to sellers having to drop their asking prices.
Realistically-priced homes are now selling in an average 11 weeks six days – a far cry from the 19 weeks one day experienced three years ago and a further decline on the 13 weeks six days reported in theFirst Quarter 2014 FNB Estate Agent survey. It is also the lowest estimated average time spent on the market since the first quarter 2008.
Equally important in determining seller pricing realism is the percentage of sellers required to drop their asking price before concluding a sale. This figure has fallen three percentage points to 78% since the first quarter – the lowest level since the first quarter 2010 – and the average price drop is now only 8% when it ranged at 13% in late 2011.
The survey also highlights that the overall perception of housing affordability has improved with half the recipients recognising South Africa’s income levels have kept up with rising house prices – the highest level in a decade. During the height of the 2008 market surge, only 8% of agents believed people were earning sufficient salaries to keep abreast of home purchasing costs.
The reality is that interest rates remain at a 40-year low, despite the two recent 25 basis point increases, and estate agents are trained to interpret market trends when compiling their comparative market analysis (CMA) – the comparison of property prices for homes recently sold and those on the market in the neighbourhood to a client’s home, essentially the competition.
Consequently, sellers serious about disposing of their property must take heed of the recommended market price range, given the knowledge vested behind that suggestion.
A market price by definition is the one for which a willing buyer will pay a willing seller at a specific time. Buyers purchase on comparison and are typically savvy about the market trends in their areas of interest, so genuine buyers will overlook over-priced properties.
Added to the mix in maximising opportunities for selling a property is awarding an agent a sole mandate. The decision on who receives that responsibility must be based on the agency who has presented the most comprehensive CMA; professionally placed on the table a well-thought out marketing plan for selling the home at the best price with the least number of hassles and provided factual statistics backing up their claims.
The end result must be one where the client accepts a price with which they are satisfied was the best possible one the current market was willing to pay.
by Myles Wakefield, CEO Wakefields Real Estate