Sellers have to get realistic in South Africa

 ·15 Oct 2023

Sellers in South Africa must be realistic with their asking prices as there are fewer buyers, a slower sales pace and lower prices on offer.

This is according to Samuel Seeff, chairman of the Seeff Property Group, who noted that the market has notably slowed the year, with some areas declining up to 30% to 40% in sales activity compared to the boom of 2021/22.

Higher-than-expected interest rates will also likely remain an obstacle to the market for the foreseeable future.

“Two years ago, the market was flooded with buyers looking to take advantage of the low-interest rate with offers flowing in and prices climbing. Properties were selling within a week to a month of listing in many areas, and the good times were rolling for sellers,” the group said.

“While the market started its downward curve towards normalization by early 2022, the reality is that the higher-than-expected interest rate has put tremendous downward pressure on sales volumes and offers.”

Winter was notably disappointing amid an intense slowdown in sales, with the country firmly in a buyer’s market.

Buyers are also taking longer to purchase, and since there is little competition, they are not willing to pay exorbitant prices, with most offers below the asking price.

Amidst the downward pressure on asking prices, the FNB House Price Index declined from 3.5% in 2022 to just 0.8% in August 2023.

In addition, roughly 65% of properties spend three months or longer on the market compared to roughly one-third last year.

Samuel Seeff

“The average purchase price is also under pressure, and buyers are now spending less on homes,” the group said.

According to ooba, home loan applications have dropped roughly 30% since 2021 and 25% since 2022.

“The upside for the market is that while we are now largely back to the 2019 pre-pandemic volumes despite the higher interest rate, the bank lending conditions are significantly better,” the group added.

“Home loan approval rates, for example, have remained largely unchanged with over 80% of applications being approved.”

In addition, deposit requirements are also below 10% on average – the lowest level in nearly a decade.

First-time buyers are also offered 100% loans, with the group’s mortgage originators reporting an approval rating of over 80%.

“As we head to the busier period for the market, we expect an upsurge in buyer activity. Similarly, many sellers will be looking to get their property sold as quickly as possible so that they too can move before or by the new year,” the group noted.

That said, sellers must be realistic with their asking prices, as there will definitely be higher stock levels in many areas.

“If your price is out of step, you will need to drop your price, especially if you are selling in some of the more challenging areas, such as Gauteng.”

Read: 3 new shopping malls in the works for South Africa

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