Is your area flashing “buy” or “stop” signals?

Before you commit to buying a home, you really need to know what’s been happening to property prices in your preferred area over the past few years so that you can gauge the likelihood of making a good return on your investment – or not .

“And,” says Braam de Jager, national operations manager of Aida, SA’s best-known estate agency group, a well-prepared agent will usually refer to a record of changes in the median price for the area (not the average) when giving you an answer.

“When the median – a price halfway between the highest and lowest prices recorded during a certain period – shows an increase, it means that more buyers are purchasing higher-priced homes in the area. When it falls, it indicates that a greater percentage of sales are taking place on the lower side of the scale.

“Consequently, median price shifts are a good general guide to the state of the real estate market in a specific area. But buyers must be aware that, like any statistics, they may not tell the whole story.”

He explains that the median price could be negatively affected, for example, by a batch of sales in a new development where unit prices are lower than those of surrounding single-family homes, and lead prospective buyers to think twice about an area.

“But actually, the fact that there is a new development in the area might be a sign of rising interest in the area and a likely surge in prices in the near future – quite the opposite of what the median price movement would appear to show.”

Consequently, De Jager says, it is important for potential buyers to also look out for other indicators of market strength – or weakness - the main one being the time it takes to sell homes in the area, “a statistic the agent should easily be able to draw from a Comparative Market Analysis”.

“If homes in the area took an average of four months to sell a year ago, for example, and the average listing time is now down to two months, it means that there are more buyers around or that there are fewer homes for sale, or both, and that price increases are generally on the way.

“Other very good signs of a local market on the rise are a declining difference between the average asking and selling prices in the area, and home sellers starting to receive multiple offers because demand in the area exceeds the supply of homes for sale.”

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