Eastern Cape market lull blamed on rampant overpricing

The current market lull in the buying and selling of residential property in the Eastern Cape market has been dumped mainly at the door of the industry’s leading bodies and the Estate Agency Affairs Board.

Unscrupulous real estate principals have also been landed a sharp uppercut, by John Cooper, who claims that because of their ineptitude or inability to compete fairly more than 50 percent of practicing agents in the region lacked the necessary qualifications and supervision to operate in an industry rampantly dependent on many lifesavings.

Cooper, owner of the Chas Everitt International franchises in Port Elizabeth, Jeffreys Bay and St Francis Bay, brands the degree of over pricing as a “sickness” also blames greedy sellers to trying to dictate to the market. He acknowledges a seller’s right to market pricing, but says these rights have lost touch with reality pointing out that up to 70 percent of homes for sale in the region are overpriced by between 20 to 30 percent. “Few (sellers), if any, listen to the advice of agent’s recommendations on pricing anymore.”

Worse still, and in spite of widespread publicity given the subject, many sellers are refusing to budge from their loftiness to the point that Cooper forecasts market activity and price growth being negatively affected this year. “Normally a high percentage of sales are from people upgrading, but sellers stand-off on price negotiation is beginning to suffocate this tradition.”

Others, especially in the lower end of the market are also being squeezed out, often marginally so, by not being able to meet asking prices.

Kobie Potgieter, owner principal of Port Elizabeth’s RE/MAX Independent, agrees that the stultifying impact on the market from overpricing could dampen price growth, forecasting a five to ten percent annual growth if the current sluggish conditions prevail, whereas Cooper believes given a “normal” market it could be as high as 15 to 20 percent in Port Elizabeth given the strength of a local economy buoyed by burgeoning industrial development.

Apart from overpricing, which Potgieter agrees is widespread in the region; she believes the situation has been exacerbated by properties selling at inflated prices during the boom. “Because of that bull run many homes were sold at inflated prices as a result of eager buyers paying asking prices rather than entering into negotiation and this has contributed to sellers digging in their heels.”

However, Potgieter does see some light at the end of the tunnel. “Properties, which were previously selling themselves now need the marketing skills of experienced agents with good negotiating skills and proper budgets to reach buyers.” Already she has witnessed a tapering off in the influx of new agents joining the industry and expects this to grow as principals come under siege from tighter budgeting, particularly from advertising costs.

Cooper agrees up to a point, but makes a strong case for meaningful intervention by the industry in terms of greater selection of new agents and by the EAAB introducing an apprenticeship followed by a comprehensive examination before agents are allowed to practice. He is particularly critical, in keeping with many other industry captains of the current candidate agent system, which allows such agents full agent status after one year’s industry service without passing any examination.

“Right now the industry is plagued with too many rats and mice unable to do even a basic comparative market analysis, which is the first and most basic service an agent gives to his, or her, client.”

Rudi Botha, CEO of mortgage originator BetterBond, believes principals should play a greater role in valuations in the form of backing up their agents valuation, but concedes this would still not over ride the price determination of a strong minded seller.

“It all comes down to the agent’s ability to educate the seller on price and here I believe agents could be better prepared on their own market knowledge that if well presented could influence some of even the most obstinate sellers.”
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