Sellers must get real with their asking prices to sell in this market

While there are always exceptional areas, the reality for the market is that with fewer buyers, a slower pace of sales and lower prices being offered, sellers must now be realistic with their asking prices, says Samuel Seeff, chairman of the Seeff Property Group.

After a buoyant few years’ the market has slowed notably this year with some areas seeing a decline of up to 30%-40% in sales activity compared to the highs of 2021/2. Buying power has been affected by the higher-than-expected interest rate and while we are pleased that it has remained stable, it remains an impediment for the market for the foreseeable few months.

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.

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. Seeff says it was a disappointing winter as the pace of sales slowed notably.

We are now decidedly in a buyer’s market characterised by fewer buyers and more stock coming onto the market in most areas. Buyers are taking longer to put pen to paper, and since there is little competition among buyers, they are no longer willing to pay those high prices, and in most instances, offers are coming in below the asking prices.

Price growth trends reflect the downward pressure on asking prices. The FNB House Price Index has declined from a high of 4.2% in 2021 and 3.5% in 2022 to just 0.8% in August. This year’s growth has slowed even further from 2.8% in January to a negligible 0.8% in August.

Seeff says that about two-thirds of all properties now spend three months or longer on the market compared to just about one-third a year ago. The average purchase price is also under pressure and buyers are now spending less on homes. Seeff says according to mortgage originators, ooba, home loan applications are down by about 30% from the highs of 2021 and 25% since last year.

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

Deposit requirements are also still below 10% on average which is still the lowest in over a decade, says Seeff. Additionally, 100% loans are still available for first-time buyers and here too, Seeff’s mortgage originators report approval rates 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.

Sellers will, however, need to be realistic with their asking prices as Seeff says there are definitely 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.