Short supply of properties to buy and rent
The FNB Valuers Residential Market Strength Index indicates the supply and demand for property.
It is measured on a scale of 0 to 100, with a level of 50 indicating a balanced market where the supply meets the demand. For December 2014, this level was at 50,44, which suggests that demand slightly outweighs the supply.
John Loos, household and property sector strategist at First National Bank (FNB), agrees that the demand for properties is exceeding the supply, however, not by extreme amounts.
He said: "For the past three years we have seen mildly positive real price growth. When you adjust for consumer price inflation you have price growth exceeding consumer price inflation and I think that reflects a mild mismatch between demand and supply, more demand than supply, but only moderately."
The availability of property
Real estate agents seem to be of the opinion that there is quite a large shortage of properties on the market. Caron Leslie Broker/Owner of Re/Max Property Associates in Tableview states that the demand for rental properties, as well as properties for purchase is high.
She said: "We can't keep up with the enquiries we are receiving for rental properties. In the Western Seaboard there is definitely a desperate shortage of rentals available especially in the middle to lower end of the market. And the demand for homes to purchase is very strong. In the current market conditions there are multiple offers on a property."
Grant Rea, rental specialist at Re/Max Living in Cape Town said: "The demand for rental properties outweighs the supply to such an extent that you often have countless prospects both queuing outside the property and being willing to pay rentals in excess of the asking price or a year upfront."
According to Cape Town based Durr Estates property consultant Angela Kewney, in the last two years the demand for both rentals and homes for purchase has increased drastically, with the supply not meeting the demand.
Kewney explained that a lot of people seem to prefer the prospect of not maintaining their own home and prefer rentals as a result as they are not ultimately responsible for the home's upkeep. "We find that a lot of people also can't afford to purchase on their income or are black listed."
In the rentals market at the moment, there seems to be the highest demand for two bedroom cottages and apartments with parking. Rea points out that the time from listing to lease conclusion is less than five days.
The seller's market
Real Estate agents believe that it is currently a seller's market, as the demand for properties is so high. Sellers are able to demand high prices for their properties as the demand far outweighs the supply. Kewney said: "With the increase in demand, sellers are not willing to negotiate and tend to fetch their asking price, often in a very short period of time."
Rea noted: "There is a renewed confidence in the purchaser market, with many of the new properties that the company [Re/Max] is adding to its portfolio being new landlords and property investors who are purchasing multiple rental properties. Properties don't stay on the market long and the demand remains high.
The property market at the moment seems to be weighted in favour of sellers as they are achieving very close to desired asking prices and the period from listing to sale is quite short, particularly in the City Bowl and the Atlantic Seaboard."
Financing your house
Despite it being a seller's market, Leslie says that people are reluctant to sell and move on as they are unable to obtain a home loan to finance another property. However, Loos disagrees saying that since the crash in 2008, banks are more relaxed about giving loans, but people still have to meet the criteria laid out by the bank when applying.
In some cases sellers are asking more for their properties than what they are actually worth, in the third quarter of 2014, about 86% of sellers had to drop their asking price, which Loos believes brought the price of the house to a more realistic value.
Loos notes: "Many of us start off deliberately too high, so there is always going to be a person in the market that has to drop their asking price ultimately and that doesn't always say everything about the market."
After applying for a bond, the application goes through an approvals process. During this time a valuer will conduct a valuation on the property. If the valuer finds that the property is not worth the offer to purchase and the bond application amount, the bond application will be denied.
However, Loos believes that rather than being angry at the rejected application, buyers should use the valuation as a guide, adding: "The valuers that the banks employ are professionals, they are highly qualified at valuing properties."
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