Is South Africa experiencing a property shortage?
The index 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, suggesting that demand slightly outweighs the supply.
"The average time on the market is now at just over two weeks, although well-priced units are selling almost as soon as they come onto the market," said Ian Slot, Seeff's managing director.
By late last year, just over 520 unit sales were recorded for the City Bowl area in Cape Town, more than double the highs of 2009 (260 units) and about 10% ahead of 2013's figures, for the area.
The total value of around R970 million that Seeff made from sales was also well over double the value generated in 2009 and about 30% up on 2013's value.
However, Cal de Beer, sales associate for RE/MAX says that property values have increased, but not necessarily the quantity of properties sold.
"It is however interesting to note that in the suburb of Tamboerskloof for example, the number of houses (not flats) sold in 2014 is almost half of that in 2004 ten years ago. In spite of this, the total Rand value of sales of houses in that suburb has increased," said de Beer.
Slot went on to explain that sellers are also getting on average within about 5% of their asking price, probably among the best price differentials across the city and even country.
De Beer agreed: "Many sellers are getting their asking price, and some buyers are even offering more than asking price although this is an exception rather than a rule."
Popular Cape Town properties
Laurie Wener, managing director for Pam Golding Properties in the Western Cape's Cape Town metro region said, in a statement that in high demand areas, such as the Cape's sought-after Atlantic Seaboard and popular Southern Suburbs, the fact that the demand exceeds the supply tends to narrow the margin between ceiling and asking price.
This, for example, can be seen in popular Newlands.
"Newlands quite possibly ranks as one of the most popular suburbs in the entire Greater Cape Town precinct. This is due to the beautiful leafy ambience, its exceptionally convenient central location – only 10km from the CBD – and most important of all, its close proximity to many of the Cape's best schools,"said Gareth Edwards, from Rawson Properties.
The popularity of Newlands, said Edwards, has resulted in a 16% year-on-year price rise – one of the biggest increases seen in any residential area in South Africa.
"This is definitely an upmarket suburb and the high prices are particularly remarkable as the homes here tend to be smaller than many in other upmarket suburbs, such as Rondebosch or Constantia," said Edwards.
"Most suburbs have a ceiling price which obviously fluctuates with market conditions," said Wener.
If the costs of building and renovating exceed that which can realistically be obtained in the market place, then this is over-capitalisation.
"However, over-capitalisation can be reduced by capital growth achieved over the time that the property is held," said Wener.
She explained that the luxury or high end category of the housing market is more difficult to evaluate due to the uniqueness and lack of comparative properties.
"We spend a huge amount of time and research to ensure solid and realistic valuations. Over exuberance by inexperienced agents and unrealistic expectations by sellers always make it a challenge. Over valuing property does no one any favours, in fact it usually jeopardises the whole transaction," said Rainer Kloos, a property consultant for RE/MAX.
However, even the most experienced agent may be incorrect in their assessment and there is also a high degree of subjectivity. This is especially with unique or iconic properties and in an environment of market fluctuation.
Pricing a home to sell
Even though it is a seller's market at the moment that does not mean it is always easy to sell a home, according to Pam Golding.
"Pricing a home to sell requires a subjective view of the property", said Stuart Millar, Pam Golding Properties area principal in uMhlanga and uMdloti, in KwaZula-Natal.
"Sometimes people start at the 'wrong' end and work backwards, by looking at how much they've spent on the property and what they'd like to achieve for it. It's advisable to consult a qualified and experienced agent in the area who knows what prices have actually been achieved for comparable homes in the recent past," said Millar.
Finding the right price
While talking to an estate agent about valuing a home, there are other ways to determine the price. By finding out how much other properties sold for in the same area, as well as using the comparative market analysis (CMA) a seller can get a better idea of what to ask.
"While using the CMA as a basis, the general market activity, sentiment and many other economic factors must be taken into account in assessing the current value, which is where an experienced agent's skills come to the fore," said Wener.
However, sellers must not forget that the more buoyant the market, the greater a role the emotional factor will play.
"Many properties have an emotional draw and it is not unusual for beautiful furnishings or a lovely garden to attract a premium price over the similar but less appealing house in the same street," said Wener.
"This makes correct pricing crucial as the buyer pool is in action in the first two weeks of the mandate being listed and launched to the marketplace, so if you don't capture that market then, you've lost those buyers," said said Carol Reynolds, Pam Golding Properties area principal in Durban, Durban North and La Lucia.
Reynolds said that the last thing a seller wants is for their property to sit on the market for a lengthy period and then become 'stale', "as buyers know when a home is over-priced or remaining unsold, in which case they dismiss this property and move on."
De Beer concluded that sellers are in the 'pound seat' at the moment, being able to ask more than in previous markets.
"Buyers are currently desperate to acquire property (both residential and commercial) in this area, and consequently are prepared to pay more in anticipation of good future capital growth, so sellers are definitely in the pound seats, being able to demand higher prices than they would have been able to in a market with lower demand," said de Beer.
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