PROPERTY: Property Market Turns Frosty
Recent Western Cape Business News
With most of the country in the grip of winter now, there’s also a cold wind blowing through the real estate market, and sellers would do well to note the drop in temperature.
That’s the word from Lew Geffen, chairman of Sotheby’s International Realty in SA, who says several factors have combined with the lack of credit availability to cause a distinct decline in market activity over the past two months.
“These factors include the extended school holiday period in April and pre-election apprehension, but the most significant is the new mood of debt aversion among potential buyers.
“With household debt levels still high, and fuel, electricity and food costs on the rise, many consumers are extremely wary of taking on any new debt, even when they can qualify for home loans. And this situation is being exacerbated by the prospect of interest rate increases as soon as the end of this year.”
In short, he says, home sellers need to accept that the World Cup euphoria and the interest rate cuts late last year, which bolstered the market right through to the first quarter of this year, have now run their course. “We are now feeling the lingering effects of the recession without any cushion, and this is not the time to stubbornly defend an unrealistic asking price if you need to sell your property.
More than 80 percent of sellers, Geffen notes, are having to cut their asking prices by between nine and 12 percent in order to achieve a sale – and listing times have lengthened again from five months at the start of the year to an average of 6,5 months – close to the average of eight months during the depths of the recession in 2009.
“There is, quite frankly, very little to motivate homebuyers at the moment except the prospect of acquiring a ‘bargain’ – a desirable property at a discount price – and homeowners who must sell should be prepared to be flexible.
“To aggravate matters banks are stickier than ever, and are loathe to grant bonds on properties whose prices are inflated in their opinion. However while it might be the winter of discontent for sellers, it is full summer for first-time buyers and upgraders.”
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