Property pricing calls for reality check

03 July 2018

Property pricing has been a much discussed topic in Cape Town in recent months as the stagnating market and price growth declines have seen more properties for sale than buyers.

The length of time properties are on the market has increased significantly, asking prices are being dropped, and although online activity remains strong, far fewer prospective buyers are actually going to view properties.

Schalk van der Merwe, franchisee for the Rawson Properties Helderberg Group, says there is no doubt that the first half of this year has been "uncharacteristically slow" for Cape Town property. Buyers are reluctant to take the next step because of current market conditions that are influenced by political uncertainty, the water shortage, a decrease in semigration, and - of course - affordability. The economic impact of the drought is also undeniable, he says.

So for the homeowner wishing to sell or let their property, it is critical that their homes are pitched at accurate, market-related prices that will enable it to compete with other comparable properties for sale or rent in the area. This is particularly important in the current market, which is becoming more favourable to buyers, says Lanice Steward, head of training for Pam Golding Properties.

"Today's buyers across all price sectors are extremely savvy and research the market thoroughly before committing to a purchase decision, so it's imperative that a property is not brought to market at an unrealistic price.

"If you don't capture the market within approximately the first two weeks, then it's most likely you've lost those prospective buyers."

Steward says it is a misconception that a property should be pegged at a considerably higher price than its market value, to allow for any downward negotiation.

"The fact is that overpriced properties stay on the market for longer and normally result in achieving a lower price than if they went to market with a more realistic price. This is because buyers look out for price reductions and then see this as an opportunity for a bargain, which is detrimental to achieving the best market-related price."

Annien Borg, managing director for Pam Golding Properties in the Boland and Overberg regions, adds: "We are currently experiencing a shifting market where buyers are starting to resist prices. With the rising cost of living, people have less disposable income and are generally more price-conscious. This makes it all the more imperative that homeowners who want to sell their properties ensure these are priced correctly."

Furthermore, sellers are advised to take note of the number of properties on the market that will be competing with their property once they go to market. On the sought-after Atlantic Seaboard in Cape Town, area manager for Pam Golding Properties, Basil Moraitis, says this area has entered a period of adjustment after enjoying double-digit price escalations over the past four years.

In addition to affordability issues and water crisis concerns, Van der Merwe says the previously strong inwardbound semigration trend that bolstered Cape Town property prices for many years appears to be slowing.

But this does not mean that the market it in turmoil as sales are still happening and properties are still appreciating.

"If we look at the sectional title market - a sector that makes up 59% of all Cape Town property sales - average year-on-year growth is at 8.8%, which is actually healthy. The problem is we've become used to averages like the 18.8% we enjoyed leading up to 2017, but that kind of growth is simply unsustainable in the long term."

Sellers just need to adjust their expectations to account for current market conditions, he says.

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