Buyers and sellers in the residential property market are now 'in equilibrium'



Buyers and sellers in the residential property market are now 'in equilibrium', and there's much more chance of a fair negotiation than in the past two years, when sellers were able to take advantage of low inflation, low interest rates and low stock levels. So says leading Johannesburg agency principal Lew Geffen, who notes that the slow price growth evident during most of the Nineties has been fully corrected over the past two years and that recent interest rate increases have had a further stabilising effect on the market.'We have entered a consolidation phase, in which buyers will regain their influence and value growth will revert to normal levels, for several reasons.'In the first place, he says, three interest rate increases this year have induced a drop in demand - and sales volumes - as marginal buyers and upgraders retreated from the market.Secondly, the impact of the increases and steadily rising inflation has already been felt by existing homeowners geared to the maximum, and resulted in more stock coming to the market.And thirdly, the serious buyers remaining are well aware that price increases have slowed and are no longer urgently househunting 'to beat the upswing'.'This is quite clear if one looks at the sales being generated from showdays. In 2000/ 01, we were selling 40 percent of the houses on show in any one weekend, compared to just 15 percent during the interest rate crisis of 1997/ 98. Now, this 'strike rate' is down to around 23 percent - which we regard as the normal market figure'.Also evident is a growing resistance to overpricing, as evidenced by an increase in the differential between asking and selling prices. In fact, says Geffen, any seller determined to hold out for a price more than 15 percent above offers received is now highly likely to find the property sticking.'Buyers now have a greater choice and, given the possibility of a further interest rate increase, are taking their time to make purchases that will give them some financial leeway, as well as value for money.'On the other hand, serious sellers who have adjusted to this new scenario and are pricing realistically are having few problems in disposing of their properties. Existing homes are still selling at a 25 percent discount to replacement value and this is expected to increase with rising delivery costs for new homes.' Article: Property24 News for the latest real estate news, visit www.property24.co.za