PUBLISHED IN THE BUYER'S MARKET OF 2010.
Has Cape Town’s Residential Property Market hit the bottom?
“Absolutely not” says Phil Wilson, Director of Alexo Property Brokers, “If the residential property market had already reached its’ low point, we would be able to confidently say that a property for sale now would achieve a higher price than it would have in the recent past. The truth is that the residential property market is still in decline and it has been since the high point of 2007.”
“It has become evident to me that the majority of recent PR about residential property, being delivered by industry leaders, refers to a recovery in the property market. I believe that this PR, generally from estate agencies, is aimed at purchasers, encouraging them to release their cash now at the “low point” in the market. The problem with this message is that sellers are being conditioned to believe that the property market has hit the bottom and is on its’ way up. The result of this is that the few buyers present in the market are becoming frustrated, as they are not seeing sellers’ prices drop. The many sellers in the market are feeling even more frustration, as they are not seeing written offers close to their asking price.”
“Sure, there are definitely recent cases where properties in Cape Town have sold at close to the asking price, a price far higher than expected. But these high prices have been achieved through an emotional purchaser buying a property from a non-urgent seller, whose property has generally been on the market for a long period of time.
For example, use a few of City Bowl’s high value sales & show no of days on the market.
These examples give estate agencies the opportunity to deliver a message of recovery to the market. The information that they fail to disclose is how low these volumes of exceptional transactions are compared to how many properties remain unsold and are still on the market.”
City Bowl – Sales Volume (100) : Show Day Volume (100) Q3&Q4 2009
City Bowl – Sales Volume (50) : Show Day Volume (200) Q1&Q2 2010
“Due to the combination of the banks’ strict lending criteria and the National Credit Act, the majority of potential purchasers present in the market are bargain hunters with cash. They are the extreme opposite of the emotional purchaser. These cash buyers are simply not finding their bargain, in what they believe is supposed to be a “buyers market”. If the residential property market has already reached its’ low point, why have the majority of cash buyers not yet been able to purchase their bargain? To me, the answer lies in simple economics. There is still a massive over-supply of property on the market, at prices too high to achieve any kind of realistic demand from cash buyers.”
Number of Sectional Title Properties on Show as at 1 September 2010 (200) @ Average R/m2 R20,000 vs Actual Average Selling Price per m2.
“The residential property market’s low point lies in the future, not the past. It will be achieved through the emergence of sellers, with a really urgent need to sell, dropping their prices to a level acceptable to cash buyers. Sellers, who do not have an urgent need to sell, realizing they will probably not achieve the price that they desire, will withdraw their property from the market. Supply will fall and demand will grow. That will signal the beginning of a true recovery in Cape Town’s property market!”
Phil Wilson of Alexo Property Brokers gives free advice to Property Owners.
He can be contacted on firstname.lastname@example.org