So, How's the Market?
Category Property News
Being involved in the Property Industry, the most common question I get asked when either meeting people for the first time, or even when socializing with friends, is… “How’s the market?”
Its sometimes a difficult question to answer because you have so many stakeholders in the property industry and therefore to give one standard answer to this question probably wouldn’t satisfy everybody. So here is a snapshot of how I would imagine the market may appear right now to the various stakeholders in the Durban North property market, as we sit at the end of 2011:
The “Not-so-Serious” Seller – The market is not so good for this type of Seller right now because there are so many of them who have listed their home for sale on the market at an unrealistic price, and because they are quite prepared to sit back and wait for the “right” offer to come along, their home sits on the market for a prolonged period of time. Unfortunately the active buyers in this current market are well educated on market value and wont present an offer anywhere near the price these Sellers are expecting. The result is that their homes remain on the market for extended periods of time, and this becomes even more counter-productive in the long-run.
The “Serious” Seller – In the Durban North and surrounding suburbs right now, the serious seller will find that the property market is actually starting to look pretty good for them. Why? Well most serious sellers have a strong motivation to sell because of certain factors in their life, and therefore they are more inclined to price their property correctly to achieve the desired result. Because the buyers are so used to seeing stock on offer from the “not-so-serious” seller with an over-zealous price tag, when they do come across a well-priced property that represents good market value, they flock in their numbers and offers come in quickly. Right now, agents in our office are selling these types of homes within days of them coming onto the market. In fact, we have one agent who’s last 3 properties have all sold in 1 day of being listed on the market. Incredible. Pricing right now is the most important decision a seller has to make in the current market.
The Cash Buyer – most of the press will have you believe that we are still in a typical “Buyers’ Market”, but what they don’t often tell you is that despite the large amounts of stock that is available, the buyers that still have to finance their property through the banks are finding it tough in this market. Therefore those buyers who have cash available to purchase their home are certainly sitting quite high on the “food chain” right now. When presenting a full cash offer, not only is the buyer in a position to negotiate, but more importantly with regards to properties listed by serious sellers, these buyers are in a position to act swiftly when the good stock hits the market. Make an Offer. Get it accepted. Deal done. What a pleasure.
The “Salaried” Buyer – As mentioned above, these Buyers are placing offers subject to them getting a Home Loan Application successfully granted. The national grant rate is still around the 50% mark, and is improving slightly, however the banks are scrutinizing all applications like never before. 21 working days is a minimum period that should be allowed for a bond application on a Sale Agreement and therefore the Seller is never really assured of the sale until this period has lapsed, or the bond is granted. For these buyers, the one negative of buying in this market is that the concessions on the interest rates that the banks are offering are, in general, prime rate and above. Gone are the days of prime less 2% interest rates. Having said all this, if these buyers are pre-approved, and have their affairs in order with the bank before they make an offer, this market is still a good one for them, and they just have to wade through enough properties to find the one that represents best value to them.
The “Self-Employed” Buyer – In terms of all the stakeholders on this list, I would say that the current market is treating these buyers only slightly better than the “Not-So-Serious” Seller. These buyers are really finding that the banks place a premium on the risk they present, and therefore the scrutiny applied by the bank on their application is extremely tough. In fact, if you have a new business, or one that has been operating for less than 3 years, you will find that you already fall short on the requirement of 3 years of financial statements, and getting a bond is almost impossible. To be blunt, 2 of the major banks will not even entertain their application in this situation. Unfortunately it doesn’t really matter if you are in a Buyer’s Market or not, if you can’t raise the finance, you can’t buy the property.
The Landlord – with everything mentioned above, renting still presents a good option for those who cannot afford to buy, and it’s the Landlords who benefit from this. Unfortunately though, in our market, rentals very rarely cover your bond and rates, and the landlord will typically be subsisding these expenses. With rental stock on the short side at the moment, rentals being achieved by Landlords has increased in 2011.
The Tenant – they are paying slightly higher rentals than this time last year, however tenants will find that they are currently able to rent in accommodation that ordinarily they may not be able to afford should they purchase the property for themselves. For example, a property in Durban North worth R1,500,000 would require a monthly bond repayment of approximately R15,000 (assuming 100% bond), yet this property would be rented out in the region of R7,500 per month.
Now, imagine running through that answer around the braai this summer!
Here’s wishing everybody a successful, prosperous year in property in 2012.
