What Kind of Market Are We In?

There’s been a fair bit in the press lately about our changing market. There is no doubt that things have changed in the past 9 months. But according to our research the current Helderberg market is different to growing markets of times past.

There are 3 kinds of markets: a Buyers Market, where there are more sellers than buyers – a Sellers Market, where there are more Imagebuyers than sellers – and a Balanced Market, where there are equal numbers of buyers and sellers.

The first thing to appreciate is that the property market, like all markets, reacts to supply and demand. When demand is low and supply increases, then prices drop. When demand is strong and stock levels decrease, then prices increase.

From 2008 – 2011 we saw a dramatic increase in the quantity of properties available, as the market became flooded due to owners’ inability to afford their repayments. Buyer numbers were very limited as banks declined about 60% of all bond applications, and were giving relatively low loan-to-value loans. Buyers simply didn’t have the cash required to make up the difference. The result was the property values dropped, in some cases by up to 35%.

From 2012 we have seen a steady increase in bank lending, with more purchasers being able to obtain homeloan finance. An increase in sales has lead to a decrease in supply. A few years ago there were approximately 1000 properties on the market in Somerset West. Now there are less than 500. The increased demand and reduced supply means there is upward pressure on prices.

But, in the Helderberg area, there is a difference this time over previous markets, at least in my 25 years of real estate. The difference is that this time we have all 3 kinds of markets at the same time, but in difference market segments.

Our research shows that in the price range up to approximately R 2 750 000 there is a shortage of listings, and a strong supply of buyers. The means that this market segment is currently a Sellers Market – with good upward pressure on prices. Buyers have to compete strongly to secure a property.

In the market segment between R 2 750 000 and R 5 000 000 there are equal numbers of Home-builder-confidence-rose-in-June_13_633443_0_14074535_500buyers and sellers – a Balanced Market. This means that sales are taking place at a good rate, but there is not as much upwards pressure on prices as buyers still have a range of listings to choose from. We may see this change soon as listing numbers reduce – and we’ll keep our eye on this segment.

In the price range above R 5 000 000 there are still relatively higher stock levels in comparison to the numbers of buyers. So this market segment, at least in the Helderberg market, is currently still a Buyers Market. That doesn’t mean prices are falling here – in fact they are growing at a healthy pace. But what it does mean is that there are more listings than buyers here, and sellers need to price more competitively to attract interest and secure a sale.

It must be said though that, in any market, a property that is correctly priced and well marketed will sell at market value. The good news is that, across all market segments, there is healthy growth.

Steve Caradoc-Davies
Principal of Harcourts Platinum, and Director of Harcourts South Africa

Email your real estate question to steve.cd@harcourts.co.za.

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