Author: Siphamandla Mkhwanazi
9 July 2020
Most SA houses are now worth less due to Covid, but these are selling at above asking price.
- FNB expects house prices will fall by 5% this year.
- More than 90% of properties above R750,000 are selling below asking prices.
- But some cheaper properties sold above asking prices.
In a new report, FNB predicts that property prices will fall by around 5% this year – but properties that cost less than R750,000 should be more resilient.
FNB analyst Siphamandla Mkhwanazi says while prices of houses above R750,000 should fall, relative resilience in the affordable market is expected.
In the past three months, only 39% of properties below R750,000 were sold below asking price – compared to a whopping 92% of pricier houses, an FNB survey among estate agents shows.
In fact, 5% of these affordable properties were sold above asking prices.
On average, for all SA properties, the final selling price was 12% below asking price in the second quarter, from 13% in the first quarter.
Houses below R750,000 now stay on the market for an average of 11 weeks, compared to the rest of the market, where houses are usually only sold after more than 15 weeks.
The negotiating power still favours buyers in the upper segments, and sellers in the lower end, says Mkhwanazi.
“Nevertheless, there is a ceiling to which sellers (in the affordable market) can push their asking prices, even with a supply deficit.”
“Downscaling because of life stage” is still the top reason for selling a property in SA, representing 23% of all transactions in the second quarter.
Concerningly, estate agents reported an increase in volume of properties believed to be put on the market due to financial pressure, FNB reports. The rise in selling due to financial pressure largely came from the market for properties below R1.6 million.
Nevertheless, an estimated 55% of these sellers return to the market and look for a cheaper property, as opposed to renting.
Emigration-related sales remained unchanged at 17% in the second quarter, after having averaged around 18% over the past year.
After the quietest property market in seventeen years in the second quarter this year – at the height of lockdown – Mkhwanazi expects both sales and house prices to decline significantly this year.
“Some pentup demand could be unleashed in the recovery phase (potentially from 2021), due to lower prices and borrowing costs. However, this will likely not be enough to replace the lost demand (possibly constrained to sought after areas) due to very weak labour market outcomes and the uncertain economic outlook.”
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