Property market trends play a significant role in shaping buyer perceptions.
“Given the extensive and ongoing media reporting about the existence of a buyer’s market, property bargains that abound and the increasing number of distressed sales, sellers should therefore be aware that many buyers share a common perception that, in this market, they have the upper hand. And this significantly influences selling prices of properties at the moment,” says Adrian Goslett, CEO of RE/MAX of Southern Africa. The First National Bank (FNB) estate agent survey for the third quarter of 2010, which has just been released, estimates the percentage of properties being sold for less than their previous purchase price at 14%, while around 40% are sold at a price equal to their previous purchase price. This means that, on average, only 46% of the total percentage of properties being sold are achieving prices higher than their previous purchase price, of which 38% are being sold at just 10% above previous purchase price.
“Therefore, the best way for sellers to establish a fairly accurate market value for a property in the current market is to look at the selling prices achieved by similar properties in the same area in the last few months,” he says. He adds that buyers are aware of the fact that property sales are not as robust as they were a few years ago and that the number of distressed properties on the market is still growing. “For this reason, many buyers are indeed expecting to find a bargain when they buy a property in the current market, which means that an overpriced property will sit on the market for longer,” says Goslett.
FNB survey statistics, such as the fact that 25% of sellers are selling their homes to downscale due to financial pressure, further increase buyers’ perceptions that they will be able to reduce the asking price substantially through negotiation. The report also shows that 81% of sellers, on average, are required to drop their asking price to make the sale with the estimated average drop being 12% of the initial asking price. “Realistic asking prices are therefore a crucial factor in achieving sales in a buyers’ market,” explains Goslett, adding that only then will sellers be able to shorten the average time a property is on the market before being sold, which is currently estimated at 15 weeks and four days.
