The market is a wonderful schoolmaster. It eventually disciplines sellers and ensures that market pricing prevails where transactions result. Over-pricing is endemic across the higher end of the residential property market and sellers are typically slow to respond to changes in market conditions, hoping to hold out for conditions with stronger demand than allow pricing to adjust downwards to meet the demand. In this way house prices are "sticky" downwards, to use an economic term.
The average time a property remains on the market prior to a sale is an excellent measure of market demand and the recent FNB Estate Agent Survey indicates that in the 3rd quarter of 2018 the average time on the market was 17 weeks and 6 days, a further lengthening from the prior quarter of 16 weeks and 4 days.
This measure suggests a market that remains on a weakening path. The other measure frequently cited for market demand is the percentage of sellers that have to reduce their asking price in order to realize a sale.
The 3rd quarter figure was measured at 93%, slightly down from the exceptionally high 96% recorded in the prior quarter. This figure remains very high by historical standards indicating how rare it is in this market that a seller manages to sell their home at their asking price.
Sellers will often refer to the level of investment in a property, or the length of time they have held the property, to defend a certain position on price. These aspects are always important for a seller or property owner but largely irrelevant to the market and pool of buyers that will ultimately determine transaction pricing based on comparatives and affordability.
So if 93% of sellers currently have to reduce their pricing in order to realize and sale, by how much are the typically reducing their price This is also measured by FNB and the 3rd quarter figure is provided as -8.6% from the previous quarters' -9.2%.
There is an interesting difference between the length of time a property is on the market within the Gauteng Metro and the three main Coastal Metros of Durban, Port Elizabeth and Cape Town. Gauteng's average time on the market for the 3rd quarter was 15 weeks and 1 day, while the average for the three main Coastal Metros was 22 weeks.
On a national basis FNB regard the equilibrium length of time on the market to be 12 weeks. This would represent an equal match between market demand and supply. Currently we are trending away from this equilibrium threshold.
A measure of market demand that FNB measure is the serious viewers of show houses. For the 3rd quarter 2018 this was measured at 10,77, which is slightly up from the 10,42 of the prior quarter.
If you consider a moving average figure of the last 4 quarters to remove any fluctuations, the figure is 10,32 indicating the trend line is flat and that it is well below the 14,42 high reached in the final quarter of 2013.
In times of market weakness such as we are experiencing current Sellers should pay special attention as to how best to present their property relative to other similar homes in the market. An experienced estate agent would provide real value and astute advice.
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