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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2013-11-15
As estate agents at the coalface of the property market, we have an intrinsic sense of market conditions and can quickly understand which segments of the market are most active. 

Our recent experience along the Dolphin Coast is that the lower end of the market is very active and outperforming the high end. This view is supported by the recently published FNB estate agent survey report analyzing the residential property market performance by price segment, and categorized into Lower Income, Middle Income, Upper Income and High Net Worth. 

The  activity levels in the bottom two segments suggest that this is where a lot of the trade has been happening. 

The main reason for selling in the lower bracket is to upgrade, the estimate of this currently being 24% of all these sellers. For the other three segments the incidence of selling to upgrade ranges between 15% and 17%.  

The lower bracket sellers are buying in the middle bracket thereby adding support to this segment with the result that both of the lower segments have performed well. 

The sellers in the middle income segment looking to upgrade are estimated at 15% thereby providing far less support to the income segment above it. Strong first time buying is a main driver of the lower income segment. Excellent examples within our immediate area are new developments such as Sheffield Manor and Manor Estates. 

As these are new developments, and therefore no resultant group of sellers from this pool are looking to upgrade as yet, the higher priced segment has not enjoyed support from this source. 

The impact of first time buyers on these developments is however significant and this pool of buyers is a key target market for these local developments. The financial stress-related selling in order to downscale has declined (improved) consistently across all the income segments but more rapidly in the lower income segment. 

Compared with the peak of 38% of the 2nd quarter of 2009, the lower income segment have seen their percentage of sellers believed to be downscaling due to financial pressure decline to 15,7% for the four quarters leading to and including the 3rd quarter of 2013. 

Whereas the lower income segment had a far higher percentage of sellers between 2008 and 2012 looking to sell due to financial pressure, this has been reversed over the past year and this financial stress related downscaling percentage has even moved below the percentages of middle income areas (17,7%), higher income areas (16,3%) and high net worth areas (16,3%). Selling price realism as measured by the period a property remains, on average, on the market prior to selling appears to be better in the lower income segment. 

For the 4-quarters up until the 3rd quarter of 2013, a home in the lower income segment would take 11,6 weeks to sell. The middle income (13,4 weeks), the upper income (19,5 weeks) and the high net worth (18,5 weeks) market segments indicate a greater degree of over-pricing. 

We have noticed this along the Dolphin Coast where properties in the lower and middle income segment trade relatively quickly with stock shortages now becoming more prevalent. 

The percentage of seller's having to decrease their asking price in order to secure a sale (84%) is also lowest in the lower income bracket, which compares to the 86,3% of the high net worth segment, 87,8% of the middle income segment and 91,3% of the upper income segment.

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.