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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2016-07-08
When Tyra Banks, Sports Illustrated Swimwear and Victoria Secret model, and uber celebrity, decides to adjust the pricing on her Beverly Hills home it makes headlines in the Los Angeles Times. It was recently reported that she decreased the asking price on her home from US$6,9m to US$6,5m. This is a second downward adjustment as the home was reported as originally listed at US$7,750,000. A 16% plus discount off the original list price is significant, especially by US standards, which typically has a far more active residential real estate market that we may be used to. The home is a 600 sqm, four bedroom, five bathroom villa with a triple garage. By Zimbali standards it looks like a reasonably modest home. The US$2m renovation (sounds more impressive as a R30m renovation) resulted in a well appointed and modernized residence but the 1920's Spanish Colonial architecture does not do much for me. This price reduction was of interest to me as it is similar to a home we first listed in Zimbali at R7,750,000, which also had a major renovation done to it and which we are now considering adjusting to an asking price of R6,9m. Just as in the case of Tyra Bank's home, the next price threshold down would be R6,5m.

The currencies and scale may differ but the reality of the residential market and painful adjustment downwards by the seller remains the same. At every stage a seller will be doing a cost-benefit analysis - comparing the cost of holding on and paying the monthly accounts associated with ownership of the property to the benefit of a sale but at a possibly lower price. As agents we see the same sequence of events over and over again. Every property eventually sells. This is a fact. However in the face of recessionary clouds and crazy uncertainty both locally and internationally, the smart move is more than often a quick and decisive price reduction by the seller in order to seek out a willing and able buyer, rather than holding out for potentially higher pricing that may or may not result. People buy on the value a home represents relative to the rest of the market for similar or alternate opportunities. Alternate opportunities can range from vacant land to an investment in a business or even other asset market such as equities.

To gain an understanding of what the current market for residential properties looks like within Zimbali Coastal Resort it is instructive to analyse every recorded sale since 1st Jan 2014. Our data is taken straight from the deeds office reports we subscribe to. A total of 232 sales amounting to a gross sales value of R1,32bn traded hands. Of these R450,4m was represented by 95 sectional title transactions and R870,2m by 137 freehold transactions. It is interesting to note that of the 29,764 sqm of sectional title property that transacted, the average price per sqm was R15,132.57. As a seller of a current sectional title property, if your asking price is higher than this average rate per sqm then you are either priced above the market average or you must have a compelling reason as to why you think your property should carry a premium. Sectional title properties are often similar in nature, especially within the same sectional scheme. This makes value comparisons in terms of the rate per sqm more meaningful and a useful guide to expected selling price. Freehold properties are a little harder to value in that there are always large differences between properties even when located next to each other within the same road. Subtle variations between quality and design between homes can have a significant impact on what the home eventually trades at. Nevertheless the market, rather than the seller or estate agent, eventually dictates the pricing if a transaction is to result.

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

Andreas Wassenaar

Principal - Seeff Dolphin Coast

Cell: 082 837 9094

andreasw@seeff.com