Property Talk

There has been a fundamental shift in activity within the residential real estate market this year from the lower levels to the higher priced levels. For the first time in many years we are seeing record prices achieved in Zimbali and stock shortages even starting to develop in price brackets that previously had an over-supply. Homes that have been on the market for extensive periods of time are suddenly trading.

These perceptions of the market, which we as estate agents gain from operating at the coal face of the industry on a daily basis, has been re-enforced by the recently published FNB Estate Agent Survey by market price segment. This report indicates that the Upper Income segment has gained more in terms of their activity rating and is now classified as the most active market segment, slightly ahead of the Middle Income bracket and High Net Worth segment. A noticeable gap has opened up between the Lower Income segment and the rest. The beneficiaries of this shift within our Dolphin Coast area are typically the gated estates of Zimbali and Simbithi that are able to service the Upper and High Net Worth Income segments.

An interesting insight from the report is that the high percentage of sellers in the Lower Income segment selling in order to upgrade (25%) has created a key driver of buyer activity levels in the next segment up, which in turn provides the opportunity for the Middle Income segment to buy into the Higher Income segment creating the demand we have now witnessed. Financial stress-related selling in order to downscale has remained at similar levels across the income segments - the Middle Income segment indicates this motive for selling at 16%, while the Lower Income, Upper Income and High Net Worth Income segments are all recorded at 14%.

What has been impressive is that the Lower Income segment's motive to sell due to financial pressure has declined from a peak of 38% in the 2nd quarter of 2009 to its current 14%. This is a dramatic improvement over this period and provides a sense that the market is in a far healthier place than five years ago. It is often cautioned that the low interest rates we are currently enjoying can mask the actual financial frailties and that as soon as interest rates will start to move up we can expect to see a weakening again. This may be true for a portion of the market, but when we consider that our overall household debt to disposable income ratio has improved from 83% to 73,5% over this period, it does show that households have stronger balance sheets than they did in 2009 and are better equipped to deal with the prospect of rising interest rates.

The two measures of price realism - the average time a property remains on the market and the percentage of properties sold at less than their asking price is best in the Lower Income and Middle Income segments but we have seen a rapid improvement of the Upper Income segment across these measures. The Lower and Middle Income segment homes are currently taking 12.1 and 11.2 weeks to sell. The Upper Income segment homes take 13.5 weeks on average and the High Net Worth Income segment homes are recorded as taking 16.9 weeks. Regarding the percentage of sellers having to drop their price to secure a sale, the Lower Income segment homes are ahead of the game with only 70,8% having to do so. The Middle Income, High Net Worth Income and Upper Income sellers by comparison are recorded as 82,5%, 85,3% and 86,3% respectively, but we have seen a significant improvement again by the Upper Income segment on this measure.

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

Andreas Wassenaar

Seeff KZN Chairman

Principal - Seeff Dolphin Coast

andreasw@seeff.com