Bugle Sales Talk Editorial

FNB have defined four national income segments: the High Net Worth segment (average price of R4,45m); the Upper Income segment (average price of R2,25m); the Middle Income segment (average price of R1,42m) and the Lower Income segment (average price of R856,300). Although these are averages and seem lower than what we may be used to in Zimbali (current average price is R6,831,345) or Simbithi (current average price is R4,317,792), the trends can be extrapolated to higher income brackets. When considering activity level over the past 4 quarters across these four income segments it becomes clear that the growth is coming from the Lower and Middle income segments with the Upper income segment turning downwards and the High Net Worth segment sharply down in terms of reported activity levels. This is a notable trend reversal with the High Net Worth segment rising sharply until around mid-2014. We have seen that the percentage of sellers selling in order to upgrade has started to turn lower in most segments, but even more so in the higher income levels.

It can be expected that the Lower Income segment would typically have the largest percentage of sellers selling in order to upgrade which is the case with 24.25% of these sellers selling for this reason. Within the High Net Worth segment only 15,5% of sellers sell in order to upgrade and this is trending downwards at a quicker pace than the other segments. This could mean that people are facing affordability issues as the house price growth has been steady over the past 3 years but the growth in disposable income has been slow. Fortunately so far the financial stress related selling has remained low and within a close band of 12-14% across all the income segments with the downward trend still evident. Two excellent measures of price realism are the average time on the market prior to a sale being achieved and the percentage of properties sold at less than their asking price.

Looking across the income segments we note that the Lower and Middle Income segments show 10 weeks and 9.6 weeks respectively as the average time on the market, and getting very close to the 8 weeks considered the norm in an actively traded market. The Upper Income segment is currently at 12.9 weeks as the average time on the market, but still trending downwards. The surprising reversal has come from the High Net Worth segment, which has moved upwards to 17.1 weeks reversing its downward trend. In terms of the percentage of properties sold at less than their asking price we see that the High Net Worth and Upper Income segments have remained very similar at 84.3% and 84.8% respectively. The Middle Income segment is at 80% and the Lower Income segment at 78.3%.

One of the certainties in the real estate market is that a seller will always want more than a buyer is willing to pay and a buyer will typically want to pay less. The interesting aspect is that percentage differences are opening up between the income segments indicating that activity levels in the more affordable price brackets are significantly higher. The recently increased rate of transfer duty payable from 8% to 11% for properties priced over R2,250,000 can be expected to impact negatively on activity levels at the higher end, while the lower end is benefitting from lower transfer duty.

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
  
• Word Count: 629