Bugle Sales Talk Editorial

The key take-away from this most recent report is that the overall market can still be described as stable but that the key growth variables are moving downwards indicating a potential slow-down on the horizon. An interesting measurement that has come out of the report is the number of serious visitors to show houses. The figures presented show an average of 9.31 viewers per show house in the 3rd quarter of 2015, which is down from 11.05 in the previous quarter and 11.5 in the 3rd quarter of 2015. Are show days an important indicator of residential demand? Yes they definitely can be - certainly in areas that lend themselves to show days (i.e. traditional suburbs such as Ballito rather that gated communities such as Zimbali and Simbithi that do not permit show days). The change in attendance levels at show days can therefore be an early indicator in the change in levels of demand for residential property.

The level of stock constraints is another of those early indicators of a change in residential property demand. Currently, as at the 3rd quarter, this is measured as 17% of agents in SA citing stock constraints as a significant enough aspect of residential activity in their markets and has been trending downwards over the past two quarters from 24% in the 1st quarter of 2015. So what is the normal level of stock of saleable properties in any residential market at any point in time? A useful rule of thumb is that 10% of the existing stock can be expected to be on the market at any one point in time. So out of the 1,000 homes in Zimbali we can expect 100 of these to be on the market at any one point in time. Some markets however, such as the V&A Waterfront in Cape Town, do experience acute stock shortages with prospective buyers far outweighing the number of sellers. Stock levels recorded below 1% have been reported to me by the leading Seeff agents operating in that market. For them it is all about sellers as the buyers compete for the available options.

The price realism indicators of the number of days a property remains on the market before being sold and the percentage of sellers having to drop their asking prices in order to achieve a sale are not as yet providing clear evidence of a trend change in residential demand. The number of days on the market figure for the 3rd quarter 2015 is down to 11 weeks and 1 day from the previous quarters 12 weeks and 1 day. Since the 3rd quarter of 2014 when this stat was 11 weeks and 4 days, this measurement has moved largely sideways. The current low is a bit surprising, as we would expect homes to remain on the market for longer as the demand levels slow down.

The number of sellers having to drop their price to close a sale is now at 87%, unchanged from the previous quarter, but significantly higher than the recent low recorded in 2nd quarter of 2014 of 78%. The average amount that selling prices have to drop in order to secure a sale has been recorded at -9% in the 2nd and 3rd quarters fro 2015, which is down from the -8% recorded in the previous 5 quarters. This increase would tend to lead as to think in terms of an early indicator of a potential change in residential property demand levels.

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