Rain or shine, cold weather or hot, the home sales just keep rolling on at the moment, with show days drawing flocks of prospective buyers and many properties attracting multiple offers.
“However,” says Berry Everitt, MD of the Chas Everitt International property group, “there is one big spanner in the works, and that is not having enough stock to sell.”
A quick survey among agents recently revealed that in the most popular areas there has been a decline of up to 60% recently in saleable inventory – with the properties that were available having either been sold or withdrawn from the market.
But, he says, those sellers who are backing out now in the belief that rising demand among buyers will enable them to get a much higher price six months or a year from now are making a big mistake.
Writing in the latest Property Signposts newsletter, Everitt says: “The truth is that while there is no shortage of buyers at the moment, and that well-priced properties are selling faster than at any time in the past five years, there are several factors in play now that mitigating against any really significant price increases in the coming months.”
And all of these have to do with the fact that interest rates are widely expected to rise over the next few months – the Reserve Bank’s most recent decision to keep them static notwithstanding.
For one thing, he says, rising interest rates mean declining affordability, because they raise the proportion of income that prospective home buyers have to put towards paying off their debts. “This means they can only qualify for smaller home loans and become extremely value conscious and willing to negotiate hard to pay lower prices.”
Secondly, whenever interest rates start going up, the banks get more wary about granting credit, and more conservative in their valuations of the properties on which they are being asked to grant loans. “And once again, this translates into downward pressure on home prices, and a dwindling supply of buyers.”
Consequently, says Everitt, the best advice for home sellers at the moment is to stay in the market, take professional advice on pricing their properties correctly and make the most of the current still-strong demand to achieve a swift sale – “bearing in mind that this will put them in a good position to secure a loan for their own next purchase”.
Issued by Chas Everitt International – http://www.chaseveritt.co.za/