Residential real estate in overdrive due to demand

RESIDENTIAL real estate shifts into overdrive, sellers now reign supreme.

After idling at a sluggish pace over the last few years, the residential real estate market has shifted into overdrive, says Seeff chairperson, Samuel Seeff.

Despite the subdued economic outlook and second interest rate hike, he does not expect the buoyant demand in the urban areas to subside. Quite the contrary, he adds, the demand has been building for the last few years and we now see buyers scrambling to get their hands on attractively priced property.

FNB’s property strategist, John Loos, notes in the bank’s latest Property Barometer that he predicts that market activity will inevitably slow over the coming months. He believes that the poor economic performance, interest rate hikes and inflationary pressure will reign in the demand, but Seeff disagrees.

While we may see a seasonal dip over the winter months and buyers will undoubted have to budget carefully, the overall performance as far as we can gauge is still up on previous years, he says.

Consumers have been cutting back, improving their credit standings and saving for their deposits over the last few years and Seeff says they now see the effect on the housing market.

Not even the cold weather is keeping house hunters away as they continue to flock to show houses. We sit with a backlog of cash and credit ready buyers, but with stock levels down by about 40% year-on-year, our agents now battle with significant stock shortages, he says.

Seeff says the residential real estate market has turned the corner and is now in a definite upward phase. Homes are selling twice as fast compared to last year and about 90% of buyers now pay close to, or the full asking price.

Multiple offers and strong buyer competition is driving offers ever higher to above the asking prices in many instances. There is no doubt that we are now in a sellers’ market, sellers reign supreme, he says.

The primary housing market is hot, not only in the sub-R2 million sector, but almost across the board. Even at the top end, R20 million-plus sector of the market, stock shortages are a significant draw-back, says Seeff.

Foreign and trophy home buying are at the highest levels since 2007. On the Atlantic Seaboard alone, some 26 properties above the R20 million mark (worth just under R780 million) have sold this year compared to 18 sales worth about R529 million during the first six months of last year. That is more than 40% up year-on-year, he adds.

In top-end areas such as Sandton, Ballito, Cape Town’s Southern Suburbs and the Atlantic Seaboard, Seeff’s turnover is up by over 30% this year compared to last year.

Sales on the Atlantic Seaboard alone amount to almost R900 million for the first six months of this year, up by 35% from just over R600 million during the same period last year and, we look to close this year well ahead of last year’s R1 billion achieved in the area, says Seeff. This buoyant buyer activity is now also spilling over into the secondary investment and leisure markets.

The latest FNB Property Barometer confirms that buy-to-let activity has strengthened for the third consecutive quarter, now accounting for about 10% of all buying activity.

Seeff says the market is nicely balanced, packed with eager buyers, but it is missing the sellers.

With well-priced homes selling within anything from a week to a month of listing and buyer appetite at a five-year high, this is an unprecedented opportunity for sellers to attract good offers.

Sellers still waiting and watching, possibly in the hope that prices will blow out of the water, may just miss the perfect opportunity, especially if they in turn want to upgrade or downgrade. Sellers also need to be mindful that if prices go up, they too will have to pay a higher price.

The South African property market continues to show its resilience and Seeff says it was always just a matter of time before buyers would be back and buying.

While the economic outlook remains a mixed bag, we should take encouragement from the JSE’s recent good performance and the currency clawing back some of its value.

Certainly insofar as real estate is concerned, the confidence is high. It is undoubtedly a good cycle for sellers, but wait too long and you may just have to stay put.