Affluent homeowners who have been battling to sell their properties are pulling them out of the market and renovating them instead.
This is according to the FNB Property Barometer November 2020. Anecdotal evidence suggests that homeowners are withdrawing properties on the market for sale, in favour of home improvement.
According to the report, homeowners are believed to be using savings, thanks to low interest rates and travel cost reductions.
Siphamandla Mkhwanazi, FNB senior economist, says with many people working from home, many affluent homeowners want better work-at-home environments.
“The market is still excessively supplied, and selling conditions add to the problem,” says Mkhwanazi of the top end of the residential market.
Read also: It’s getting faster to sell property in SA, but buyers are making very cheeky offers
Now is a good time to renovate
The Absa Homeowner Sentiment Index Q3 2020, shows that many are renovating property. Of the homeowners surveyed, 65% consider the current market conditions to be an appropriate time to renovate or make alterations. However, this is down from a high of 79% in the fourth quarter of 2019.
Muzi Zim, Absa Home Loans head of advanced analytics, says sentiment for renovating and making alterations increased by 4%. “Homeowners who believe in renovating their properties accounted for 30%, with 24% saying the current timing is good.”
The Seeff Property Group reports that affluent homeowners with properties priced above R20m are not in a hurry to sell. Owners of upmarket homes in Cape Town’s Clifton, Bantry Bay and Fresnaye are prepared to wait for their asking prices.
In these suburbs, homeowners often add value by renovating and upgrading, and not necessarily because they are battling to sell. “It is rather a factor of the incredible demand and capital value growth in the area,” according to Seeff.
Read also: Top five tips for selling property
Homeowners withdraw properties from the market
Estate agents say in some top end markets, homeowners are taking their properties off the market. In Gauteng, some affluent homeowners have chosen to rent out their homes instead, according to Seeff.
Alisha Dippenaar, general manager for Seeff Sandton, Fourways and Midrand says that sellers choose to stay indefinitely rather than sell. “For others, it’s taking a break from marketing the property with the intention to re-enter within a 12-month period.”
In Bishopscourt and Claremont Upper, some sellers are taking their properties off the market and opting to rather renovate. “We see this especially where sellers are not able to achieve their asking price. This takes into account the costs of selling and moving,” says Francois Venter, Seeff luxury market specialist for the suburbs.
The SA residential property market is as unhealthy as your average overweight 58yo hookah smoking dude at Cubana. The market is even weaker than Arsenal’s defense.
Thinking of buying a house? When is the right time to pull the trigger? This is for you [Thread]
— Koshiek Karan (@iamkoshiek) July 4, 2020
Over-pricing is the reason many of the properties haven’t sold. According to FNB, it’s getting faster to sell property, taking only 10.6 weeks by the third quarter of 2020.
“Homeowners choose to hold or live in the property while they wait for the market to improve. Well-priced properties continue to sell well,” says Dr Andrew Golding, Pam Golding Property group CE.
According to Susan Watts, broker/owner of RE/MAX Living Cape Town, currently some sellers may battle to get what they originally paid for properties.
“There’s constantly new stock coming onto the market, and those who price right are getting good returns.”
Some homeowners are pulling their properties out of the market because their asking prices are unreasonable.
“In a competitive market, overpricing is disastrous for the seller.” This is according to Luc Delys, team leader for Team Blade RE/MAX All Stars Alberton and Germiston.
Delys says homeowners who are not under financial pressure to sell might consider holding onto their properties for now. “They can always re-look at selling under better conditions.”
Read also: SA property sellers discount prices by as much as R500k on Black Friday
Taking advantage of low interest rates to buy luxury homes
However, Samuel Seeff, chairman of the Seeff Property Group says there is no general trend of affluent homeowners taking their properties off the market to renovate right now.
Seeff says there has been a trend at the high-end of the market due to the high costs of capital gains tax and transfer duty, and is not linked to the current market.
“Favourable interest rates have made it more attractive to buy up now.” This has provided for a great deal of mobility in the market in the price band to around R3m – R5m.”
Seeff says they are seeing a great mobility up to about R10m – R14m. “Buyers within this price bracket are looking to capitalise on the favourable buying conditions.”
However, he points out that affluent buyers are reluctant to purchase properties above R18m currently. “These are cash buyers concerned about the country’s outlook. Buyers are opting to invest offshore until they see the policy and economy changes needed for the country to return to a growth path.”
The property market remains active and the outlook positive for 2021, driven by the low interest rate and favourable mortgage lending climate: https://t.co/3XBXM2oC6r#Seeff | #PropertyInsights | #RentalInvestment | #Market | #FestiveSeason | #2021 pic.twitter.com/g5KO6tKgFj
— Seeff Properties (@SeeffProperties) December 1, 2020
