Vital now to price ahead of the market
Category From Our CEO
High inflation and rising interest rates have been at the forefront of most real estate discussions in the past few months, but these are thankfully set to mitigate now as we go into a new year that promises to be largely positive for the residential property market.
Indeed, most economists are already predicting that the rate of inflation will drop to around 5,5% in 2023 compared to an average of 6,9% in 2022. And while the Reserve Bank is expected to announce two or three more interest rate increases, these are expected to be smaller than those which caused home loan repayments to rocket last year.
Nevertheless, we believe that affordability will be the absolute key driver in most sectors of the market this year - with the exception of the luxury sector, where buyers are generally much less affected by any interest rate changes that apply to consumer credit.
The reason for this is revealed in the latest figures released by BankservAfrica, which show that even the nominal take-home pay of the average salary earner in SA has declined over the past year. The BankservAfrica Take-home Pay Index (BTPI), which is based on the month-end salaries paid into the accounts of millions of South Africans, shows that the average take-home pay recorded in 2022 was R14 633 - or 4,8% lower than the average R15 403 in 2021.
What is more, the "real" or after-inflation decline in the average salary was an even worse 6,9%, due to the fact that the average increase in remuneration, according to the Reserve Bank, was well behind inflation at just 5,7%.
In other words, the prices of most things that consumers need to buy are rising faster than their salaries, and unfortunately this pattern is likely to continue in 2023, mostly due to slow economic growth keeping the lid on pay increases.
This means that, no matter how strong the demand for housing remains, buyers are just not going to have as much disposable income available to cover home loan repayments.
And that will become an increasingly important consideration for all home sellers in the next 12 to 18 months, because when buyers are under pressure, they generally choose one of three routes: They may exit the market altogether, they may set their sights on smaller, less expensive properties, or they may diligently compare all the available homes in a certain price bracket until they find the one they are sure offers them the best value for their money.
Over time, all or any of these put downward pressure on prices, and create an environment in which any home seller who wants to stand out from the crowd and achieve a quick sale needs to price their property just ahead of the downward curve.
At the same time, no-one wants to set an asking price that is unnecessarily low, and achieving the perfect balance is where the assistance of an experienced and responsive property professional becomes invaluable.
Most important is access to the very latest and most detailed market intelligence for the specific area, and we have built our technology to ensure that all Chas Everitt agents have this at their fingertips. They are thus able to provide extremely nuanced price guidance, as part of the solutions-based service that is at the heart of our mission to achieve the best possible outcome for every customer.
Author: Berry Everitt