High-end homes hard to sell

Are high-end own­ers pric­ing their prop­er­ties to sell? Lea Jacobs in­ves­ti­gates

Business Day - Home Front - - HOMEFRONT -

THE gen­eral pub­lic may be for­given for think­ing that the wealthy have man­aged to sur­vive the eco­nomic fall­out and es­cape rel­a­tively un­scathed. While this may be true to some ex­tent at least, those who earn the most, in­vested the most, and bought the most, have been burnt. Al­though the fi­nan­cial burns may not be as painful as those felt by peo­ple in the lower in­come brack­ets, it still hurts and many have been forced to off­load as­sets in a bid to sur­vive.

The num­ber of lux­ury prop­er­ties com­ing onto (and staying on) the mar­ket has risen in re­cent times. The must-have pur­chases have be­come a li­a­bil­ity for many and listings of high-end prop­er­ties have in­creased.

One may as­sume that as high­end in­vestors these in­di­vid­u­als have enough fi­nan­cial savvy to re­alise that an over-priced prop- erty is not go­ing to sell. Sadly, how­ever, this does not ap­pear to be the case and many peo­ple sell­ing prop­erty in the higher brack­ets of­ten seem to be more stub­born as those in the lower mar­kets — hold­ing out un­til their price is met. This has af­fected the av­er­age time for which these prop­er­ties re­main on the mar­ket.

John Loos, a Strate­gist with FNB Home Loans, noted in a re­cent re­port that al­though the fig­ures have dropped since 2008/9, the per­cent­age of home sell­ers sell­ing to down­scale due to fi­nan­cial pres­sure re­mains high, at around 22%.

An es­tate agent sur­vey con­ducted by the bank sug­gests that the mid­dle and lower-in­come seg­ments are still per­form­ing bet­ter than the higher-end seg­ments. The re­port in­di­cated that the high net worth seg­ment re­mains very flat in terms of de­mand.

The up­per-in­come seg­ment showed some sum­mer im­prove­ment in de­mand, but re­mained lower than the mid­dle-and low­er­in­come seg­ments.

In terms of bal­ance be­tween sup­ply and de­mand, as re­flected in the av­er­age time for which a prop­erty is on the mar­ket, the up­per­in­come seg­ment had the most pro­nounced in­crease in the es­ti­mated av­er­age time on the mar­ket in the first quar­ter of this year. It was also the only one of the four seg­ments not to have an im­prove­ment in the per­cent­age of sell­ers sell­ing to down­scale due to fi­nan­cial pres­sure, as well as hav­ing the weak­est es­ti­mated per­for­mance in the per­cent­age sell­ing to up­grade.

More of­ten than not res­i­den­tial prop­er­ties tend to be bought on an emo­tional whim and Laurie Wener, MD of Pam Gold­ing Prop­er­ties in West­ern Cape, says this ap­plies to even the savvi­est of in­vestors and in these cases re­turn on in­vest­ment is sec­ondary.

The fact that many of the high­end prop­er­ties cur­rently on the mar­ket are sit­u­ated in ar­eas tra­di­tion­ally re­garded as hol­i­day ar­eas has not helped mat­ters, as this seg­ment of the mar­ket in par­tic­u­lar has felt the full brunt of the eco­nomic slow­down.

John Fuller, prin­ci­pal of Chas Everitt’s Plettenberg Bay of­fice, says re­ports re­flect only 1,5% of SA buy­ers are look­ing to in­vest in a hol­i­day home.

Given the iconic na­ture of the prop­er­ties, it is of­ten more dif­fi­cult for agents to value an up­mar­ket prop­erty and this, cou­pled with the in­ci­dence of mo­ti­vated sell­ers, makes this seg­ment of the mar­ket more dif­fi­cult to sell.

Ev­ery­one knows that price is key and if buy­ers re­gard the prop­erty as over­priced, they will con­tinue to hunt un­til they find what they deem to be good value for money. One would think that these fac­tors would in­duce the sell­ers of up­mar­ket prop­er­ties to mar­ket them at a re­al­is­tic level, but Fuller says this is of­ten not the case.

“The view­point re­mains that if they re­ceive their price they will sell. A fac­tor com­pound­ing mar­ket value is the fact that this de­pends en­tirely on what a will­ing buyer is pre­pared to of­fer — and of­fers are usu­ally well be­low the ask­ing price. At the top end there are so few buy­ers that the choice is quite con­sid­er­able and the most ex­pen­sive prop­er­ties there­fore stay on the mar­ket for a very long time — years in fact.”

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