The article by Brandan Peacock “While property prices have dropped, sellers are still aiming too high” (Sunday Times 25/09/2011), really hit the nail on the head when it comes to fully understanding the reality of the South African and Dullstroom property market.

We keep trying to convince some clients that the price they hope to get for their property is just too high. Unfortunately a few ignore our advice and often their property stands on the market for months on end with no sale in sight.  The bottom line is that sellers are still unrealistic and asking prices will have to fall if the market is to start seeing any real movement.

So why are property prices still too high?

First of all no seller wants to believe their primary asset has depreciated to such a degree and secondly no one thought that the  down cycle of the property market would last so long and sellers thought they would ‘wait it out’ to get their price.

The grim reality is that the market isn’t going to turn around any time soon.  As John Loos FNB Home Loans property strategist  says, “there has been a real decline of about 15% in property values, and I think there is a nominal house price decline to come next year, despite an obvious resistance to lower prices from sellers”.

Some statistics

Here are some statistics taken from Peacock’s article that will perhaps give sellers a glimpse of this current sobering reality.

• Nearly 90% of people are selling for less than their asking price compared to 33% in 2004
• Property economist Francois Viruly says sellers are aiming at least 15% too high. “The difference between asking and selling prices is beginning to narrow, to maybe 8% at the moment. A readjustment must take place.
• Properties have been marketed at too high a price and this has lead to properties being on the market for 200 days or more
• Buy-to-let and second home owners are under more pressure than the primary residence market

The good news is that once prices settle to a more realistic level, we should see more property sales.  As Viruly says, “Oversupply is relatively easy to fix, however lack of demand is not. The longer the downturn, the more the asking and selling prices will begin to meet each other. Once that happens, I think we will see more transactions  at the lower prices. The number of transactions  – related to price movements - will probably turn around over the next six months.”

So when will we know when the market has adjusted to a realistic level? John Loos says that when properties are an average of two months on the market it would appear to be a benchmark for a realistically priced market.