Stubborn home sellers face shock

Johannesburg - Stubborn home sellers not willing to drop their asking price may be in for a rude awakening, a new survey shows.

According to FNB's September Home Price index, house prices are unrealistic.
 
"This is admittedly a subjective statement, but agents surveyed estimated a lengthy average time on the market of 15 weeks and four days," said FNB Property Market Analytics strategist John Loos.  
 
"This average, back in 2005/6 when the market was healthier, was generally below two months."
 
The index reported house prices increased by 4.5% year-on-year, significantly lower than last month's 6.9%. This was the fourth successive decline. The average house price for August was R772 306.
 
"In the absence of strong demand, we feel that prices will have to adjust downward to ultimately create a better balance between demand and supply," said Loos.
 
According to Loos, the impact of lower interest rates is wearing thin. He also cited still-high household debt levels which constrained credit-driven home buying.
 
"The reduction in the household sector debt to disposable income ratio continues to proceed at a snail's pace," said Loos.
 
The bad news for home sellers is that FNB believes house prices will drop further, until the lower levels of demand are addressed. "We expect average price decline for 2011 as a whole, after an expected 6.4% increase in 2010," he said.
 
Standard Bank's house price index for September, released last week, also showed median house prices decreased month-on-month by 2.5% to R586 000.
 
The group said this suggested a "loss in momentum" over the medium term as the property market digested the impact of weaker expected growth, fragile employment market conditions and other uncertainties.

However, Standard Bank's Johan Botha thinks there is light at the end of the tunnel. Interest rates, which remain at 30-year lows, and inflation well below the midpoint of the target range are putting money back into the pockets of consumers.

 - Fin24.com