80% of property sellers forced to cut asking prices

Residential property sellers are still unrealistic about the price they want for their homes. In the fourth quarter of last year, 80 percent of sellers were forced to reduce their asking price to conclude a sale.

The average reduction in price by sellers was estimated at 11 percent, according to the results of FNB's fourth-quarter estate agency survey released yesterday.

John Loos, a strategist at FNB Home Loans, said agents continued to point to unrealistic pricing in the market, with the percentage of sellers having to cut their asking price remaining almost unchanged at 80 percent in the fourth quarter, compared with 81 percent in the previous quarter.

Loos said the average time properties remained on the market before being sold was still a lengthy 15 weeks and six days in the fourth quarter, slightly worse than the 15 weeks and four days previously.

The survey pointed towards a "back to basics" approach to home buying with primary residential demand a priority and non-essential buying remaining firmly on the back burner.

Loos said that the various motives for buying and selling appeared to be indicating that the household sector was still experiencing very significant financial constraints.

This conclusion was drawn from the fact that primary residential demand as a percentage of total buying increased to a record 92 percent in the fourth quarter.

The percentage of sellers selling to upgrade rose in late 2009 into early last year, but fell in the second half of the year from a 2010 high of 15 percent in the second quarter to 10 percent in the fourth quarter.

However, Loos said the good news was that the financial stress might be receding, with agents in the fourth quarter reporting that 17 percent of sellers were selling to downscale because of financial pressure, which was still high, but the lowest estimated percentage for this category of selling since the first quarter of 2008.

It was still a buyer's market despite the slight strengthening in sales following the previous two quarters of decline in home-buying demand.

The survey shows that on a 10-point scale, the agent demand activity rating rose to 5.79 in the fourth quarter from 5.66 in the previous quarter.

Loos said seasonal factors were believed to have played a significant role in this, but the possibility also existed that the interest rate reduction in September had a positive impact.

Looking ahead, Loos said it appeared that the near-term expectations of agents had deteriorated. "While many point to the positive factor of low interest rates, many also point to the negatives of still tight bank lending criteria, as well as deteriorating perceptions of home affordability," he said.

Business Report

Posted at 09:56AM Jan 28, 2011 by Editor in Residential  |  Comments[7]