The property market is finally starting to move faster, and it is a great time for sellers to take advantage of the momentum, says the Seeff Property Group.
The price is usually the main draw card of a property and, if not priced correctly and offering value compared to the hundreds of properties available to buyers, it can delay the sale, says Tiaan Pretorius, manager for Seeff Centurion.
Determining the correct asking price when a property is listed on the market for sale is often one of the most difficult issues. Gerhard van der Linde, MD for Seeff Pretoria East says sellers tend to have a much higher expectation of the worth of their property compared to the market realities. The biggest risk for sellers is that serious buyers tend to overlook an overpriced property, resulting in lost opportunities.
The reason for the higher price expectation is often that the seller actually needs to make a particular profit. It is therefore vital for the seller to be upfront with the agent about their financial needs. Van der Linde emphasizes that this is particularly crucial if the sale must be completed urgently. The agent can then advise the seller on what can realistically be achieved within a particular timeframe.
How is the asking price determined?
Pretorius says the main tool used by property agents to determine a suggested listing price is a Comparative Market Analysis (CMA). This analysis considers recent sales of similar properties in the area, as well as those listed on the market. It compares like for like in terms of property size, condition, and features, to establish a realistic price benchmark.
Various factors determine the asking price. These include the location and amenities in the area, size and condition of the property, demand for the particular property type and style, demand for the area, and current economic and market trends.
The property is also assessed in relation to other properties in the neighbourhood. For example, the property might have desirable extras such as a braai room and a swimming pool which could entice buyers to pay slightly more for the home. Elaborate extras are, however, not a guarantee of a higher price. That is one of the main reasons why property agents caution against overcapitalising, says Pretorius.
The pitfalls and consequences of overpricing
Given that property listings are now all online, buyers have access to all properties on the market. Van der Linde says that buyers can therefore immediately assess the choice of properties available in their desired price band, and will likely only contact those which appear to offer value for money.
It follows that a property which stands out as overpriced will be overlooked. The result is that it will attract fewer buyers, if any, and could consequently stay on the market for longer.
Overpricing in relation to the market will simply drive potential buyers to competing properties. Buyers usually look in particular areas because it fits with their affordability. If the price is out of step with peer properties, it will simply drive buyers to competing properties on the market.
You may then end up having to reduce your asking price which might also be off-putting to buyers. Price drops can have a negative impact as it can create the impression that the seller is desperate which can lead to lower offers.
Van der Linde says decades of experience has shown that rather than attracting a higher price, an overpriced property may end up selling for lower than what it would have if priced correctly at the outset.
When considering property as an investment, many buyers focus on the asking price, but this is just one factor in determining a property’s value.
To truly assess whether a property is a good investment, potential buyers need to look beyond the price tag and evaluate a range of financial, market, and situational factors, says Antonie Goosen, principal and founder of Meridian Realty.
“A property’s asking price is only part of the equation,” says Goosen. “Investors should think about what the property can deliver in terms of returns, whether through capital growth, rental income, or both. The goal is to ensure that the long-term benefits outweigh the initial costs and ongoing expenses.”
Goosen advises buyers to start by investigating the local property market. Factors such as recent sales in the area, demand for rentals, and the overall growth potential of the neighbourhood are key indicators of a property’s value. “Neighbourhood trends play a crucial role,” he notes. “Look for areas with improving infrastructure, proximity to schools, or new commercial developments. These are often signs of increasing property demand, which can boost future value.”
The condition of the property is another important consideration. Goosen warns against properties that may require extensive maintenance or renovation, as these costs can erode profits. “While fixer-uppers can be appealing, buyers need to weigh the renovation costs against the potential value increase,” he explains. “A thorough inspection by a professional is non-negotiable, as it helps to uncover hidden issues and assess the true state of the property.”
In addition, buyers should evaluate the potential rental yield if they plan to let the property. Calculating the annual rental income as a percentage of the purchase price can help determine whether the investment will generate sufficient cash flow. “A good rental yield depends on the area and market conditions, but as a rule of thumb, it should at least cover your bond repayments and other costs,” says Goosen.
Finally, investors need to consider their financial position and long-term goals. “Don’t overstretch your budget for a property that may not align with your financial or lifestyle aspirations,” Goosen advises. “Think about whether the property will still be valuable to you in five or ten years and whether it fits into your broader investment strategy.”
By examining these factors, buyers can make informed decisions that go beyond the surface appeal of the asking price. A well-researched property purchase can yield significant returns, making the effort to assess its full potential worthwhile.
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