People trying to sell South African homes currently have to discount prices by between nine and 12% in order to achieve a sale, according to Lew Geffen, chairman of Sotheby's International Realty in South Africa. He feels the most likely cause is the recent apprehension over elections, long school holidays and an increasing aversion to take on more debt.
Levels of household debt in South Africa are still at high levels, and with food, fuel and electricity costs forecast to rise, buyers are choosing not to take on such large mortgages, even if they can. The majority of South African households have an annual income of around R192K which puts them firmly into the lower income property buying market. This means they can comfortably afford homes costing up to R1.4 million.
As a result there has been increasing demand for smaller high-density housing in metropolitan areas. The affordability of homes has improved since 2007 and 2008, but people are definitely becoming more interested in keeping the costs of homeownership down, and are mindful about the prospect of interest rate rises by the end of the year.
There are also signs that banks will not lend on properties whose price is overinflated, so anyone asking an unrealistic price is less likely to achieve a sale. In general homebuyers are not particularly motivated to move at the moment, and are more likely to do so if they think they are getting a bargain. The market was bolstered to a certain extent by the effects of the 2010 FISA World Cup and the interest rate cuts late last year, but now these influences have run their course.
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