Although demand for property in upmarket areas hasn't declined, sales have fallen as a result of unrealistic seller expectations.
Despite the wallowing economy, the appeal of property in upmarket suburbs like Inanda hasn’t waned although house sales volumes have notably slowed, and local agents say it’s not due to lack of interested buyers or available stock.
According to Lightstone, only 10 properties with a combined value of R79.8 million changed hands in Inanda in the 12 months ending 30 April with Atholl faring a little better with 24 sales realizing R146.5m, but Justine Roux, Area Specialist for Lew Geffen Sotheby’s International Realty, says that there were many more potential sales which fell through during this period.
Sellers happy to sit tight
“One of the main reasons homes aren’t selling is that sellers simply won’t budge from their listing prices despite the notable decline in investor numbers that has precipitated a shift to a buyers’ market.
“Many sellers in suburbs like Inanda, Illovo and Atholl have high expectations and low financial stress which means they can often afford to sit out the tight economic conditions and wait for the market to improve – however long that takes,” says Roux.
“Most of them have second homes and very few have mortgages, so there is no urgency to sell, with a growing number selling to move to the Western Cape or to downsize and move to smaller homes in the same area.”
She adds that another negative knock on effect of declining sales is that some agents resort to overvaluing properties in the hope of securing sale mandates.
“This is counterproductive, as buyers are generally far too astute to pay more than the market value for a property and, with diminished budgets, most are looking for more home for less outlay.
“The result is that these sellers are often eventually obliged to drop their prices, sometimes even selling for far less than if they had been realistic from the outset.”
According to Roux, sales volumes would most certainly increase if buyers (should be sellers??) were more flexible and open to negotiation: “Not only do these suburbs tick the right boxes, this precinct also offers a wide variety of stock to suit all needs and most budgets.
“In Inanda almost 50% of the properties are freehold estate homes, around 36% freestanding houses and 14% sectional title units with a similar split in Atholl.
“In the largest of the three precincts, Illovo, the majority of homes are in sectional schemes (81%), with 14% freestanding homes, with the balance being freehold and sectional title units.”
Roux says sectional title units are moving more quickly than freehold homes, as more people are opting for the convenience of a lock-up-and-go lifestyle, the cost effectiveness of low maintenance homes and the accessible pricing.
“We are finding that more young families are wanting to move into the area, as well as young professionals who want to be close to Sandton. Because of the higher transfer duty, many buyers look for slightly cheaper homes that they can renovate over time.
“If you buy a R6m home and transform it into a R10m property, the savings on transfer duty are significant,” says Roux.
More stock on the market
She says prices haven’t dropped in the past two years, but there is far more stock than in 2015. “Freehold homes range between R5m to R30m, and you can buy sectional title units from R2.5m to R7m.”
Conversely, the rental market here is booming, and secure upmarket homes in the area are particularly popular with corporates and the international market.
Roux says. “It is becoming quite common for investors or developers to buy old houses on sizeable properties with a view to developing one or two cluster homes on the site. The demand is such that they can easily let the existing house while they wait for the rezoning process to take place.”
What contributes to these area's popularity?
Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, says that two of the main drawcards of the Inanda, Atholl, Illovo precinct are its convenient location and the fact that it is an established, family-friendly area.
“This has changed the resident demographic in recent years and it is now home to many young professionals and creatives who work in Sandton and nearby business centres.
There are also many top-class amenities in close proximity, including the elite Inanda Club, an iconic polo and equestrian landmark, Wanderer’s Cricket Stadium, shopping destinations like Hyde Park and excellent schools such as St David's Marist, Inanda primary and high schools.
“Atholl is known for its tall, lavish buildings, beautiful tree lined streets and many different entertainment and shopping facilities including the popular Atholl Square, a convenient neighbourhood centre.”
These three suburbs truly have something for everyone and, with an adjustment in sellers’ expectations, could enjoy a stronger market than many other areas.