Price resistance is showing signs of cracking in the R10m to R20m price bracket in Zimbali.##
With the high end of the residential real estate market typically resisting price reductions, the volumes tend to plummet when faced with a decrease in the demand.
This is what Zimbali Coastal Resort – the best example of the high-end residential property market in KZN - has experienced over the past two years, says Andreas Wassenaar, Seeff’s Licensee and Principal here.
“Zimbali has 1300 homes with over 100 of these in the R30m plus bracket and over 250 being in the R20m to R30m range. Conservatively there would be 500 homes priced in the R10m to R20m range.
The price bracket above R20m has seen sharp price reductions over the past 12 months. What was typically priced at R35m has been reduced to R30m and what was priced at R25m is now closer to R20m.
However, the larger price bracket between R10m to R20m has been slower to adjust – until now.
In a recent string of price reductions, Seeff Zimbali has reduced pricing on some of its key mandates within this bracket on the instruction of the sellers”.
Wassenaar continues some perfect examples of these reductions include a home that has been reduced from R16,95m to R13,95m; a home that was reduced from R12,95m to R10,95m and another one that was reduced from R15,95m to R13,95m.
“New listings are tending to start their life on the market at more aggressive pricing - understanding where the market is currently at - and therefore aiming to get the pricing right from the outset on the agent's advice.
The higher-end residential market is characterised by property owners that are rarely under financial pressure to sell and therefore would typically decide to keep pricing unchanged and simply not sell.
This can last for an extended time until eventually they realise that to finalise a transaction in any given market, the intersection of demand and supply is where the actual sale happens”.
Wassenaar adds that the market eventually disciplines all sellers and regardless of what a seller wants from a property, how much they have spent on a property, what they bought it for or the length of time they have held the property for, the prevailing market demand will dictate the price.
Prices are at first 'sticky' downwards, but eventually adjust to meet demand. This is good news for estate agents who rely on transaction volume to earn commissions”.