High interest rates slows sale of residential properties

Elevated interest rates remain key considerations in the residential property market. While it is a buyers market, property experts say consumers are not rushing to buy property just yet, possibly waiting to see how the elections pan out. This means properties are taking a little longer than normal to sell.

In many instances, sellers are forced to reduce their asking price more than once.

Home Realty’s managing director, Adeline Naude says the market has changed considerably since 2017 when she expanded her business to Johannesburg. She confirms that homeowners are battling with high interest rates at the moment.

“Your high interest rate, they actually cannot cope with the increase in payments, the monthly premium. And then obviously moving work-wise, they are relocating to another city.”

Naude says properties in the R3.5 million range are being bought at a much faster pace, followed by those priced between R800k to R1.3 million. She does confirm though, that properties are now staying on the market for longer than the average of six months.

“You know a lot of people are saying why is my house not selling and basically its either too highly priced or secondly because there are other houses similar to yours in your same area selling for less or selling for higher. So you need to know that balance. And does it have value, did you renovate your place, did you maintain your place? That is very important. If do want to sell fast ensure that is in order. Thirdly, the potential buyer see his needs being met by your property. Is it the right area? Is it the right size?”

More supply than demand

Bond originator company Get A Bond agrees that there is more supply than demand currently in the market. It says still with these market conditions, there are buyers who are getting rejected for mortgages.

Getabond Home Loans, Andre Parsons explains, “The biggest factor I would say is interest rates. To qualify in an entry level home loan of about R950 000 in the qualifying salary for a bond of R950 000 in the beginning of January 2022 you would have needed to earn R25 000 a month. Now it’s R35 000, so it’s a huge difference, it’s taking a whole lot of buyers out of the market, so many fewer people who can enter the market.”

Parsons says added to the high interest rates, is the uncertainty that comes with elections. But the number one reason that properties fail to sell, is price.

“99% of the time if a property doesn’t sell it’s price, market conditions, supply and demand determine price. You may not think that because you paid R1.5 million for your property three years ago is now asking R1 550 000 million is overpricing the property you would never think that, just wanting to break even you never think you’re overpricing. But you are probably going to have to take down the price in order to sell in a relatively shorter time.”

While, residential property is moving a snail’s pace, the 1st Quarter 2024 FNB Property Broker Survey pointed to declining vacancy rates in all three commercial property classes. According to FNB, it points to business sector expansions at a time when the economy has been coming under significant pressure from a combination of a slower global economy, and significantly higher interest rates compared to just over a year ago.

However, the survey also suggests that recently mounting economic pressure may stall this improvement in 2024.

High interest rates slow property sales: