How to value your property in a changing market

All indicators are there that we can experience a global house-price slump, based on evidence in nine 'rich economies'. SA's market will take a similar beating, with a significant impact on residential property prices.

It is possible to attribute the residential property value declines to a poor economy, rising interest rates and higher than wanted inflation, cost of living expenses and escalating faster than wage increases which are causing, in some cases, household financial distress. As a result, many owners are fast approaching the need to sell their once 'higher' valued homes in a buyers' market.

When linking interest rates to declining incomes, the result, is a depression of prices because of shrinking 'affordability. Obviously, when affordability is under pressure, the repayment of the home loan is threatened. Property owners then look to sell their property and want to achieve the highest price possible. However, with interest rates rising, combined with a stagnating economy and acceleration in inflation, declining in the value of property prices is the nett result.

After a boom period, it is hard for sellers to adjust their bullish expectations downwards, resulting typically in longer periods that houses are on the market before a sale is realised. To avoid this, a home has to be priced realistically. Without the assistance of an experienced property practitioner in the current environment, there are likely to be some shocks to sellers.

Lightstone, as measure in April 2022, showed the effect of inflation on property in that a property worth R1-million lost R50 000 of its value to inflation over the three months up to April.

Adjusting homeowner-seller expectations, is exceptionally hard, particularly when they have added value over the years, whether it's in additions, alterations or general updating.

For a homeowner to 'estimate' the value of a home before engaging the services of a professional property practitioner is not as easy as one may think. While owners may compare their house and its size, facilities and location with other properties sold recently in the area, to get to the most realistic and true value would require statistical analysis, taking into account multiple variables based on comparative sales, and property for sale in the market.

Even if a home ticks the right boxes and is priced according to similar sales or the use of deep analytics, the time a house stays on the market should (on average) be no more than three months. If it stays longer, the implication is, that the asking price is too high.