Is it any wonder that home sellers are confused about the state of the property market?
The estate agents responding to the FNB surveys are still wearing rose-coloured glasses and FNB reports that home prices are still rising by 3.6% p.a. (in nominal terms).
But at the coal face, things are far different.
Business confidence in Q1 2017 plummeted by 11 points to 29 out of 100 points, according to RMB/BER Business Confidence Index. The Gupta Leaks spell out daily new missing millions of tax payers’ money and President Zuma is fighting for his political life as the ruling ANC party is under attack internally and externally from a “gatvol” South African public who line the streets protesting to get rid of the President. The Economist reports this week that AngloGold Ashanti is to retrench a further 8,500 from their workforce and that the mining industry in South Africa has shed 70,000 jobs over the past five years.
Is it any wonder that according to a Homeowner Insights Study conducted by Absa and Columinate in 2016, only 16% of people selling their properties trusted their estate agents as reported in HomeTimes recently.
Neville Berkowitz, a veteran property economist, institutional adviser, investor and developer and the founder of HomeBid, South Africa’s largest low commission estate agency says it’s time that homeowners and potential homeowners were told the truth about the embattled residential marketplace.
Berkowitz who produced the esteemed The Property Economist during 1980-1995 and earned a valuable reputation as an unbiased and independent commentator, sees the market daily through the eyes and ears of the salespeople at HomeBid and through his network of contacts throughout the industry to which he has belonged for over 44 years.
“The traditional estate agents are bleeding. June 2017 was probably the worst month they have had for many a year. We interview estate agents daily looking for jobs at HomeBid where we offer a monthly salary and profit share bonus. They all tell the same story that monthly targets of around R80m- R100m of sales per office are only reaching R20m- R40m, buyers are backing off and older sellers are refusing to drop prices. Some agents state that the market above R5m is in “free fall” and even the market above R2m is starting to see price drops,” says Berkowitz.
“HomeBid’s focussing on the market up to R1,5m and although we do list and sell homes above that level we are recording record months especially in the below R1m marketplace. We have a strong competitive edge at 1.95% commissions and saving up to R65,000 per R1m home value in commission is very meaningful in these tough times,” says Cavan Sheahan, GM for HomeBid.
According to Sheahan HomeBid only lists at market value. This value is assessed by registered property valuers used by the banks and both buyers and sellers have sight of these valuations. “Last month our top listing agent, Claudia Karsten, listed 31 homes and our top sales agent, Terri Levin, sold 13 homes. Mostly under R1m per home,” he adds.
“I have many friends who own traditional estate agencies and others who are estate agents and they confess to me how tough the market is for the traditional estate agents. Their biggest concern is financing their businesses as the average office with a sales target of R100m is costing them R1m/month in overheads plus R1m/month in advertising costs. This means that at an average 5% commission, of which the principal earns 2.5%, they need to generate R80m a month in sales. Currently, they are averaging R20m to R40m a month in sales and running at an R500,000 to R1m loss each month. I know these figures because I am helping out a few friends with personal loans against their commissions earned but not yet paid,” says Berkowitz.
The man-in-the-street homeowners and potential homeowners should know that it’s tough out there for traditional estate agencies. “Home prices above R2m are under pressure and the market over R5m is cracking and prices are falling. It’s only the market under R1m that could be showing any sort of price increase although this market is very sensitive to interest rate increases, increasing retrenchments and no job growth in an economy that is in recession,” says HomeBid’s Berkowitz.
Trust is earned, and telling the truth about market conditions is the way that the poor public perception of estate agents can be improved from the current 16% trust level.
This feature was sponsored by HomeBid – the largest low commission estate agency in South Africa, currently selling over 50 homes a month, at a minimum commission of R17,500 plus Vat.
Find out more about career prospects at HomeBid here.