It's the Saturday Open Thread. This weeks topic: If you are buying now, what discount off the asking price should you be aiming for?
9 comments:
Anonymous
said...
That does bring up an interesting topic indeed. So much has been said about current house prices and bubbles. What you see as prices when trawling through property magazines, and what's really going on in the background is something quite different. A lot of people are holding onto that bubble mentality where they cannot understand that the value of their houses doesn't go up every year as it always did. I recently put in an offer for a freestanding in the northern suburbs for 1 bar, the asking price was 1.3. Owners fell just short of tearing up my offer to purchase and urinating on it. When I pointed out the last 15 sales in the area where going between 850 000 and 950 000, and the property had a municiple valuation of R935 000 as well as a host of other problems, they didn't care. Denial? It makes it difficult to buy because you will have to seperate the serious sellers from the wishful thinkers. However being on the market, I hear a lot from the various agents on the huge gap between asking and selling price. During the bubble, if you bought property but got a shitty deal, it fine, nobody stayed in negative equity for long anyway. These days of you get shafted, you could be stuck with your little money pit for a long time.
Here's the problem. There's a mixture of people asking realistic prices, and those who live in a dream world. I agree that a municipal valuation is a good starting point, albeit not always correct. My take would be an offer between 5 and 7% above the municipal valuation - that would be a fair offer. Also important is to then compare this to other SOLD properties (not advertised prices) with a same square metres. Of course, there's also fit and finish to take into consideration, but in 80% of the cases the above would be spot on. So Anonymous, you've done right, the owners are way off...
Municipial valuations are wonky because owners can appeal if they think it's too high to bring their rates down.
A friend was looking at buying a victorian terrace house in the city bowl and the two houses on either side had the exact same floor plan and they both looked in good nick on the outside but the municipal valuation on the two differed by R900 000!
This topic brings up the concept of value. How do we know what anything is worth today, where is the benchmark of value to compare to? Houses down the road? What were they compared to? Where does the buck stop? Honestly no one knows what anythings true value is because there is no true unencumbered physical benchmark, yet.
Value is tied to utility. But the utility of houses brings no straight answers either. For a recent poster the utility of primary abode is so great it doesnt matter what price you pay; its worth it [yet he still offered 35% less than asking which renders his statement untrue btw]
For others its a speculative utility and others a savings vehicle or store of value. There are many others.
One can clearly see it is all perceptions and thoughts. The perception that Lehman was leveraged to the hilt and the interbank spigot being turned off was the last straw that broke the camels back, or shattered the rose tints whatever you prefer.
We have a new paradigm. Many are slow to wake up to it. The popular realisation of this shift and the fear of being caught under it will bring CJ's long awaited correction. Greed and fear drive all markets, ours is no different.
Property was in a bubble, world wide. It most places, that bubble is now bursting. Not (yet) in SA though. But it will burst, and many people will get seriously hurt!
Do I care? No! They have had plenty of warning. They didn't wan to listen, so now they must feel.
It's interesting how nobody even commented on the question that was raised in the beginning. It starts to make me think that the only readers of this blog are ppl who want the bubble to burst.
Well sorry to disappoint you but I think you readers will just be waiting fo0r 10 years before you buy property. There would need to be a major interest rate hike to burst the “bubble”. If not then property will just stagnate for 5 – 10 years or whatever. No property owner in their right mind would sell a property in this stagnant market if they need to drop their price 50%.
Anon above, they have answered the question but its clear you dont want to hear what they have had to say.
Btw I want to wait 10 years before getting back into residential property, I think thats a reasonable timeline. This could change depending on developments but the world will be a very erratic place for a decade at least.
9 comments:
That does bring up an interesting topic indeed. So much has been said about current house prices and bubbles. What you see as prices when trawling through property magazines, and what's really going on in the background is something quite different. A lot of people are holding onto that bubble mentality where they cannot understand that the value of their houses doesn't go up every year as it always did. I recently put in an offer for a freestanding in the northern suburbs for 1 bar, the asking price was 1.3. Owners fell just short of tearing up my offer to purchase and urinating on it. When I pointed out the last 15 sales in the area where going between 850 000 and 950 000, and the property had a municiple valuation of R935 000 as well as a host of other problems, they didn't care. Denial? It makes it difficult to buy because you will have to seperate the serious sellers from the wishful thinkers. However being on the market, I hear a lot from the various agents on the huge gap between asking and selling price. During the bubble, if you bought property but got a shitty deal, it fine, nobody stayed in negative equity for long anyway. These days of you get shafted, you could be stuck with your little money pit for a long time.
Here's the problem. There's a mixture of people asking realistic prices, and those who live in a dream world. I agree that a municipal valuation is a good starting point, albeit not always correct. My take would be an offer between 5 and 7% above the municipal valuation - that would be a fair offer. Also important is to then compare this to other SOLD properties (not advertised prices) with a same square metres. Of course, there's also fit and finish to take into consideration, but in 80% of the cases the above would be spot on. So Anonymous, you've done right, the owners are way off...
Municipial valuations are wonky because owners can appeal if they think it's too high to bring their rates down.
A friend was looking at buying a victorian terrace house in the city bowl and the two houses on either side had the exact same floor plan and they both looked in good nick on the outside but the municipal valuation on the two differed by R900 000!
This topic brings up the concept of value. How do we know what anything is worth today, where is the benchmark of value to compare to? Houses down the road? What were they compared to? Where does the buck stop? Honestly no one knows what anythings true value is because there is no true unencumbered physical benchmark, yet.
Value is tied to utility. But the utility of houses brings no straight answers either. For a recent poster the utility of primary abode is so great it doesnt matter what price you pay; its worth it [yet he still offered 35% less than asking which renders his statement untrue btw]
For others its a speculative utility and others a savings vehicle or store of value. There are many others.
One can clearly see it is all perceptions and thoughts. The perception that Lehman was leveraged to the hilt and the interbank spigot being turned off was the last straw that broke the camels back, or shattered the rose tints whatever you prefer.
We have a new paradigm. Many are slow to wake up to it. The popular realisation of this shift and the fear of being caught under it will bring CJ's long awaited correction. Greed and fear drive all markets, ours is no different.
Let's put this into simple English!
Property was in a bubble, world wide. It most places, that bubble is now bursting. Not (yet) in SA though. But it will burst, and many people will get seriously hurt!
Do I care? No! They have had plenty of warning. They didn't wan to listen, so now they must feel.
Anyone who thinks the bubble hasn't burst yet should try selling a property right now.
Unless you drop your price significantly and by this I mean 30 to 40% from it's peak crazy 2007 "value", you won't find any willing buyers.
Buyers aren't stupid. It's the sellers who aren't serious that are living in a dream world.
@Goldilocks - hehe you are right. But my little troll did bring out the righteous lurkers left right and centre.
It's interesting how nobody even commented on the question that was raised in the beginning. It starts to make me think that the only readers of this blog are ppl who want the bubble to burst.
Well sorry to disappoint you but I think you readers will just be waiting fo0r 10 years before you buy property. There would need to be a major interest rate hike to burst the “bubble”. If not then property will just stagnate for 5 – 10 years or whatever. No property owner in their right mind would sell a property in this stagnant market if they need to drop their price 50%.
More like a dragnet Jdog.
Anon above, they have answered the question but its clear you dont want to hear what they have had to say.
Btw I want to wait 10 years before getting back into residential property, I think thats a reasonable timeline. This could change depending on developments but the world will be a very erratic place for a decade at least.
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