The process of selling a house is more complex than many potential property sellers anticipate. It is a very time-consuming process which includes many components such as: marketing the property to the general public; showing the property to potential clients; and negotiating a sale. On average, the process of selling a property in South Africa takes (roughly) between three and nine months. In this month’s newsletter, we delve into some of the dynamics that affect how long a property will be listed for, before being sold. This period is commonly referred to as the property’s “time on market”.
Time on market shares a commonality with most key indicators of the property market (such as house price inflation, total transactions, and new property stock built) since it too is dependent on economic drivers such as economic growth and interest rates. The relationship between major economic variables and time on market is, however, not as strongly linked as one might think. It seems as if time on market is only responsive if there is a significant shock in the economy such as the subprime mortgage crash of 2008/09. However, even when these economic shocks occur, the number of months a property needs to be on show for before it is purchased, seldom changes by more than one month.
As seen in the figure below, the average time on market for the three most prominent value bands was a bit higher in those quarters where house price inflation was lower.
There is also a significant difference between the average time on market of mid value properties and high and luxury value properties. On average, mid value properties take roughly five and a half months to six and a half months before they sell, while high value and luxury properties take between five and six months to sell. This difference is probably due to the fact that the majority of high and luxury value properties are located in metros where there are larger pools of potential buyers, and more competitive property markets.
There is, however, still a large amount of variation in the average time on market for the different suburbs of South Africa. A closer look at a few familiar suburbs scattered across the metros of South Africa shows that the average time on market in some suburbs (such as Garsfontein) can be as low as 2.78 months or as high as 7.41 months (such as in Parkhurst).
These trends are not completely unexpected. Over the past few months we have published a few newsletters analysing migration patterns of repeat homeowners and found that in cases where people move to a different province, they tend to move to the Western Cape and Gauteng. Despite the trend that the Western Cape as a province saw the highest growth in repeat owners due to migration, the suburbs that saw the highest influx of repeat buyers were not located in the Western Cape. Interestingly, the most popular town repeat home owners migrated to was Pretoria - particularly the eastern suburbs such as Morreleta Park and Garsfontein. It is therefore not surprising that these suburbs sell in a relatively shorter period after being listed.
While it might seem typical that suburbs that are in high demand would transact much sooner after being listed, there are also other dynamics at work that could determine how long a property stays on the market before it transacts.
In the upper end of the luxury value segment properties might stay on the market for longer because there are less potential buyers. If a seller isn’t pressed to sell the property at a particular time we could also expect the time the property spends on market to be longer.
Overall, it doesn’t seem as if the uncertainty in the economy and its potential persistence will significantly change the average time a property will remain on market. Even though there is a small difference in the average time on market for lower value properties, the major determinant of time on market is still located inside each suburb. As long as sellers are willing to adjust their selling price and bring it in line with market value, there is no reason to expect any significant changes in the average time a property sells after being listed.
