Unpacking the risks of overpricing in the Plett market

Unpacking the risks of overpricing in the Plett market

Plettenberg Bay with its stunning coastal views and relaxed lifestyle, has long been a sought-after destination for homebuyers and investors. This is in fact quite evident from the significant growth in the market in terms of sales and prices over the last five years in particular.

The strong growth in demand has translated into success for many sellers. That said, one drawback of the market has been the tendency for asking prices to be significantly higher than the selling prices. A recent Lightstone Report specifically highlighted this as a standout market trend compared to other areas, showing that Plettenberg Bay in fact boasts the lowest price-to-asking ratio on the Garden Route.

This indicates a consistent disconnect between seller expectations and the market reality. The study also demonstrates that the longer the property stayed on the market, the bigger the gap between the asking and ultimate selling price. Listing price data from Property 24 shows that the average gap between the asking and selling prices was fairly consistent at around 26% in the 2019-2021 period which correlated with the boom in sales volumes and increasing prices. Since 2022, it has, however, spiked to around 38% on average for the last 3-4 years. This, while sales volumes and overall price growth declined again due to the interest rate hiking cycle.

This persistent upward pressure on asking prices, particularly in the face of fluctuating sales volumes, suggests that sellers are often looking for a price which is well above what the market is prepared to pay. This overvaluation poses a number of risks for sellers with potential negative consequences which can severely undermine a property's sale potential, and perhaps also the price achieved.

Overpricing Lengthens the Sale Cycle and Lowers the Selling Price
Overpricing poses several risks for sellers. These include:

A longer sales cycle. One of the risks of overpricing is that it prolongs the time that the property spends on the market. Generally, the initial three months are usually the crucial period for most property sales. A property which is priced in line with current selling price trends will sell much faster and attract a higher price.

It may create doubt with buyers. On the other hand, an overpriced property often sits unsold, accumulating digital "dust" as genuine buyers pass it by. Prolonged market exposure can raise doubts for potential buyers, making them question if there is an issue, and ultimately creating a negative perception that grows the longer the property remains available.

Forced price reductions. Extended time on the market often leads to forced price reductions, especially for urgent sellers. Today's well-informed buyers can easily identify overpriced properties and are likely to bypass them in favour of better-value options. This creates little motivation for buyers to consider an overpriced home, increasing the likelihood of further price drops.

The Importance of Accurate Pricing as a Key to Selling Success
Accurate and realistic pricing is crucial to avoiding the pitfalls of overpricing. Setting a property's price correctly from the outset is the most important factor in achieving a successful, profitable sale. Properties priced in line with current market trends attract more interest, create urgency, and often generate stronger offers, resulting in a quicker sale. In fact, experience has shown that an overpriced property could sell for less than what it would have if it were priced correctly for the market.

The starting point to success is always take emotion out of the pricing decision, and for sellers to trust the expertise of a professional property practitioner who has a deep understanding of the local market and a track record of successful sales. A data-driven approach using comparable sales data and current market conditions to determine an accurate asking price will facilitate a more successful sale, and mitigate risks such as spending too much time on the market, and potential price reductions.

While it may be tempting to "test the waters" with a high price, the data clearly shows the risks of a longer time on the market, negative buyer perception, and potentially also forced price drops, far outweigh any potential rewards. At Seeff Plettenberg Bay, we recommend that sellers price correctly from the outset as the smartest strategy to facilitate an optimum outcome for sellers. We have assisted thousands of sellers and have achieved some of the best prices in the market. We can do the same for you, contact one of our specialist agents today.

Seeff Plettenberg Bay
044 533 0311
plett@seeff.com