Tag: sales

By Jon Porter for The Verge

Amazon says it has just had its “biggest holiday season to date” as customers turned to the site to shop rather than venturing out to physical stores.

Although CNBC notes that the company did not share actual sales figures for either Black Friday or Cyber Monday, in a blog post the company revealed figures for independent sellers on its platform.

Amazon says these sellers saw over $4.8 billion in sales through the two shopping days worldwide, an increase of 60 percent over last year.

“Through Cyber Monday, 2020 has been the largest holiday shopping season so far in our company’s history thanks to customers around the world,” Amazon wrote.

While Amazon’s sales reached record highs, traffic at physical stores has reportedly plummeted. Preliminary data from Sensormatic Solutions reported by CNBC said that in-store traffic fell by 52.1 percent this Black Friday compared with 2019, as customers stayed home to avoid the crowds. If current trends continue, 42 cents of every dollar spent this holiday season could go to Amazon, according to one analysis, up from 36 cents last year.

Amazon says 71,000 small- and medium-sized businesses worldwide surpassed $100,000 in sales so far this holiday season. But Amazon’s own brands also appear to have sold gangbusters.

The company says customers bought “more Ring, Blink, and eero devices on Amazon than during any previous holiday shopping weekend.” The company adds that other top-selling devices on Black Friday and Cyber Monday include its new Echo Dot and Fire TV Stick 4K.

Other top-sellers in the US over the holiday season include Barack Obama’s book, A Promised Land; a Revlon hair dryer and volumiser hot air brush; and a genetic DNA test ancestry kit from 23andMe.

Over the course of this year, Amazon has been one of the biggest beneficiaries of changing shopping habits due to the pandemic. In its last earnings release, the company reported that its net income nearly tripled in the quarter compared to the previous year, and that’s not including its Prime Day sale that had to be delayed this year.

This growth has fuelled a massive hiring spree at the company, The New York Times reports, with Amazon adding 427,300 employees to its global workforce over the course of ten months.

 

Dell, HP report sales boost on pandemic PC surge

By Nico Grant for IOL

Dell Technologies and HP reported quarterly revenue that topped Wall Street estimates, lifted by customer upgrades of personal computers for remote work and school during the pandemic.

Dell’s sales climbed 2.8% to $23.5 billion in the period that ended Oct. 30, the Round Rock, Texas-based company said Tuesday in a statement. Rival HP reported it shipped a record 19 million PCs in its recent quarter, as well as more home printers than it has sold in years. HP also gave a profit forecast for the current period that beat analysts’ projections and said it would raise its quarterly dividend 10%.

Michael Dell and HP Chief Executive Officer Enrique Lores are trying to revamp their PC makers into more profitable businesses. Both companies have taken steps to cut operating expenses during the pandemic, and they produced better-than-projected profits in the October quarter. Billionaire Dell is trying to spur more predictable, recurring revenue by letting corporate clients pay for products over time rather than upfront. Lores, meanwhile, is overseeing a corporate restructuring that will result in lower expenses and a smaller workforce.

“We are very optimistic about where the company is going to be going during the next quarters and years,” Lores said in an interview.

HP shares gained about 5% in New York trading, helped by the company’s announcement that it would boost the quarterly dividend to 19.38 cents a share. Dell shares fell roughly 2%. The stock is up more than 30% so far this year.

HP’s revenue fell about 1% to $15.3 billion in the period that ended Oct. 31, the Palo Alto, California-based company said in a statement. Analysts, on average, expected $14.7 billion, according to data compiled by Bloomberg. Profit, excluding some items, was 62 cents a share in the fourth fiscal quarter, while analysts projected 52 cents.

Adjusted profit in the current quarter will be 64 cents to 70 cents a share, HP said. Analysts, on average, estimated 54 cents.

Dell’s sales from consumer PCs jumped 14% to $3.5 billion in the fiscal third quarter, the company said. PC sales to business and government clients increased 5.4% to $8.78 billion. Server and networking sales fell 1.8% to $4.16 billion, the seventh consecutive quarter of year-over-year declines for the unit. Executives said they expect continued “soft” data-center spending in the current period. Storage hardware revenue declined 7% to $3.86 billion.

“I’m generally pleased with how the business performed,” Dell Chief Financial Officer Tom Sweet said in an interview. “We’ve got to continue to work our way through the uncertain environment. Given our broad, diversified portfolio, we have an ability to drive a consistent stable cash flow, consistent results.”

Dell said that it expected revenue in the current period to increase 3% to 4% compared with the third quarter’s.

Sales of HP’s Personal Systems, mostly computers, was little changed from a year earlier at $10.4 billion. Revenue from consumers jumped 24% while business sales decreased 12%. Printing revenue declined 3% to $4.8 billion. The company reported a 21% rise in consumer hardware sales and a 22% drop in hardware revenue from businesses.

While corporate customers aren’t buying printers with their offices closed or at reduced capacity, Lores said demand from consumers working at home was so strong that HP shipped 12 million printers in the quarter — the highest number since the corporate split from Hewlett Packard Enterprise Co. in 2015.

Sales in laptops, stationery and toasters boom

Source: Business Insider SA

Between January and August 2020, South Africans newly working from home showed a serious appetite for office equipment and stationery, with year-on-year growth of 83% recorded.

Of South Africans who buy online, 52% now own laptops, compared to 40% last year.

But broadly speaking, technology sales weren’t great during lockdown, the latest market insight from consumer experts GfK South Africa shows – despite the work-from-home boom. In the first quarter of 2020, technical goods showed a 1% year-on year increase in sales, then revenues plummeted by 25% during hard lockdown (April to July), when the sale of non-essential goods were banned.

South Africans, it appears, had to improvise, or do without.

The move to Alert Level 4 in May saw a sudden surge in demand for smartphones, tablets and small domestic appliances.

“Consumers snapped up appliances for making quick meals and drinks, including toasters, sandwich makers, coffee machines and microwaves,” says Nicolet Pienaar, head of market insights at GfK South Africa. “Performance for content creation devices such as laptops and tablets was strong, since sharing a device between people in the household was not an option in a time of remote working and home schooling.”

These isolated gains in the technical consumer goods market coincided with 10% revenue growth associated with small domestic appliances and 8% in mid-level information technology systems. But those were offset by steep declines in the supply of multifunctional technical goods, photographic equipment, and telecommunications.

Retailers were quick to capitalise on the announcement of Level 2 lockdown in August, redoubling promotional activity and running tailored marketing campaigns.

That seems to bode well for the upcoming Black Friday and Cyber Monday promotional period.

“After a gruelling year that has hit many South Africans in the pocket, we’re expecting to see demand from two types of consumer over Black Friday: the reset spender, looking for genuine bargains after months of holding back and the revenue spender, looking for deals that let them trade up to premium products,” says Pienaar.

Comparative growth in the second quarter of 2020 is expected to boom, with 69% of brick and mortar retailers anticipating Black Friday sales to be at least as good as they were last year. Additionally, 36% of online retailers anticipate that Cyber Monday will be at least as good as last year, and 36% expect it to be better.

Shoprite reports record sales

Source: Shoprite Holdings

South Africa’s largest retailer, Shoprite, has reported a healthy rise in its key market for the 52 weeks to 28 June 2020, despite significant Covid-19 lockdown restrictions impacting the group.

Highlights of the results include:

  • Sale of merchandise increased by 6.4% to a record R156.9 billion;
  • Excluding the impact of hyperinflation, trading profit increased by 10.4% to R8.3 billion;
  • Diluted headline earnings per share (DHEPS) increased by 2.5% to 765.8 cents;
  • Adjusted DHEPS increased by 16.6% to 717.5 cents;
  • Full year dividend, in line with Group policy of 2x DHEPS cover, increased by 20.1% to 383 cents;
  • Net cash position improved by R6.4 billion to R10.0 billion (2019: R3.6 billion);
  • Net borrowings declined by R6.1 billion to R2.0 billion (2019: R8.1 billion); and
  • A total of 147 stores comprising 101 corporate and 46 franchise stores were opened. 

Insurers under pressure from Covid-19

By Londiwe Buthelezi for Fin24

It’s a grudge purchase, often the first expense to fall away when households’ budgets are strained. But South African insurers have shown different degrees of vulnerability to the challenges posed by Covid-19.

Those heavily dependent on face-to-face sales, like Old Mutual, would surely want to see an accelerated march to lockdown Level 1.

Given the recent trading updates and insurers’ experiences in April and May, the question is: who seems to be on the right path to maintain value for shareholders and whose vulnerabilities have been most exposed?

Everyone is suffering, in one way or another

Warwick Bam, head of research at Avior Capital Markets, says all insurers and pension administrators are taking some beating right now from retirement contribution holidays, insurance premium relief and additional cover they’ve advanced to support their customers for the next few months. But some will inevitably be more prejudiced.

“Intermediaries dependent on face-to-face interactions have been unable to sell policies in April and May,” says Bam, pointing out that Old Mutual is one player more reliant than others on face-to-face interactions at branches and worksites to sell.

Old Mutual told investors recently that it’s been difficult to sell, and that some existing customers asked for premium holidays and, in extreme instances, lapsed their policies.

But it’s not only insurers dependent on face-toface sales who suffered. During a call with investors, outgoing Sanlam CEO Ian Kirk said the insurer also struggled to sell.

In April and May, the insurer, which is the biggest in Africa, saw new business volumes tank between 50% and 70% compared to the same time last year, Kirk says. He foresees productivity will only return to normal when SA moves to lockdown Level 1.

Could Covid-19 have raised awareness on the importance of insurance?

However, Sanlam says it has been pleasantly surprised that its businesses – including Sanlam Sky, which serves low-income earners – has not shown the kind of strain it expected when it comes to lapses in April and May. Customers opting for premium holidays are likely to have stalled the lapse rate for now. But Kirk thinks there’s another factor at play.

“Obviously, there’s pressure on consumers. But when you go through something like this, people say ‘jeepers, I’ve got to keep my life cover going. I’ve got to keep my funeral plan in place’. It’s almost like there’s awareness on health and safety stuff,” says Kirk.

Momentum Metropolitan Holdings also says its lapse rates remained stable for life insurance products in April, but more people have asked for relief like premium holidays. The group is keeping its eye on the lapses in the medium term when levels of unemployment start to increase.

It looks like some insurers have seen this increased awareness as an opportunity. For instance, Discovery has enhanced a number of its products by adding a Covid-19 benefit. The insurance group, which is trying to grow its new bank, even launched Vitality Health Check for seniors, making itself ever more relevant to panicked insurance customers. Discovery did not respond to questions on whether these enhancements have improved its persistency ratio or attracted new customers.

But Bam thinks this is a well-thought move. “By tailoring products to Covid-19 risks, persistency is likely to improve as insurers can further justify the benefit of retaining cover when affordability declines,” he said.

When it comes to Covid-19-related claims, big life insurers aren’t too concerned. They haven’t yet recorded any material increase in death claims and many say they expect a modest increase in the coming months.

However, SA hasn’t reached its Covid-19 peak yet. Friday marked the 100th day since the first known Covid-19 patient arrived back in the country from a trip to Italy, and by Saturday 1 423 deaths had been recorded.

But even when claims start rising, insurers have deep pockets to finance these, and have reinsurers to fund the rest.

Bam says the bigger listed guys in particular have strong balance sheets which “can withstand almost any eventuality in the current Covid-19 scenario”. Sanlam has already set up a “pandemic reserve” of R760 million.

But job losses threaten to setback the whole industry

While things like funeral cover could be on top of consumers’ minds now, employment levels will determine if insurance will remain a line item in households’ budgets.

South Africa’s largest pension funds administrator Alexander Forbes is already preparing itself for the worst as its success depends largely on having more people formally employed and saving for retirement. Alexander Forbes offers both retirement and group life insurance that people subscribe to in their workplaces.

Like Kirk, Alexander Forbes CEO Dawie de Villiers says people are asking for advice more than ever as they try to navigate their retirement and investment options under Covid-19. However, while the importance of financial advice has been elevated, De Villiers says the rising number of employers announcing retrenchments is causing a headache for the industry.

“We haven’t seen any retrenchments come through, but we believe that there will be retrenchments. We also agree with the analysts’ numbers about the unemployment rate going maybe up to 35% from the current 29%, and that will affect our bottom line as less people belong to schemes,” De Villiers says.

Source: Pipe Drive

No matter the size of your organisation, it’s likely you’ve been affected by the COVID-19 outbreak. It’s forced many of us to change the way we work and adapt to a sudden shift in consumer behaviour.

The COVID-19 outbreak showed us just how quickly life can change. One of the biggest impacts was made on the way we work, as well as the level and type of support our employees, customers and peers need from us.

Entire organisations have adopted remote working infrastructure at a rapid pace, ensuring those that have the ability to work from home can do so. Many were successful, while others are still overcoming teething pains.

So, what’s the best response to a crisis like this? How do we shift our behaviour and routines with minimal disruption?

In general, it’s great to have the tools and flexibility for remote working set up in your organisation, regardless of whether or not you will use them in your day-to-day. Having these infrastructures, technologies and processes in place is vital, especially when a major life event or public crisis keeps you or your team away from the office.

For example, sales teams must implement a stack that allows for both internal communication and reliable video calls with prospects.

Processes also need reviewing. What policies will you put in place to allow people to do their best work? For example, during the COVID-19 outbreak, many schools have been shut down. This means parents must strike a balance between work and looking after their children.

To respond to this, many organisations have adopted flexible working hours. As long as team members are available for two to three hours a day for communication, it doesn’t matter when they get their work done.

Audit the activities you conduct on a daily basis and see how you can optimise them for optimal remote working efficiency. Ask your team for their perspective, and allow them to contribute.

After all, these changes affect everyone in different ways. Take a dynamic approach and empower your team to perform to the best of their abilities.

Keeping your sales team safe, optimistic and productive
For salespeople used to the hustle and bustle of a lively office, the sudden change to remote working can be challenging. Not only do they need to find a new routine, but get a handle on new technologies for communication and collaboration.

This new, enforced way of working applies to sales managers, too. Your processes and training workflows must adapt; keeping salespeople motivated and engaged requires a different approach.

Making these changes doesn’t have to be daunting. As a sales leader, you have a responsibility to keep your team safe, create effective remote working policies and communicate them clearly.

Advise your team to follow their government’s guidelines and to do their best to stay out of harm’s way. You can help by ensuring they never need to break a recommended safety policy for work. This means implementing a 100% work from home policy, with guidance on how to maximiae productivity.

Luckily, getting your remote environment up and running is fast and simple.

Most importantly, expect pipeline volume to be volatile. Let your team know that this is OK and that you have a plan to weather the storm and come out stronger on the other side.

Reassuring customers and adjusting your sales messaging
Your customers will also feel the pain during times of crisis. Their priorities will shift, often overnight, as they face new and unexpected challenges.

As you help your team adjust to a new reality, no matter how temporary it may be, you must also do the same for your customers. The best philosophy to adopt? Serve first, then sell.

Yes, it’s important to continue closing deals. But there should also be a focus on helping customers and prospects that are facing new uncertainties in their lives.

For example, it’s wise to pause your cold email initiatives as a crisis breaks out. Standard messaging may seem tactless during this crisis. Instead, take this time to rework and re-frame your messaging to align with your customer’s most urgent needs.

But don’t leave them “on pause” forever. As people adjust, use that time to craft more value-driven and empathetic messaging. Once the workforce is more acclimated to this new reality, continue cold outreach initiatives with helpful content that customers and prospects can immediately benefit from.

It’s critical you communicate your company directives to your team. Make them aware that a new direction is necessary and outline a policy on what they should and shouldn’t be including in their messaging. Get them involved in the process so they not only have a sense of ownership, but also a duty to serve prospects.

Learn more about how to reassure customers and adjust your sales messaging in our guide here.

Managing your sales organisation during a health crisis
While cutting costs seems inevitable, it’s important that you continue executing revenue-generating activity.

We’ve identified three critical business-driven priorities for sales teams during this crisis:

  • Generate and communicate empathetic messaging to employees and your audience
  • Prevent pipeline decay
  • Identify new business opportunities
  • Depending on your industry, sales may drop. Adapting to sudden and temporary changes in consumer behaviour is an effective way to combat this. In the B2B world, your buyers will shift priorities to adapt and you must do the same.

Listen to and serve your existing prospects. How are they being affected by this health crisis and how can you help them beyond your sales processes? For example, if you usually share content with prospects, start collating timely information that impacts their industry and roles as it’s published from third party sources, and see if you can create or adapt your own.

New opportunities will also emerge. How can your product or solution serve your customers during this time? What features could be used to tackle these new challenges?

Capitalising on these opportunities requires a great deal of care and it can be tempting to jump toward discounting in order to tackle these issues. Resist this temptation and focus on how to best serve your customers instead.

Source: EWN

Tiger Brands employs more than 11 200 people in South Africa, excluding seasonal staff, a company spokesperson said.

South African food producer Tiger Brands said on Monday it is looking at “significant” job cuts and won’t pay an interim dividend as its business is hit by supply disruptions and margin pressures due to the impact of the coronavirus.

The owner of Jungle Oats and Tastic rice said first-half headline earnings fell 35% and it expects coronavirus-related costs of about R500-million ($28-million) to hit profit in the second half due to rand weakness, global supply chain disruptions and additional costs incurred during a lockdown in South Africa to curb the spread of the virus.

As a result the company has started looking at cost-cutting measures, including possibly “significant” job cuts, Chief executive Noel Doyle told reporters in a media call.

“Not just in headcount but right across our whole offering and of course we have to look at a couple of the categories where we have been incurring significant losses,” he said.

Tiger Brands employs more than 11,200 people in South Africa, excluding seasonal staff, a company spokesperson said.

Tiger Brands said it had decided not to declare an interim dividend in order to preserve cash, adding that it would re-consider an annual dividend at the end of the year depending on the group’s trading performance.

Headline earnings per share from continuing operations fell to 501 cents in the six months ended March 31, the company said, from 773 cents in the same period last year. Pretax profit from continuing operations fell 65% to R673 million.

“The group’s overall performance reflects the difficult trading environment and the challenges faced, particularly within grains, groceries, Value Added Meat Products (VAMP) and exports,” Tiger Brands said in a statement.

Group revenue from continuing operations increased by 2% to R15.7 billion. However, group operating income dropped by 29%, with operating profit margins declining to 7%, impacted by lower volumes, raw material and conversion costs rising ahead of inflation and increased marketing investment, it said.

“These costs, together with the effect of government regulations on pricing during the national disaster period, may have an impact in excess of R500-million on profitability (in the second half),” the company said.

A Spar in Durbanville, Cape Town,  has elected to remove certain items from their shelves in a bit to support neighbouring small businesses during the Alert Level 4 lockdown.

As businesses struggle to survive due to the lockdown and employees around the country lose their jobs and endure pay cuts, Palm Grove Spar is playing its part by lightening the financial burden and uncertainty that comes with it.

The Spar’s owners released a statement on their Facebook page saying that:

  • We will be closing our stationary section and asking that you instead support Hein and his team at PenCafe Stationers
  • We will remove all Frozen Burger Patties from our shelf and ask that you support Werner and the RocoMamas team when deciding what burger to enjoy

“As owner-run businesses, we, now more than ever, need to support each other.”

 

Black Friday is not a charity, consumers warned

Source: Supermarket & Retailer

Black Friday, which falls on 29 November this year, may feel like an annual treat for thrifty shoppers, but it has little to do with altruism. For retailers it is all about maximising consumer spend.

Some Black Friday bargains will save you money, with some items selling at or below cost price, but profit-starved stores, especially those in South Africa under extreme pressure, do not plan to come in at a loss for the day.

Rather, online and brick and mortar stores use the annual shopping day to manipulate consumers, get feet through doors, win hearts and minds, and generate additional revenue.

In South Africa, shoppers spent close to R3 billion at stores on Black Friday 2018 – a leap in spending so high that it even helped ‘save’ the country’s economy after a torrid year. And with South African consumer spending habits often dictated by pay day deposits, it’s an expense that few local consumers can actually afford.

In order to get consumers parting with their cash, and then, ironically, thanking the stores while doing so, retailers employ several tricks and techniques – many of which are refined each year as the shopping day continues to gain traction in South Africa.

This is how stores will try to trick you into spending more money than you probably should on Black Friday 2019.

Stores will build up your bargain-seeking arrogance – to your detriment.

The psychological manipulation starts long before anyone bangs on the store doors early on Black Friday morning itself, and all the retailers taking part are conspiring against you.

Stores use several psychological tricks to manipulate shoppers, but one of the most important is boosting your certainty of finding a great deal on days like Black Friday, according to brand and consumer specialist Martin Lindstrom.

He argued on Bloomberg that most of what we do while shopping is irrational and subconscious, and calls the mall “the soul of seduction”. The more rational shoppers think they are, he says, the more likely they are to be manipulated.

In other words, you might think it’s entirely rational, and even pretty genius, to be tracking down that amazing deal on Black Friday – but if anything, this confidence just means you’re more likely to fall prey to their tricks.

Building up the hype prior to Black Friday reinforces the idea that great bargains are to be had. Also watch out for messages that tease limited availability and the need to pounce on deals while they are available, rather than sitting on the idea of buying that brand new washing machine until it is “too late”.

“Limited stock” is just that – especially if the numbers aren’t specified.

Mainstream stores will not risk being caught for fraud; if they advertise a once-in-a-lifetime discount of tens of thousands of rands, they really will sell at that price. But there is no requirement for them to have enough stock to make sure you too can get that item at that price.

Be especially worried when the level of stock is not specified, because “limited” can mean “one”.

Stores count on the fact that the adrenaline rush of Black Friday will make you grab a “deal” you haven’t properly researched when limited stock means you can’t get exactly what you want – especially after you’ve camped out on a cold floor all night or obsessively clicked “refresh” on a web page.

Retailers lure you in with great deals, and then subtly tempt you to buy stuff that is not on sale

The concept of loss leaders – items that aren’t necessarily profitable, but sold to attract customers to other items – is nothing new, and not exclusive to Black Friday, either.

Between online research and social media, retailers have to offer genuinely good deals to get feet through their doors rather than those of competitors. If they draw enough traffic they may be able to offset the losses with higher volumes on regularly-priced goods, and they tend to do everything in their power to convince you to buy those.

In some cases it seems as if stores also subtly mark up items they think shoppers may not know the value of, and let the halo-effect of Black Friday give the impression that these too are really good deals.

Loss-leading is not a failsafe way for stores to generate profits, but they do work – to the extent that they’re banned in many US states and European countries.

The products on sale may be old….

Check the model numbers of the hot ticket items that are deeply discounted, and you may find that the products are anything but new.

Events like Black Friday are a great way to move old items that haven’t sold through the year, and probably won’t move during Christmas shopping either – and which will only drop in value as they are outpaced by newer models with new features or technologies.

These can still be great deals if you know what you are in for, and if you are happy with last year’s model, or one with limited features. Just don’t be caught with a “new” TV that isn’t quite what you expected.

… or inferior

Because American consumers can now be counted on to flood into stores for Black Friday, some manufacturers create products especially to capitalise on that spending.

In at least some cases, these special product lines are cheaper to make, and inferior, to mainstream product lines that carry the same name. Because of this, Forbes suggests that the very bastion of a Black Friday deal – the not-so-humble flat screen television – is better bought at other times of the year to avoid buying “toned down, derivative models”.

If you can’t find the model number for a common item from a big name with a simple Google search, beware.

You are not being paranoid: some stores will quietly increase prices before Black Friday to claim bigger discount levels.

As with some online stores in South Africa, those dramatic double-digit percentage discounts on offer come 29 November will not necessarily be as attractive as simple math would suggest.

That’s because in order to hit the advertised discounts, some retailers quietly increase the retail price of sale items a few weeks before the event.

That way they can genuinely claim a discount compared to what they were charging before, even though that is not necessarily the price that was generally charged.

Chances are you’ll get the same thing at the same discount later – and you may do even better.

It’s easy to fall into the temptation trap of Black Friday and think it’s the only sale of the year. But, in the US market at least, CNN claims that there are the same – if not better – deals to be had at other times of the year.

And the South African seasonal retail cycle is looking more and more like that of America, as Black Friday and Cyber Monday take hold here.

Sales on things like clothes and outdoor equipment are often dictated by the changing weather, so if you’re after summer fashion items, you may be better off waiting a few months after Black Friday.

Likewise, South African electronics stores increasingly release items like smart phones and televisions soon after they launch elsewhere. Those launch dates are often linked to big international events, such as the Consumer Electronics Show in the US.

So if you lust after a big-ticket item such as a new iPhone or a large TV, you might be better syncing your sales clock with, say, Apple’s international releases, and waiting for the fire-sale price drops that come when that now top-of-the-line phone suddenly becomes a previous model.

‘Cheap’ housing in high demand

Source: Business Insider SA

Properties priced between R250 000 and R500 000 are experiencing a strong third quarter, a new report by FNB showed.
Due to increased demand, 5% of properties in that bracket is sold above asking price.

FNB said there is a lack of supply in that bracket which leads to strong house price growth.

The FNB Affordable Housing Insight for the third quarter of 2019, released on Tuesday, showed a third of properties in the R250 000 to R500 000 price range sold below initial asking price.

The average discount offered for the market, also known as the gap market, was 12.7%.

In contrast, over 95% of properties in the higher end of the market sell below-asking price, at approximately 10% discount, the report said.

On average, properties in the R250,000 to R500,000 bracket remained on the market roughly 6 weeks, with 13 average viewings.

In the higher-end market, properties spend 16 weeks on the market with 9.6 average viewers.

The report showed that in South Africa 35% of transactions are typically for buy-to-let, compared to 50% of transactions in the R250,000 to R500,000 bracket.

FNB Home Finance CEO Lee Mhlongo said there is an inadequate supply of lower-end residential properties which contributes to strong house price growth.

“Prospective home buyers are looking and finding value in affordable housing. We believe that a better pipeline of supply, especially within the gap market, will go a long way to improving home ownership in our country,” Mhlongo said.

Mhlongo said emigration and relocation-related sales remain low in affordable housing bracket but is more prominent in higher price segments.

The FNB Affordable Housing Insight was compiled through surveys with the country’s top real estate agencies in Gauteng, Western Cape, Eastern Cape and KwaZulu-Natal.

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