Agent Advice

Residential property market is strengthening

Private Property South Africa
Tahir Desai |
Residential property market is strengthening

The residential property market appears to have strengthened in the second half of 2014 after a lull in the first of the year. This signals a solid start to 2015 for the property market, according to the results of the most recent FNB Estate Agents Survey.

However, stock constraints and the perception that residential affordability is deteriorating could be cause for concern.

_ The key take outs from the survey are:_

Strengthening trend in Residential Market

A seasonally adjusted version of the Residential Activity Indicator saw activity rising from 6.48 in the 2nd quarter, to 6.62 in the 3rd quarter and then further to 6.8 in the final quarter of 2014. Therefore, it would appear that we head into 2015 with the residential market still on a broadly strengthening activity trend.

Stock constraints still an issue

In the 4th quarter of 2014, the percentage of agents citing stock constraints remained significant. However, this percentage has declined for the 2nd successive quarter, from a peak of 22% in the 2nd quarter of last year to 19%. This decline may be the start of a trend towards greater alleviation in the supply because it coincides with an increase in the residential component of the FNB-BER Building Confidence Index late last year, which suggests more new buildings are being completed.

Seller price realism unchanged

No meaningful change in seller price realism took place in the 4th quarter 2014 survey. The estimated average time on the market rose very slightly to 12 weeks and 3 day from 11 weeks and 4 days. Agents also reported a slight decline in the percentage of sellers having to drop their asking price to make the sale, from 86% in the 3rd quarter to 81% in the 3rd quarter.

Asking price drop unchanged

The estimated average percentage asking price drop, on those properties where a price drop is required to make the sale, remained unchanged at -8% in the 4th quarter of 2014 for the 4th consecutive quarter. This remains significantly less than the estimated average percentage drop of -13% back in late-2011.

*Residential affordability deteriorating *

After years of improvement, agents feel that that residential affordability is starting to deteriorate. The percentage of agents believing that “income levels have kept up with prices” has declined from 49% in the 2nd quarter, to 41% and then 39% for the 3rd and 4th quarters respectively.

Stock constraints still an issue

Stock constraints (lack of stock available to sell) are a major factor on agent’s expectation for the year. 21% of agents cited “stock issues” as a factor driving their expectations, with 19% experiencing stock constraints and only 2% experiencing too much stock. This is arguably a key reason why agents are not extreme in their expectations of near term activity levels.

Average price increase of 4.3% expected

The average expected price increase, by agents, of +4.3% remains perhaps surprisingly moderate, and very similar to the prior quarter’s 4.4%.

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