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Tuesday Jul 13, 2021

Property market shows signs of slowing down after uptick

The property market is showing signs of slowing down after a slight uptick in the second half of last year, but is still above pre-pandemic levels, as consumers favour work-from-home options.

According to First National Bank's (FNB) property barometer released yesterday, while demand is moderating, it is still above pre-pandemic levels, helped along by lower interest rates.

"Current activity also reflects pandemic-induced shifts in consumer behaviour: with the greater adoption of work-from-home and homeschooling, households had to re-evaluate their housing needs, which leant in favour of home ownership," the report said.

According to analysts, the option to work from home has motivated homeowners in suburban areas to consider their holiday homes or places of origin off the coastline as a better alternative to the city, which has resulted in a slight dip in property uptake inland.

FNB noted that longer-term demand fundamentals remain a constraint: the latest data shows a slow re-adjustment in labour markets, which could weigh on wage income growth. "However, we note a potential upside on non-wage income, especially dividend income, which could ameliorate income growth for upper-income households," it said.

The FNB house price index annual house price appreciation for June decelerated to 3.7 percent year-on-year, from 4.2 percent in May.

The bank said the slowing pace of price growth coincided with the slowing of propriety demand indicators, namely the demand strength indicator derived from property valuers' database as well as internal volumes of mortgage applications. "Both indicators declined in the past three months, perhaps suggesting that the interest rate induced demand may have peaked, following a strong rebound in the second half of 2020 and into 2021. The latest FNB Estate Agents Survey also shows activity of estate agents is moderating," the bank said.

FNB property economist Siphamandla Mkhwanazi noted that the estate agents' rating of activity, a rating between 1 and 10, slipped lower in the second quarter of this year to 6.62 points, down from 6.81 points in the first three months of the year.

The affordable market of around R750 000 ranked as the most active segment, followed by the R2.6million to R3.6m price bucket, as buyers continued taking advantage of low interest rates. "Activity in higher-priced segments is reinforced by incidents of upgrading, which, in our view, is driven by the changing housing needs due to the pandemic," he said.

Time on market improved slightly to eight weeks from eight weeks two days in the first quarter of the year, but still significantly shorter than the long-term average of 13 weeks, but longer than the five weeks and one day recorded in the second quarter of 2004, at the height of property price boom in South Africa.

Mkhwanazi said interestingly, the cycle appeared to be turning in the R1.6m to R2.6m price bucket, which had recorded the best times in the last two quarters. In the second quarter of this year the time on market lengthened to eight weeks and one day, from six weeks and six days previously. Other segments moved sideways, with the R3.6m segment recording 11 weeks and one day. "Overall, improvements in the time on market could also be due to greater adoption of technology, which in some markets has shortened the search costs, including time spent comparing properties," he said.

Discount on asking prices narrowed further to 8 percent from from 9 percent in the first quarter of this year.

Mkhwanazi said this was the lowest since the second quarter of 2019 and fell slightly below the long-term average of 10 percent.

"While this gives us clues about market-power balances, it could also be indicative of sellers who are becoming more realistic about setting their asking prices," he said.

The Star Late Edition
8 Jul 2021


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