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Monday Mar 25, 2013

Residential property stock tightens while sellers cut prices, wait longer

Signals in the residential property market about a recovery are mixed.

The estimated average time a house remains on the market before being sold and the estimated percentage of sellers who had to reduce their asking price to conclude a sale both increased in the first quarter of this year from the previous quarter, according to the latest FNB property barometer.

But the barometer, based on a national survey of estate agents, also indicated that there had been a noticeable increase in both residential demand and in housing stock supply constraints.

Simplistically, a growing supply constraint could be expected to cause a renewed drop in average time on the market and stronger house price growth in the coming quarters if solid demand levels were maintained, FNB household and consumer sector strategist John Loos said.

He said a possible explanation for the apparent contradiction was that the short weak economic period late last year might have caused the average time a property remained on the market to lengthen with a lag. It was possible that seller optimism regarding market conditions had also improved, thereby sustaining unrealistic asking prices, he said.

The average time a property was on the market before being sold rose to 17 weeks and two days in the first quarter of this year from 15 weeks and four days in the previous quarter.

The proportion of properties sold at less than the asking price increased to 89 percent from 85 percent in the fourth quarter. The average cut in price was about 10 percent, the same as the past four quarters.

The residential demand activity indicator rose from 5.89 on a 10-point scale in the fourth quarter to 6.57 in the first quarter. This is the highest level since the first quarter of 2007.

The percentage of agents citing stock constraints as an issue increased to 23 percent in the first quarter from 13 percent in the previous quarter.

Loos said the fluctuating average time a property was on the market before being sold remained lengthy and was probably indicative that the market was not yet conducive to sustained real house price growth.

The percentage of homeowners selling to downscale because of financial pressure dropped to 15 percent in the first quarter from 18 percent in the previous quarter. The percentage of homeowners selling to upgrade rose to 16 percent from 14 percent in the same period.

Loos said this was the first time since this question was introduced to the survey in 2007 that the upgrading percentage was estimated to be higher than the “financial pressure-related downscaling” percentage.

Ewald Kellerman, the head of sales at FNB Home Loans, said the portion of the bank’s customers who were at least one month ahead of schedule in the repayment of their home loans had stabilised at 20 percent at the end of last year from a low of 12.2 percent in the second quarter of 2008.

Only 5 percent of agents surveyed expected demand to deteriorate in the next three months, with 65 percent anticipating demand to remain the same and 30 percent expecting an improvement.

Business Report

    
 

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