Property market stabilised, sellers have to drop their price
Estate agents’ perceptions in the first quarter of the year reveal a ‘stabilising’ residential property market in South Africa, although still favouring buyers with a marginal rise in the percentage of sellers having to drop their asking price in order to sell. These were findings from FNB’s first-quarter 2019 Estate Agent’s Survey, which indicated 95,3% …
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Estate agents’ perceptions in the first quarter of the year reveal a ‘stabilising’ residential property market in South Africa, although still favouring buyers with a marginal rise in the percentage of sellers having to drop their asking price in order to sell.
These were findings from FNB’s first-quarter 2019 Estate Agent’s Survey, which indicated 95,3% of all sellers had to drop their asking price, slightly up from 94,3% in the fourth quarter of 2018.
The average price drop, however, appears to have stabilised at around -9,4%, virtually unchanged from the previous quarter and still above the historical average of -9,0% since 2010, according to Siphamandla Mkhwanazi, economist at FNB.
“This imbalance is more pronounced in the coastal areas and in the high-net-worth segments (properties valued at R3,6 million or more), with an estimated 97,3% and 100% of properties selling at below asking price, respectively,” Mkhwanazi was quoted in a recent article by Property24.
Nevertheless, the survey indicates that agents perceived market activity to have picked up in first quarter of 2019, the second successive quarter of improvement.
The average number of ‘serious show house visitors was 9,97, almost the same as the previous quarter, and agents did not report any further slowing in demand. However, Mkhwanazi noted this still lags behind the historical average of 11,95 viewers in the fourth quarter of 2006.
Agents also didn’t perceive a further weakening in the balance between demand and supply in the first-quarter survey. Homes for sale spent, on average, 15 weeks and 3 days on the market before selling, hardly a change from 15 weeks and 6 days in quarter four of 2018 and ‘significantly lower’ than the most recent peak of 17 weeks and 6 days in the third quarter of 2018.
“Notwithstanding, this suggests that current demand levels are still insufficient to mop up available supply of housing stock on the market, when compared to the long-term average of 13 weeks and 4 days.”
The reasons for selling
Downscaling due to life stage was still the top reason for selling property in South Afirca, accounting for 23% of all sales, and remaining flat since the last quarter of 2018.
Selling to emigrate was up, accounting for 14,2% of sales, from 10% in the fourth quarter of 2018. “In fact such sales, according to estate agents, have doubled in the past two years and are, as expected, more prominent in the coastal areas and in upmarket segments.”
The increasing trend lately of downscaling due to financial pressure eased off a bit to 15,9% of all residential property sales in the first quarter of 2019, down from 19% in in the last quarter of 2018. The survey notes an estimated half of these opt to rent, while the other half look for ‘cheaper’ property.
However, Mkhwanazi added that these trends don’t appear to have benefited the rental market, as vacancies are reported to be increasing and rental inflation continues to languish below inflation. “One explanation could be that households are consolidating in the rental market, opting for shared space.”
There is a rising trend in communal living property, buying jointly with friends or other extended family members. While this is not yet a dominant trend, he indicated that the first quarter of 2019 results show that 15,9% of respondent agents are seeing this trend increasing in their respective markets, up from 12,7% in the fourth quarter of 2018.
“This consumer behaviour is not surprising when viewed in the context of housing expenses outpacing wage growth, and consistent with other manifestations of consumer pressures in adjacent markets, such as the passenger car market wherein total volumes are declining but the proportion of SUVs is rising,” Mkhwanazi said.