Property Talk

FNB Estate Agent Survey update

The green shoots of a recovery in demand for our higher-end residential real estate market seem to be evident considering the activity over the past few months and the latest FNB Estate Agent Survey seems to supports this notion.

Although the general FNB House Price Index recorded growth of only 3,3% for January 2020, down from 3,5% in December 2019, the overall market activity has been described as stable.

The 2019 year showed headline CPI Inflation averaging 4,1% which was above the general House Price growth for the year of 3,6%. Mortgage advances grew by 4,8% showing that overall banks have become increasingly aggressive in chasing market share by providing higher loan to value mortgages and additional concessions on rates.

The length of time a property remains on the market before a sale being realized is an excellent test of market demand and improvements in the higher end of the market have been recorded with overall time on the market in the 4Q 2019 shortening to 12 weeks and 2 days from the 13 weeks and 5 days recorded in the 3Q 2019. For properties over R3,6m FNB report time on the market of 17,7 weeks.

As our market in Zimbali only starts at over R4m the time on the market would range from 24 weeks and upwards. Most of our mandates default to 180 days or approximately 26 weeks indicating the typical sales cycle at the top end of the residential property market.

The discounting required to achieve a sale deepened over the 4Q 2019 averaging 13% from 11% in the previous quarter. Discounting at the higher end of the market as defined by FNB was recorded at 17% in 4Q 2019. First-time buyers accounted for 30,9% of the market in 4Q2019 and specifically account for 65% of all sales in the lower end affordable market segment.

First-time buyers are particularly dependent on mortgage finance and the current lending criteria applied by the major commercial banks are facilitating these highly credit-dependent transactions.

The reasons for selling indicated an increase in selling due to financial pressure from 13,6% to 16,2%, which is a significant increase. The emigration related selling has spiked recently and currently, on average, accounts for 14,6% of all sales.

The segmented data across the price brackets shows that the higher end sales are more impacted by this reason and account for as much as 22,6% of all sales. When you have a situation of almost a quarter of sales related to this reason, this would be considered a historical peak and of some concern.

Read together with the deepening discount in the higher price spectrum, these sellers are reducing prices to emigrate and export the proceeds of the sale.

For those buyers and sellers within the R1m to R3m bracket, it is largely business as usual with most transactions being a primary residence. For the higher price brackets, as one moves up the price spectrum, the market becomes increasingly more of a buyers market characterized by more sellers than buyers.

The smart money has now been taking advantage of this and achieving excellent results in being able to acquire properties at very aggressive pricing.