FNB survey finds that residential property demand is increasing

The first-quarter 2013 FNB Estate Agency Survey reveals that the long-awaited increase in demand for residential property is now taking place - albeit slowly and hesitantly.

FNB measure demand for residential property on a scale of one to 10. In their report on the first quarter of 2013 they record that demand rose to 6.8 from 5.89 in the previous quarter. This is the highest level since the first quarter of 2007, when demand reached a peak that was then knocked by the financial crisis.

FNB have drawn attention to the fact that the 6.8 rating is close to what they describe as the "positive" (7 to 8), which most estate agents would regard as highly favourable.

An improving trend

FNB also pointed out that the quarterly rise revives an improving trend which was evident for the first three quarters of 2012, but which dipped slightly in the fourth quarter as a result of the impaired SA economic performance, which, in turn, was caused largely by industrial unrest in the second half of 2012.

The strengthening demand for residential property appears to be prematurely boosting seller confidence. This, in turn, has resulted in a fair number of sellers still expecting unrealistic prices and in a general shortage of stock in many areas.

The FNB survey reports that in the first quarter of this year, 13% more agents cited stock shortages as a factor limiting their sales (other factors possibly causing these shortages are the difficulty in getting bonds for upgrading and the general uncertainty about South Africa's economic future).

In the circumstances, you would expect to see the average time that houses are on the market being significantly reduced. However, the FNB survey has shown that this is not yet happening. On average, houses take 17 weeks and two days to sell. This is notably higher than the fourth quarter average of 15 weeks and four days.

Asking price that is less than the list price

Furthermore, 89% of home sellers are now forced to accept an asking price that is less than the list price. This is a rise of 4% on the fourth quarter of 2012. Nevertheless, the average drop from the asked price to the accepted prices is now only 10%, a figure which has been consistent for four quarters now, after reaching 13% in mid-2002. Also encouraging, is that first-time home buyers have recently formed 24% of the total. FNB comment that this figure should be telling us something about bank lending conditions today because first time home buyers are heavily dependent on credit.

Also encouraging in the FNB survey is the fact that the first quarter of 2013 shows a further decline in sales due to downscaling in response to financial pressure. Fifteen percent of the total number of buyers, FNB report, are selling for this reason, but this is the lowest figure since the fourth quarter of 2007 and this figure has to be assessed in relation to the fact that 16% of sellers in the first quarter this year did so in order to upgrade, a very noticeable improvement. For the first time since late 2007, this figure is higher than the figure of those selling to downgrade.

In the light of those encouraging figures it may come as a surprise that only 30% of estate agents surveyed said that they expected to see an increase in activity - but it is good to see that only 5% predicted a decrease. It would appear that the recovery is taking place and, although by no means spectacular, it will be less difficult to what we have experienced in recent years. It is significant that 65% of agents surveyed by FNB foresee conditions remaining much as they are today.

In the Rawson Property Group, over 70% of franchisee forecasts are generally optimistic and approximately half of the franchisees expect growth of at least 25% in the year ahead. Coupled with the group's expansion programme, this should assure that the targeted 40% turnover growth is achieved.