First National Bank’s (FNB) recently released 4th Quarter 2010 Estate Agent Survey shows that the property market ended last year on a better note than 2009.
Commenting on the survey results, Adrian Goslett, CEO of RE/MAX of Southern Africa, says that while this is an encouraging indication that the market is showing definite signs of improvement, further recovery is expected to be gradual.
Improved residential demand
Following a decline in home buying demand in the 2nd and 3rd Quarters of 2010, an uptick was reported in the 4th Quarter with agents reporting that, on a scale of 1 to 10, demand rose to 5,79 in Q4 compared to 5,66 in Q3. “Although seasonal factors are thought to have been the main influence on the increase, the two interest rate reductions in September and November seem to have filtered through to have a positive impact on demand.”
Price it right to sell
The survey showed that throughout the country, agents believe that some properties still remain unrealistically priced, says Goslett. He says that a lack of pricing realism on the part of some sellers is sure to reflect in the time frame that it takes for the average property to sell. “Therefore, correct pricing remains a key element for a serious seller when they put their property on the market.”
Essential buying is still king
On the buying side, Goslett notes that the survey shows that the back-to-basics home buying trend continued in Q4. “Primary residential demand remains a priority – as a percentage of total buying, it rose to 92% in Q4, from 90% in Q3. The three non-essential components, namely buy-to-let, holiday property buying and buying primary residences for relatives, totalled only 8% of property purchases in Q4, which is a clear indicator of where demand currently lies in the property market.”
Financial stress easing up
Goslett says it is encouraging to note that there was a noticeable decline in homeowners who were selling their homes due to financial pressure. In Q4, these sellers made up 17% of total sellers, making it the lowest estimated percentage for this category of selling since Q1 2008.
More first-time home buyers
The survey showed that in 2010, first-time buyers made up 17% of the total buyers, an increase from the 15% and 15,8% reported in 2008 and 2009 respectively. “This is another clear indication that the lower interest rates, more leniency in lending practices from banks and a better economy are helping this category of buyers break into the market,” says Goslett.
Couples have greater buying power
An interesting trend that has been gathering momentum over the last few years is the fact that more and more people are purchasing property together as opposed to on their own. The survey shows that in 2007, single buyers made up 22% of the total buyer whereas in 2010 they only totalled 15%. Goslett attributes this to the fact that when resources of two or more people are pooled to purchase a property, they are able to potentially buy a better property in a better area as they will more than likely qualify for a higher loan amount. Goslett warns however, that joint property purchases should be undertaken with care and with all the necessary legal documentation in order to protect all parties.
Black middle class holds its own
The emerging Black middle class acted as a great support for the property market in 2010. Goslett says that the survey revealed that the Black middle class fared well, which is mainly attributed to the fact that this category of buyer generally has lower levels of indebtedness. Added to this, their income in recent years has been growing at the fastest pace off the lowest per capita base. “Its not surprising then that this group’s buying power, expressed as a percentage of total purchases, easily held its own in the survey – increasing from 29,5% in 2009 to 31,3% in 2010,” he says.
The survey suggests that agents don’t foresee a repeat of the boom times on the cards for the near future, with many anticipating the market to remain relatively flat for the duration of 2011. “It is a good thing that real estate agents are judging the market realistically,” says Goslett. “It shows an overall understanding that the market dynamic has changed and that all of us in the real estate profession need to continually strive to find new, innovative and more effective ways of working to achieve solid sales results.”