Research from FNB has revealed that the average time homes spent on the market decreased in the first three months of this year. This is an encouraging sign that the market is starting to strengthen.
Time on market decreases
FNB takes the view that the market is in equilibrium when the average time on market is around 12 weeks. Up until the final quarter of 2017, the FNB’s Estate Agent Survey indicated that the market had drifted away from that equilibrium level, reaching an average time on the market of 17 weeks and 2 days at that stage.
The 1st quarter 2018 then saw a noticeable decline, though, from the previous 17 weeks and 2 days to 14 weeks and 1 day.
Fewer sellers are dropping their asking prices
Agents were also asked to estimate the percentage of sellers ultimately being required to drop their asking price to make the sale.
Most sellers normally tend to start high and allow themselves to be bargained down as a strategy.
The 1st quarter 2018 survey showed a decline in this estimated percentage of sellers having to drop their asking price, from 95% in the previous quarter to 91%.
Like the average time on the market estimate for the 1st quarter, a decline in percentage of sellers dropping asking price also points to a shift towards strengthening of demand relative to supply.
Those who drop the prices, are dropping them by less
In the 1st quarter survey, the amount that sellers drop their asking prices by, became smaller. From -10% in the final quarter of 2017, the estimated percentage drop in asking price to make the sale diminished to -8.2% in the 1st quarter of 2018.
Property in Gauteng sells fastest
Within South Africa, property in Gauteng’s metros sold faster than in the 3 Major Coastal Metros, with Tshwane showing the lowest time on the market.
Whereas Gauteng’s estimated average time of homes on the market was 11 weeks and 5 days in the 1st quarter of 2018, the aggregated Coastal Metro estimated was a far longer 17 weeks and 6 days.
Time on market for the major metros (average of the last 2 quarters)
- Cape Town - 15.21 weeks
- Nelson Mandela Bay - 22.07 weeks
- Ethekwini - 20.64 weeks.
- Greater Joburg (City of Joburg and Ekurhuleni Metros) - 14.93 weeks
- Tshwane Metro - 10.64 weeks
On a national average basis, a noticeable decline in the average time of homes on the market was recorded in the 1st quarter of 2018, after a prior increasing trend.
This ties in with a 1st quarter indications of improved national sentiment amongst businesses, investors and consumers alike, and also with a 1st quarter jump in the FNB Residential Activity Rating.
The strongest major regional markets appear to be found in Gauteng, most notably the Tshwane Metro region, which has by far the lowest average time of homes on the market of late.
By comparison, the 3 coastal major metros are relatively weak, especially Ethekwini and Nelson Mandela Bay, but the once strong City of Cape Town also appears to have cooled off.
Some of the decline in the average time of homes on the market is likely to be seasonal, given that the 1st quarter is typically a strong seasonal quarter for home buying. However, there are signs of a significant improvement in national sentiment, which appears to have been strongly driven by political leadership change in the country late in 2017 and early this year.
This wave of relative “euphoria” can only be sustained should it be backed up by meaningful policy and delivery change aimed at placing SA on a higher economic growth path.
For the time being, however, the residential market has showed strengthening signs early in 2018, but with the strengthening largely being a Gauteng Province story, and with Tshwane Metro appearing to be the Major Metro with the strongest demand-supply “fundamentals”.