The FNB Estate Agent Survey released on Monday (28 January) showed that first-time buyers accounted for 23% of the residential property market in 2012‚ the same level as in 2011. This was well above the 15% level of 2008 when many first-time buyers were priced out of the market‚ but down on the 28.3% of 2005 when the property market boom started.
The survey showed that the FNB Residential Demand Activity Indicator declined mildly to 6.11 in the fourth quarter of 2012 from 6.17 in the third quarter of 2012 on a seasonally adjusted basis and a recent post-2008 high of 6.35 in the first quarter of 2010. This is on a scale of 1 to 10 with 10 being the strongest level of demand.
The two traditional affordability measures have both shown major improvements since early-2008. The average house price/average employee remuneration ratio‚ has declined (improved) by -25.5%‚ since the peak of "in-affordability" in the first quarter of 2008 up until the second quarter of 2012 (labour data for subsequent quarters are not yet available). This decline is the net result of wage inflation significantly outstripping weak house price inflation.
The second measure of affordability is the "installment repayment value on a 100% loan against the average priced house/average remuneration ratio". This ratio has declined far more significantly‚ by -47.6% over the same period‚ due to the added effect of huge interest rate reductions since late-2008.
Not surprisingly‚ therefore‚ the overwhelming majority of estate agents surveyed perceive improved affordability too. By the fourth quarter of 2012‚ only 17% believed that "income levels had not kept up with house prices"‚ a dramatic reduction from the first quarter 2008 peak‚ where 72% of agents surveyed perceived income levels "had not kept up with price levels".
The results of improved economic performance and some years of affordability improvements‚ can be seen in the improved ability of new entrants to enter the residential property market. FNB household and consumer sector strategist John Loos said it went further than mere affordability as one of the pressing goals in SA was to eliminate the very significant income and wealth gaps that persist on a racial basis.
"Certainly we hear encouraging indications that this process is happening‚ with Stats SA's release of the most recent census results‚ pointing to a further reduction of the racial per household income gaps since prior censuses. However‚ the pace of this transformation concerns many‚" he said.
"Since 2005 when our survey question regarding estimated percentage of buyers by race was introduced‚ we have seen the estimated total percentage of black‚ coloured and Indian buyers in these 'suburban' areas broadly rising.
"From 43% in 2005‚ the percentage of buyers from these three 'previously disadvantaged groups' rose to 50% of total buyers by 2008. Thereafter‚ however‚ a sliding economy saw this percentage decline to 46.2% by 2011. This is to be expected‚ as a higher portion of the previously-disadvantaged race group buyers are new entrants‚ have limited wealth and are thus more income‚ employment and credit dependent than many of the older white repeat buyers‚" he said.
"In 2012‚ however‚ we have once more seen a rise in this percentage to 49.2% of total suburban buyers‚ implying white buyers dropping back a little to 50.8% from 2011's 53.8%. This‚ we believe to be the lagged impact of a better performing economy since the end of the 2008/9 recession‚ along with lower interest rates‚ an effect which has also led to the improved first time buyer percentage‚" he observed.
FNB estimated the racial breakdown in 2012 for suburban home buying was estimated at 11.3% for Indian buyers‚ 8.8% coloured buyers‚ 29.5% black buyers‚ and 50.8% white buyers. Loos said the simple lesson was that the faster the country grows its economy (in a sustainable manner)‚ the more rapidly it could racially transform residential property ownership.
"This was noticeable in the boom times up until 2008. We've made some progress in racially transforming property markets. But when the economy stuttered in 2008‚ estate agents started to suggest that the process had gone backwards‚ before 2012 saw some limited progress resume‚" he concluded.