Although the latest FNB Home Buying Estate Agent survey reveals that there has been a minor drop in demand for residential properties, the weakening came at the end of a year that, as a whole, had performed better than 2011. Despite this, there were other indicators that suggest that the balance between supply and demand is improving.
According to the agents surveyed, the average time that a property stays on the market has declined slightly - from 15 weeks and 6 days to 15 weeks and 4 days - from the previous quarter. This figure is two weeks less than that recorded in the second quarter of 2011. This is an encouraging development, as it suggests marginal progress in improving the market balance. For 2012 as a whole, the average time on the market was 16 weeks, a little lower than the 17 weeks and 0.25 days averaged in 2011. However, 15 weeks and four days by year-end remained too long to represent a strong market. Judging from the healthier market days prior to 2008, a level nearer to two months on the market appears to be the benchmark for a "strong" market.
John Loos, the Household and Consumer Sector Strategist, says: "Despite agents pointing to properties being on the market for a shorter period of time, which is often seen as a good indicator of pricing realism in the market by sellers, they estimated only a very slight decline in the percentage of sellers being required to drop their asking price to make a sale.
"The percentage of properties sold at less than the asking price was 85 percent in the fourth quarter of 2012, according to the survey, which was insignificantly different from 87 percent in the second quarter and 84 percent in the third quarter."
Loos also notes that there has been a decline in the number of people selling due to financial pressure. "When asked to provide an indication of the reasons as to why people are selling their properties, in the 4th quarter the agents estimated that 18 percent of sellers were selling in order to downscale due to financial pressure. This is down from the previous quarter's 20 percent, but remains a high number."
The above needs to be read in conjunction with the percentage of sellers selling in order to upgrade, which declined slightly from 16 percent of total sellers in the third quarter to 14 percent in the fourth quarter. This, he says, is also possibly a small sign of a market settling a little after some previous growth.
First-time buyers also came under the spotlight. Loos says that first-time buyer demand tends to be more cyclical than the total market. This is arguably because many young buyers have more flexibility than do established households, being able to delay their own formation of a new household by remaining in their parent's home for longer during tougher property and remaining in a rental property for longer.
The level of first-time buying, therefore, is a good indicator of whether market conditions are improving. Given this group's high dependence on credit, it is also an indication of whether or not credit is becoming easier to access.
"For 2012 as a whole, the average first-time buyer percentage of 23 percent was unchanged from the 23 percent of 2011, with both of these years' percentages reflecting a significantly better performance when compared with the 2008-2010 period.
"However, after a steadily improving trend in the first-time buyer percentage from the 2008 low, in 2012 it has begun to appear as if this percentage has been flattening out and perhaps starting to decline a little," he says.