Residential buying activity levels deteriorated further in September, with volumes now at pre-pandemic levels, the FNB Residential Property Barometer showed.Picture: Karen Sandison/Independent News
Residential buying activity levels deteriorated further in September, with volumes now at pre-pandemic levels, the FNB Residential Property Barometer showed.
“In line with deteriorating affordability, buying activity continues to decline across the spectrum…our indicators suggest widespread downscaling in the market, supporting buying activity in lower-priced brackets,” FNB senior economist Siphamandla Mkhwanazi said yesterday.
The FNB House Price Index growth slowed to 0.6% year-on-year in September, down from 0.8% in August. This took average house price growth to 0.9% in the third quarter, down from 2.1% in the second quarter.
FNB’s market strength index continued to show declining levels of demand, while the supply of properties for sale also declined.
“Feedback from our latest Estate Agents Survey suggests two-thirds (67%) of listed properties now take three months or more to sell, up from 56% in 2Q23. As such, we expect a low house price growth trajectory to continue in the next few months, until inflation and borrowing costs ease more meaningfully,” FNB said.
January to August house price appreciation averaged only 1.8%, he said, versus 3.5% in 2022 and the bank’s prediction of a 1.7% average for 2023.
Mkhwanazi said they expected that interest rates - low interest rates stimulate the housing market - had reached their peak.
However, he warned that the short-term prospects for this forecast carried an upside risk, particularly if upward pressure on food and fuel prices intensified, and the government’s fiscal position deteriorated.
Similarly, the declining trend in vacancy rates in the rental market may be stalling. Data suggested that vacancy rates remained above pre-pandemic levels, reflecting an incomplete recovery.
Meanwhile, FNB’s Estate Agents Survey results for the third quarter of 2023 showed market activity recorded a rating of 5.1 out of 10, which was below the long term average since 2004, of 5.9, and much lower than a recent peak of 7.1 reached in the fourth quarter of 2020.
“Indeed, January to June, National Credit Regulator data shows the volume of new mortgage transactions has declined by 18%. Compared to 4Q21, at the onset of the current interest rate hiking cycle, mortgage transactions have declined by about 24%.”
Nevertheless, agent expectations for the housing market showed some optimism in the third quarter, with 50% of respondents expecting an increase in activity in the next three months, compared to 17% in the second quarter.
Factors cited for this optimism included expectations that interest rates had peaked, as well as a customary increase in activity during the summer months. Less severe load-shedding in recent months had also boosted sentiment in the market.
Financial pressure-induced sales remained elevated at 23% of total volumes in the third quarter, unchanged from the previous quarter but higher than the historical average of 18% since the fourth quarter of 2007.
These sales were disproportionately higher in the affordable market segment, with an estimated 30% of sales attributed to financial pressure, Mkhwanazi said. This reflected the impact of the sharp increase in debt servicing costs, which had a more pronounced impact on lower-income households.
Sales attributed to relocation in South Africa appeared to have stabilised from 14% to 12% in the third quarter. Incidents of upgrading had slowed from 15% in the fourth quarter of 2021 to 9% in the third quarter. Emigration-related sales were steady at 9%, much lower than the peak of 18% in 2019. However, these remained elevated in higher-priced segments.
BUSINESS REPORT