Against our earlier expectations of further strengthening, the 1st Quarter 2015 FNB Estate Agent Survey points to a lack of any further residential market improvement, perhaps reflecting a weak start to 2015 by the SA economy in general.
SUMMARY OF FINDINGS
While we had expected some further residential market strengthening in the near term due to an economic boost usually to be expected from sharply lower oil prices, the FNB Estate Agent Survey for the 1st quarter of 2015 displayed a distinct lack of further such strengthening when seasonal factors are put aside.
What is becoming increasingly apparent is that South Africa’s myriad of policy and structural constraints on its economy are working against our benefiting from periodic positive global economic events. Therefore, as a slew of weak economic numbers emerge from early in 2015, it should perhaps not be surprising that the Estate Agent Survey may be beginning to point towards a residential market starting to move more broadly sideways as opposed to stronger.
• The 1st Quarter Residential Activity Indicator rose mildly to 6.73, from the previous quarter’s 6.61. However, when one takes seasonal factors out through a statistical seasonal adjustment, we see that our seasonally-adjusted version of the Indicator declined noticeably, from 6.76 in the previous quarter, to 6.43 in the 1st quarter of 2015. Seasonal factors aside, therefore, agents implicitly perceived some weakening in activity levels early in 2015.
• In the 1st quarter of 2015, the percentage of agents citing stock constraints actually increased, from a previous quarter’s 19%, to 24%, a percentage comparable with the 22% recorded in the 2nd quarter of last year. However, while this percentage increased from quarter to quarter, it must be noted that the percentage of agents citing “lots of stock available” also rose from quarter to quarter, from 2% to 11%, so it is not clear that the overall national stock constraint actually deteriorated.
• No meaningful change in seller price realism took place in the 1st quarter 2015 survey. From a 3rd quarter 2014 estimate of 11 weeks and 4 days, the estimated average time on the market has risen slightly for the past 2 quarters, to 12 weeks and 5 days in the 1st quarter of 2015. There was also a slight increase in the percentage of sellers having to drop their asking price, from 81% in the 4th quarter of 2014 to 83% in the 1st quarter of 2015.
• The estimated average percentage asking price drop, on those properties where a price drop is required to make the sale, remained unchanged at -8% in the 1st quarter of 2015 for the 5th consecutive quarter. This remains significantly less than the estimated average percentage drop of -13% back in late-2011.
• When agents indicate the factors influencing their near term expectations, we continue to see the significance of stock constraints (lack of stock available to sell) on their thinking. 35% of agents cited “stock issues” as a factor driving their expectations, with 24% experiencing stock constraints while a lesser 11% cited “ample stock”.
• The average expected house price increase, by survey respondents, of +4.8% remains perhaps surprisingly moderate, although slightly higher than the prior quarter’s 4.3%.