Property Barometer – Estate Agents Expectations

In the quarterly FNB Estate Agent Survey, the opening question asked to agents is with regard to their perceptions of activity levels in their market. This Activity Rating is estimated on a scale of 1 to 10, with 10 representing the strongest level of activity and vice versa.

Since 2015, weak economic growth along with rising interest rates have been key in lowering this Activity Rating from a multi-year high of 6.73 in the 1st quarter of 2015 to 5.75 by the end of 2016.

Estate Agent Near Term Expectations

FNB then has to a follow up question regarding estate agent expectations for the 3 months ahead of the survey date. The question is a simple one, i.e. “does the agent expect activity levels to increase, remain the same, or decline in the next 3 months”?

FNB then aggregates the answers into the percentage of agents expecting each of the 3 outcomes.

It is probably not surprising to hear that, given the agent experience of weakening activity levels in recent years, agent near term expectations of activity have moderated too. This is only human, with many of us possessing the cognitive bias known as “recency bias”, where the recent past experience has a strong influence on our future expectations.

As at the 4th quarter of 2016, the percentage of agents expecting a decrease in activity in the next 3 months was 25%, those expecting unchanged activity measured 50% of the total, while the remaining 25% expected an increase.

This result on its own tells us little about genuine sentiment, however, firstly because FNB needs to compare it with history to assess just how strong such expectations are, but secondly because seasonal factors play sharply varying roles in various quarters of the year.

FNB thus does not pay too much attention to 1 quarter’s results, but rather prefer to analyse them on a 4-quarter moving average basis, which eliminates the impact of seasonal factors.

To this end FNB constructs their “Home Buying Confidence Indicator”, which is merely the 4-quarter moving average of estate agent near term activity expectations. Each time an agent returns an “increase” answer (with regard to expectations of activity in the next 3 months), they assign a rating of +1 to that answer, an “unchanged” answer gets a zero assigned to it, and a “decrease” answer gets a negative -1 assigned to it. These ratings are then aggregated into the Home Buying Confidence Indicator, which then runs on a scale of 1 to -1, and is the 4-quarter moving average for each quarter’s aggregate rating.

From a multi-year high of +0.27 as at the final quarter of 2015, the Home Buying Confidence Indicator dropped quite significantly to +0.13 by the final quarter of 2016.

Interrupting the declining in the indicator briefly was a noticeable “once-off” increase from +0.15 in the 2nd quarter of 2016 to +0.19 in the 3rd quarter, after which the indicator fell significantly once more in the 4th quarter of the year.

That brief 3rd quarter “spike” was an interesting one, given the timing of the bulk of the survey, most of which took place straight after the August 2016 Local Government Election.

Key Drivers of Agent Activity Expectations

Was the election a catalyst for a temporary spike in estate agent confidence? It would appear so. FNB determines this by examining the results of a follow up question in which they ask agents to give reasons as to why they expect whatever they expect in terms of near term activity levels. It is an open ended question with multiple reasons. 2 key ones which they zoom in on are those experiencing “Positive Consumer Sentiment” versus those experiencing “Economic Stress/General Pessimism”.

For some time prior to the 3rd quarter of 2016, the percentage of agents experiencing “Positive Consumer Sentiment” was a single-digit percentage. Then, from a percentage of 8% in the 2nd quarter, it spiked suddenly to 35.3% in the 3rd quarter, before very quickly declining in the 4th quarter survey to 4.7%.

Exactly the opposite happened to the percentage perceiving “Economic Stress/General Pessimism”. From a high 41.3% of respondents citing this factor in the 2nd quarter, this percentage dipped sharply to 7.3% in the 3rd quarter, before rebounding significantly to 22% in the 4th quarter.

Zooming in further on the sub-components of each major answer category, FNB indeed sees the 3rd quarter “Positive Consumer Sentiment” category being dominated by “Increased Confidence Due to Election Result”. This positive sentiment boost appears to be the combination of an election that went of relatively peacefully and orderly, and in some regions also due to the excitement in some circles of a local government change.

24.7% of respondents in the 3rd quarter survey, i.e. the lion’s share of the 35.3% experiencing “Positive Consumer Sentiment”, pointed to “Increased Confidence due to Successful Election”.

But by the 4th quarter, much of that positive sentiment that agents may have feeling had all but disappeared. Once again, after seasonal factors, the “Economic Stress/General Pessimism” factor was the leading factor cited by 22% of agents in driving their near term expectations, with only 5% pointing to “Positive Consumer Sentiment”


This brief survey “bounce” in agent sentiment gives FNB a few valuable insights. It suggests that business confidence (in this case real estate sector business confidence but possibly other sectors too) can be significantly influenced by political events in current times, be they “positive” or “negative” events whatever that may mean.

However, such sentiment swings can be short-lived too. Ultimately, once a political event or announcement has “passed”, sentiment moves back to real economic conditions “on the ground”….unless of course a political or policy event quickly brings about a lasting change in those real economic conditions.

It is difficult to say to what extent actual consumer sentiment was positively influenced by the August election outcome, because this is merely a survey of agents’ perceptions of sentiment “on the ground”.

Actual Consumer Confidence, according to the FNB-BER Consumer Confidence Index, also improved mildly in the 3rd quarter (before deteriorating in the 4th quarter once more), so what agents perceived in the residential market appeared plausible.

Nevertheless, things appear to have returned to old fashioned economic fundamentals in the final quarter, with agent sentiment once again more subdued in a weak economy.

Subdued sentiment in the 4th quarter was also seen in average survey respondent expectations of house price growth in the next 12 months. In the 3rd quarter of 2016, this average expectation rose from a previous quarter’s 4.8% to 5.1%, before declining noticeably to 3.84% in the final quarter of 2016’s survey.

Read more here: Property Barometer Estate Agent Expectations Q4 – 19th of January 2017