Absa’s Homeowner Sentiment Index (HSI) indicates that confidence in the local property market (Q1 2021: 81%) remains in line with 2020’s fourth quarter.
The index’s key findings include:
- Views towards buying property have improved for a fourth consecutive quarter (Q1 2021: 82%), the highest since the introduction of Absa’s Home Sentiment Index with views towards buying, rather than renting, also reaching its highest level.
- An emerging trend points to property renovations with 45% of those interviewed believing that alterations are an opportunity for improving security.
- Views on purchasing property outweighed the views on selling property for the second consecutive quarter which has given way to property accumulating in value – a possible indicator of the anticipated price increases because of the widening gap between willing buyers and sellers.
- Affordability emerged as a key theme due to incidental property acquisition and ownership costs (transfer and maintenance costs). Those who do not own property – and prefer to rent – together with those who have purchased property before, referred to this in the survey.
- Views on purchasing property, together with demand have been sustained since mid-2020. This demand has continued to be met with a mismatch in the supply of stock, initially due to would-be sellers perceiving prices to be too low to sell but this has likely shifted to property owners wanting to ride the price increase wave to achieve better selling prices closer to the top of the cycle.
- The property market is likely to see lagged Consumer Price Indices (CPI) reversed with house prices possibly growing in real terms. The effect of the mismatch in supply and demand on property prices over the past year was largely absorbed by available-for-sale stock. However, stock levels have been running progressively lower and the supply-demand mismatch will likely play out more noticeably on property prices.
- Buyers are reaching for pricier property. To support these purchases, there will be mortgage loan applications at higher loan-to-values (LTV) and potentially longer terms. Interestingly, Absa did not see a deterioration in quality of buyers which held out going into H2, enabling approval rates to be kept in line with pre-lockdown levels, driving the surge in registrations during the second half of the year.
- Lending increased materially towards the end of 2020, much of which was due to consumers taking out mortgages and this resulted in new lending for mortgages surging to an all-time high. This increase would have been supported by the demand for property, the shift towards more property being financed (Rather than cash purchases) and higher LTV deals being concluded. Absa expects to add to this mix, increasing property prices in the coming months.
Download Absa’s latest Homeowners Sentiment Index Q1 2021 here: