The slowing trend in house price growth continued in September, with the FNB House Price Index decelerating to 3% year-on-year (y/y) for August, from 3.6% in August (revised up from 2.6%) meaning that house price growth averaged at 3.5% in 2021’s Q3, down from its peak of 4.8% in 2021’s Q2.
Market strength indicators continue to show moderating demand, following a strong rebound during the second half of 2020 and into 2021. However, these are still above 2019 levels, reflecting the positive effect of lower interest rates on market activity and the changing housing needs due to Covid-19 i.e., working from home and home schooling.
Despite slowing volume growth, the value of mortgage extensions continues to grow at a faster pace supported by the demand for bigger loans, a shift towards higher price brackets (or bigger properties).
But weaker-than-expected labour market data from 2021’s Q2, combined with the potential adverse effects of the recent civil unrest on employment prospects for Q3, suggests that long-term demand fundamentals will take longer to recover to pre-pandemic levels. However, FNB has noted a potential upside on non-wage income, especially dividend income, which has boosted income growth for affluent households.
Estate Agents Survey results show riots had a minor impact on the KwaZulu-Natal property market
Using 2021 Q3’s FNB Estate Agents Survey results, FNB considers four market activity and sentiment indicators to assess the first-round impact of riots, particularly in KwaZulu-Natal.
Market activity
At a national level, agents’ perception of activity peaked at 6.9 (out of 10) during 2020’s Q4 and descended to 6.3 in 2021’s Q3. The deceleration is across most price segments and regions. However, the decline was most noticeable in KwaZulu-Natal, where activity recorded 5.5 from 7.2 in the previous quarter, or a 23.6% quarter-on-quarter (q/q) decline versus a 5% q/q decline at a national level.
Time on the market
Average time properties spent on the market for sale lengthened for the first time in 12 months, from 8 weeks to 8 weeks and 6 days, further signaling cooling home buying activity. Once again, the cooling market activity was seen across most price segments and all regions. Compared to the previous quarter, time on the market lengthened the most in the KwaZulu-Natal region, by approximately 2 weeks versus the national average of just 6 days.
Market sentiment:
In line with softer market activity, estate agents’ sentiment – as measured by the proportion of agents who are satisfied with prevailing market conditions – pulled back across most price segments and regions. Nevertheless, the indicator remains upbeat, particularly in the Western Cape, presumably in line with activity that is still above pre-pandemic levels and on anticipation that unrest in KwaZulu-Natal would benefit the Western Cape. The decline was more visible in KwaZulu-Natal with 51% satisfied with prevailing market conditions, compared to 72% in the previous quarter and the national average of 74% in 2021’s Q3.
Reasons for selling:
The reason for selling matrix remained broadly unchanged from the previous quarter and shows that sales are still elevated due to financial pressure as well as slowing trend of emigration-related sales.
However, 2021’s Q3 data might be signaling that emigration sales have bottomed and starting to rise in some segments. Notably, the KwaZulu-Natal region saw an increase in selling due to security reasons, at 11% versus 8% in the previous quarter and 7% for the national average.
In conclusion, the FNB Estate Agents Survey shows some impact on the KwaZulu-Natal region, but relatively small in the greater scheme of things. However, there may still be lingering longer-term effects, particularly on buyer and investor sentiment.
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