The Great Buyers Market of 2012 (The Bugle)

The great buyers market of this five year cycle is expected to continue for the next six to twelve months if we are to correctly understand and interpret the recently released economic data. The South African Reserve Bank publishes the Leading Business Cycle Indicator index and if you want to understand where demand for property will be heading, this is one of the key statistics to keep a close eye on. The most recent figures released indicate a decrease in this index by 1,1% and demonstrates that we are heading towards a period of softer general economic growth and the inevitable impact on residential and commercial property demand this translates into. 

As estate agents we cannot make or control market supply and demand forces, but we can understand all the forces that influence demand and supply and then provide intelligent and informed advise to our clients. The FNB Valuer’s Demand and Supply ratings still currently show that the supply rating exceeds the demand rating, the difference being a measure of market strength, and we can expect this gap to translate into lower real property prices, as our market strength figure comes under pressure.

The overall price movement of homes is another vitally important statistic to track. The FNB House Price Index showed a further slowing of its year-on-year growth rate in August 2012 to 6,6% from July 2012’s 7,8%. Real House Prices, after adjusting for CPI inflation, have slowed only slightly from 2,85% to 2,76%. This was largely due to the significant decrease in CPI inflation from 5,5% in June to 4,9% in July 2012. Producer Price Inflation has also steadily decreased to 5,4% indicating that manufacturers are finding it difficult to increase the prices of their goods. Lower inflation is good news as the prospect of further interest rate relief from the Reserve Bank by further decreasing the repo rate at their next monetary policy committee meeting becomes more probable. 

Buyers of residential property have never had it this good: the lowest interest rates in 40 years and an extra-ordinary choice of exceptionally well-priced options available to choose from. As most sellers of property are also buyers, what you can expect to lose on the swings you will make up on the round a bouts. Knowing the above, the recommendation to sellers is to be far more competitive on pricing and not to live in hope that pricing will somehow increase in the medium term. Buyers should enjoy this current cycle and to remember that nothing lasts forever.