Market Trends (The Bugle)

There has been a flood of market data published recently which is always good to watch and analyze to be sure we have a sense of developing market trends. If you have been involved in residential property sales for a while, you soon understand the impact mortgage finance has on the market as the bulk of all transactions are subject to finance. ABSA’s credit and mortgages review shows that the August 2013 figures are stable regarding mortgage growth. South African households cumulatively have R807,1 billion in mortgages which is growing at 2,7% year-on-year. This amount represents 73.1% of all mortgages (the other being private sector corporate mortgages) and represents 60% of household credit balances. The other 40% of household debt is represented by secured and unsecured credit. Car finance and furniture finance are good examples. Unsecured short-term loans are an aspect of household credit that spiked recently but which has come down dramatically. This will not please the retailers who will notice this pull-back on their sales activity. 

The report on the holiday home market caught my eye as we sell many of these in the greater Ballito area. FNB’s estimated holiday property buying activity is currently at 2% of all buying. The buy-to-let figure has dropped slightly from 8% to 7% of all buying. Owning a holiday home or a second property is a luxury, which has come under increasing pressure over the past five years. Using deeds office data to identify properties owned by individuals where that owner owns more than one property, FNB estimate that approximately 16% of all properties owned are this type of second home or investment property. The growth in this type of ownership has been flat over the past few years. Primary residential home sales make up 90% of the market. The North Coast has seen a significant migration of permanent residents to its suburbs and gated estates, as the trend of moving northwards continues. Ballito and the surrounding areas are therefore increasingly becoming a primary residential market rather than predominantly a holiday destination. The outstanding road infra-structure, the commercial and industrial business parks, and the King Shaka International airport form a very convincing argument for the continued expansion of the North Coast.

The most recent estate agent home buying survey published by FNB indicated that the 3^rd quarter residential activity indicator did decline somewhat even though the general trend since early 2012 has been rising.  Around 15% of agents are reporting stock constraints. Along the Dolphin Coast this is prevalent in the R2m price bracket where demand exceeds supply. We have seen an interesting decline in the estimated average time that properties remain on the market prior to a sale. This is a measure of price realism. The 3^rd quarter figure was 14 weeks and 5 days. This is down from the 2^nd quarter estimate of 17 weeks and 1 day. This decline is therefore read as an improvement in pricing realism. A second measurement of pricing realism is the percentage of sellers who have to drop their price to achieve a sale and by how much this has to be adjusted. A marginal improvement was recorded here with 3^rd quarter figures indicating that 88% of all sellers have to adjust their price – down from 90% in the 2^nd quarter. The average percentage drop in asking price was recorded as 9%, slightly lower than the 10% recorded over the past five quarters.

(Author: Andreas Wassenaar, published in The Bugle, 16 Oct 2013)