The Third Quarter Joburg FNB Residential Property Barometer pointed to a further rise in residential demand activity levels in the region.

It would now appear that the positive effect of five percentage points worth of interest rate cuts since December 2008 is increasingly being felt in the property transaction volumes, with banking sector relaxations in lending criteria also playing a positive role.

The Property Barometer is a survey of a sample of estate agents in the region regarding their personal experience of market conditions.

The main Barometer question relates to the level of demand activity and agents are asked to rate the level of demand that they experience on a scale of one to 10.

After an initial rise in the preceding three quarters from 4.1 as at the third quarter of 2008 to 4.9 in the second quarter of this year, agents estimated that activity jumped more significantly from the second quarter to a third quarter level of 5.47.

The third quarter survey was undertaken in mid-August.

Confidence up, activity levels lagging

Although the region’s activity levels are steadily improving, the agents surveyed in Joburg rated the region as having the lowest activity level of all five major regions at 5.47.

The three major coastal regions’ agents surveyed — KZN (5.86), Eastern Cape (5.82), Western Cape (5.82) — are now more upbeat in their estimates of activity compared with Joburg, while Tshwane (5.76) also has a slightly stronger reading than its neighbouring Gauteng city.

Sellers more realistic

The percentage of properties sold at below asking price showed a significant decline from 86 percent in the second quarter to 77 percent in the third quarter, while the average time of a property on the market prior to being sold declined sharply from 21 weeks and six days in the second quarter to 16 weeks and six days in the third.

These two indicators, when read together, point towards more realistic pricing by sellers. The greater realism may not only be due to sellers setting prices lower, but also due to the market catching up to price levels, therefore making previously unrealistic price levels now a little more realistic in a stronger market.

Declining emigration, less financial pressure

In 2008, there were arguably two key reasons for selling that were largely contributing to the oversupply of property on the market. The big one was selling in order to downscale due to financial pressure along with emigration selling.

Emigration selling reached an estimated peak of 21 percent of total selling (admittedly in a thin market at the time) in the third quarter of last year, while selling in order to downscale due to financial pressure peaked at an estimated 36 percent in the second quarter of this year. Since a year ago, emigration selling has declined steadily to seven percent of total selling by the third quarter of 2009, while selling in order to downscale due to financial pressure declined significantly off its second quarter high of 36 percent, to 27 percent in the most recent quarter.

A further reflection of better interest rate times was a quarter to quarter rise in selling in order to upgrade, from six percent of total selling to 15 percent of total selling in the third quarter.

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