FNB Estate Agents* Survey reveals improvement in 4Q19 market activity
- The FNB HPI kicked off the year on a low gear and registered 3.3% y/y in January, from 3.5% y/y in December. The underlying housing market activity remains broadly stable, despite the apparent weakening of households’ balance sheets.
- The 4Q19 FNB Estate Agents Survey revealed a mild improvement in the buying and selling activity. Improvements primarily came from the middle- to higher-priced segments, while the bottom end remained broadly stable.
- The improved market activity was also reflected in the reduction of the time a property is on the market for sale. While it remains relatively long (by historical standards), the survey reveals that time to sale shortened to 12 weeks and 2 days in 4Q19, from 13 weeks and 5 days in the previous quarter. Much of the improvement came from the higher-priced segments. This could be attributable to the discounted property prices (due to excess supply) and the availability of credit in the upper end.
- The FNB Estate Agents Survey further shows that there were insignificant changes in the reasons for selling matrices. Of concern, however, is the rising incidents of downscaling due to financial pressure. These accounted for 16.2% of sales volumes, up from 13.6% in the previous quarter. Furthermore, while there was no overall worsening in the trend, emigration-related sales remain concerningly elevated, particularly in the R2.6m-R3.6m price segment.
- Looking ahead, we expect the prevailing discounting in the upper end and the robust house price growth in the lower end to persist into the year. This is primarily driven by the divergent demand-supply dynamics in these markets. Notwithstanding the lower borrowing costs, the financial state of households remains a key downside risk, particularly in the lower end where affordability matrices are fragile and relatively more sensitive to income shocks. For now, low borrowing costs appear to be (cyclically) offsetting the drag from the weak labour markets and uninspiring economic outlook. Nevertheless, economic developments will remain the key (structural) driver of housing market trends over the long term. As such, we expect house price growth to remain low this year and average 3.7% y/y, modestly up from 3.6% in 2019.
* Please note that we have expanded our sample to include the “Affordable market”.