82% of houses sold below asking price

Pretoria - About 82 percent of residential properties are now being sold for less than the asking price compared with about 30 percent in the first quarter of 2005 while a home remains on the market for an average of 11 weeks before it is sold.

Jan Kleynhans, the chief executive of FNB Home Loans, said yesterday that houses in the top end of the market remained on the market for an average of 14 to 16 weeks while it took about eight weeks to sell a home at the lower end of the market.

Kleynhans said although activity levels in the residential property market were stable, FNB's residential property barometer revealed the rate of change in activity levels declined by 15 percent in the fourth quarter of last year compared with a year earlier.

However, Kleynhans said this decline was "not as bad as expected" in the light of negative influences on the market and pressures on consumers.

He attributed the decline in activity levels to rising interest rates, inflationary pressures and the National Credit Act.

The barometer also revealed that the proportion of properties bought to let was at an all-time low at about 10 percent while the proportion of first time buyers was also relatively low at 17 percent.

The barometer is based on the perceptions of estate agents of market activity levels.

John Loos, an FNB Home Loans property strategist, said a snap survey done last month showed a significant rise in activity levels. Although this was largely due to seasonal factors, underlying market conditions remained weak.

Loos does not believe the market has reached the bottom of the cycle yet but expects the demand for residential property to gradually improve from the second quarter.

This is based on FNB's expectation that interest rates will move sideways from now until late in the year, when the Reserve Bank may cut rates.

Loos said affordability pressures were strongly reflected in the survey about the reasons for selling a house.

As a percentage of total sales, 21 percent of homeowners were selling because they were downscaling due to financial pressure; 17 percent were downscaling in line with their life stage; 9 percent were emigrating; 9 percent were relocating within South Africa; 18 percent were upgrading; 12 percent were moving for safety or security reasons; 8 percent were selling because of changes in the family structure such as a death, divorce or marriage; and 6 percent were moving to be closer to work or amenities.

Loos said there would be a turnaround in the future in people selling for safety or security reasons and moving closer to work or amenities, as traffic congestion worsened

Articlre by: Roy Cokayne - www.fnb.co.za