House sales slump
WAIT AND SEE: Many first-time home buyers are waiting for better conditions to arrive before making a decision

It now takes 12 weeks and four days to sell a home

The number of new buyers who have entered the property market this year dropped by three percent — compared to the last four months of 2007.

The FNB Residential Property Barometer for the first quarter of this year was at the lowest point since its inception in 2003.

It reported yesterday that first-time buyers dropped from 17 percent in the fourth quarter of 2007 to 14 percent in the first quarter of this year.

The index is based on a national quarterly survey of estate agents who are asked to rate the residential property market activity levels in their areas on a scale from one to 10.

The latest barometer recorded the worst activity levels at 4.96 — a 0.13 decline from the fourth quarter’s 5.09 rating.

Current levels were a far cry from 2004’s first quarter rating of 7.66, which was the highest recording since the inception of the barometer in 2003, said FNB.

The knock-on effect of the drop in activity is that it now takes 12 weeks and four days to sell a property — from 11 weeks and two days in the last quarter of 2007.

This year 83 percent of sellers have been forced to accept a lower price than their initial asking price, a one percent increase from last quarter.

John Loos, a property strategist at FNB, said that the deteriorating ratings were unsurprising and were indicative of tough times ahead for the local residential property market.

Loos said the bank had adjusted its previous expectation of a property market recovery in the middle of this year, to now being a probability only in the last quarter — or for it to emerge only in the first quarter of 2009.

He said the survey had also found agents increasingly reporting on noninterest-rate factors such as political uncertainty and the country’s power crisis, in addition to the usual suspects: a slowing economy, further interest rate increases and rising inflation eating into real disposable incomes.

FNB said the introduction of the National Credit Act had dropped to third place as a priority issue.

Interest-rate increases came first, followed by socio- economic and political uncertainty.

‘‘Potential first-time buyers, who either still live with their families or are currently in the rental market, are postponing entry into property ownership, and are probably waiting to see an improvement in the market first,” Loos said.

‘‘This makes sense in the short term as one could still be paying less if one is renting, compared with a bond repayment. But in the long term first-time buyers know that they would have to make a purchase,” Loos said.

He cautioned prospective buyers not to expect an interest rate decline.

Meanwhile, RE/Max SA said people remaining in the rental market should expect to pay higher rentals, because landlords would pass on increased mortgage costs to their tenants.

The estate agency said the recent interest rate increase of 50 basis points by the South African Reserve Bank would further trim the already shrinking volume of residential property sales.

It said the impact would be cushioned if sellers lowered their expectations on asking prices so as to effectively absorb the higher cost.

Jeanne van Jaarsveldt, marketing and finance director of RE/Max SA, said the effect the increase would have on residential rentals would undoubtedly be passed on to tenants.

She said that the lower end of Johannesburg’ s rental markets were already reaching crisis level.

‘‘Stock is there, but because of the surge in failed credit checks, landlords are insisting on double deposits and higher rentals.”

Article by: Xolile Bhengu - www.sundaytimes.co.za