THE FNB Property Barometer survey, released today, shows that after a rise from a historic low of 4.1 in the third quarter of 2008, to 5.65 by the 3rd quarter of 2009, the 4th quarter level came in at 5.68 - an almost unchanged level.

The survey 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 1 to 10.

FNB said therefore, while the improving trend continues, the marginal rate of improvement possibly reflects a market constrained by a slow economy, and a highly-indebted household sector unable to respond in dramatic fashion to the big interest rate cuts earlier in 2009.

Nevertheless, despite the negative factors stacked against the market, last year's interest rate cuts, along with some moderate relaxation in banks' lending criteria, have made some difference.

FNB analysts John Loos and Ewald Kellerman said in the latest FNB Property Barometer, that the 4th quarter survey continues to point towards residential market improvement.

"Demand is up further, albeit only marginally from quarter-to-quarter, but still very significantly on a year-on-year growth basis, and average time on the market is significantly down. Financial stress-related selling is also down, although it is safe to say that it is still painfully high," they wrote.

However, despite growth continuing, the year-on-year rate of growth in the demand activity rating did decline from the previous quarter's growth, which may be an early sign that a plateau in demand will be reached later in 2010 as the interest rate cutting stimulus wears off.

The Barometer survey pointed to a slight decline in the percentage of Black buyers buying suburban property, compared with 2008, but this was not significant, and the longer-term trend still shows a steady rise in the Black population group's importance in the "suburbs".

Finally, the survey indicated that, these days, far less agents believe that income levels are far behind home price levels than was previously the case - they believe that the traditional affordability measure has improved.

"Our own traditional affordability measures also point towards this. However, we do not believe that the affordability issue has diminished in importance, but merely that it has changed in nature. While the average price/average income ratio has improved, and the cost of servicing debt has also declined somewhat due to rate cuts, the "new affordability issue" now relates to the costs involved in owning and running a home," they wrote.

The most glaring example currently is Eskom tariff hikes, but don't discount the probability of water, sewage and municipal rates showing steady increases in coming years, as local government's strive to fund shortfalls and other non-electricity infrastructure investment is also required, they added.

"These rising costs are in favour of smaller sized homes and stands with less luxuries built in, while the mounting urban transport and space pressures heighten the importance of location. Indeed, affordability looks set to be a key housing-related "theme" in the new decade, but in a different form," they added.

I-Net Bridge

Article fron: www.businessday.co.za