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Realistic pricing leads to faster home sales

13 Apr 2018

Property asking price realism has improved nationally in the first quarter of this year.

FNB reports that the average time homes remained on the market had shortened noticeably to 14 weeks and one day in the first quarter, from 17 weeks and two days in the previous quarter.

John Loos, a household and property sector strategist at FNB, said the percentage of sellers required to drop prices also improved slightly - to 91 percent from 95 percent in the previous quarter.

Loos said a mere 3.4 percent of agents cited "stock constraints", slightly higher than 2 percent in the previous quarter, but it remained very low compared to the 24 percent high registered in early 2015.

He said these improvements tied in with indications of improved national sentiment among businesses, investors and consumers, and an increase in activity levels.

However, FNB reports that first-time home buying levels as a percentage of total home buying has continued its weakening trend this year, but still remains stronger than during the 2008/09 economic recession.

It said the levels declined to 17.6 percent from 20.28 percent in the previous quarter, below the 28 percent high achieved in the second quarter of 2014, but above the 12percent recorded during the 2008/09 economic recession.

Loos said first-time home buyers did not yet appear to be sharing in the improved sentiment in the country since early this year.

"We had recently believed that the level of first-time home buying was beginning to stabilise, but it appears that such a belief was perhaps premature," Loos said.

"However, the (FNB estate agent) survey was done in February, and it is possible that the more recent March interest rate cut may bring them out in greater numbers."

Loos said a broad, multi-year decline in first-time home buying commenced in the second half of 2014, which they viewed as being in response to gradual interest rate hiking from early 2014 until early 2016, together with some years of economic weakness.

"As yet, we haven't seen a convincing reversal of that broad trend," he said.

Loos said first-time home buyers were typically more sensitive to economic and interest rate cycles than repeat buyers, because on average they were financially weaker and more heavily dependent on credit for their home purchases.

In addition, many young, aspirant buyers had not yet established a family, which meant they had greater flexibility in terms of where they lived, with some remaining in their parents' homes for longer if financial or economic times appeared uncertain, or renting for longer, he said.

However, Loos said there were large regional differences in first-time buyer levels in the major metro regions.

Loos said Gauteng was still a strong first-time buyer region, while Cape Town was very weak.

He said Greater Johannesburg had an estimated first-time buyer percentage of 21.59 percent for the two summer quarters, and the Tshwane Metro a massive 30.75 percent.

The eThekwini Metro had the highest rate of the three major coastal metros at 20 percent, with Nelson Mandela Bay having a weak 10.5 percent rate and the Cape Town Metro "a very low 6.46 percent".

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