The South African property market has entered an extended phase of stability.
The latest First National Bank (FNB) Residential Property Barometer shows that although overall market activity has decreased, activity in the middle-lower end of the market is not decreasing at the same rate as the upper-end.
According to FNB, which conducts the survey among real estate professionals on a quarterly basis — the latest being for the second quarter — the barometer indicates that favourable economic conditions driven by a low interest rate have placed more spending power in the hands of income earners in the middle-to-lower bracket.
The barometer also clearly reflects a drop off in market activity levels in the second quarter — to 6,8 from 7,4 in the first quarter. FNB points out, however, that — on a scale out of 10 — a score of 6,8 is still a positive indicator and that growth in the South African property market remains strong, with the next quarter likely to be better.
It adds that seasonality is a contributing factor for the sentiment held by real estate professionals as the research was conducted in the run-up to the winter months.
“Furthermore, it would seem that the decrease in the interest rate announced in April 2005 has not significantly affected the sentiment held by the property professionals.
“In addition, there has been a significant shift in the ‘very active’ sentiment (9-10 on the barometer), which has dropped from 26% to 32%.”
Though the overall market may be cooling, the bank adds, the middle-to- lower market is not slowing down at the same rate.
“This could indicate that the next step of the property cycle is beginning to take place, presenting new opportunities for real estate professionals,” FNB says.
“Encouragingly,” it adds, “the number of first-time entrants to the market has moved from 26% in 4Q04 [fourth quarter of 2004] to 32% in 2Q05 [second quarter in 2005].”
The bank adds that as asking prices begin to settle into ranges more acceptable to buyers, there is a definite emergence of stability in the residential property market rather than the “bubble-burst” many predicted.
“The middle-to-lower end of the market could provide new opportunities for those looking to expand their interests in the residential property market,” it concludes.-I-Net Bridge