Property owners will be relieved to know that there has been a pick-up in property activity over the past quarter, according to the latest FNB residential property barometer.
The index, which gauges property activity through 150 property agents, has been declining since the second quarter of last year as a direct result of interest rate hikes last year.
However, the first quarter of this year showed a strong recovery with the overall score the highest in two years.
Activity is calculated by the number of feet through the doors of show houses and is an indication of the confidence of homebuyers in the market. The report suggests that, while the first quarter of the year is usually a good one, it was boosted by the fact that there was no interest rate increase in February.
There is a general view that we are close to the top of the interest rate cycle, which has improved confidence in buyers.
South Africans have become used to extreme movements in interest rates and many homeowners have not forgotten the rate hikes experienced in the late Nineties.
The fact that interest rates look set not to go higher than the 12,5% to 13% mark has brought buyers back into the market.
However, the frenzied buying period we saw over the past few years has passed and the market has matured into a buyers’ market with properties staying on the market for slightly longer.
The report says that discerning buyers tend to shop around more prior to making a purchase. As has been the trend over the past two years, prices in the upper and premium areas have slowed while the lower end of the market continues to experience high price growth.
Sellers are also not getting the prices they were expecting, with 72% of properties selling for less than the asking price and, on average, properties remain on the market for about two months before being sold.
If you are a property investor with rental properties, the good news is that the buy-to-let market has decreased marginally with only 16% of buyers purchasing to rent, which means the glut in certain parts of the market will start to retract.
According to the report, however, it is still becoming increasingly difficult to rent out at the higher end of the market, with many properties standing vacant for months between contracts. Nevertheless, if you are looking to invest in property, there is an overwhelming demand in the middle to lower end of the rental market and properties are rented out very quickly. Properties in secure cluster or townhouse complexes are still more popular.
Overall, there is a positive outlook for the property sector next quarter because of stable interest rates and an overall confidence by buyers, but the property heydays are over.