First National Bank’s (FNB) residential property barometer has dropped to the lowest level recorded for any quarter since its inception in 2003, the South African Broadcasting Corporation reported on Monday.
The bank said the barometer, which measures commercial activity in South Africa’s major urban centres, dropped to 4,96 — on a scale of one to 10 — in the first quarter of 2008, from 5,09 in the previous quarter.
Up to 83% of people selling their houses had to accept a much lower offer than their asking price.
The bank said the average time a house remained on the market had risen to 12 weeks and four days from 11 weeks and two days in the previous quarter.
This lapse in the sector was largely due to interest-rate hikes and rising inflation.
There was also a general erosion of sentiment by a slowing economy, political change at Polokwane in December last year and the energy crisis, FNB economists said.
The barometer picked up a substantial rise in the number of people selling their properties in order to emigrate, compared with the previous quarter.
”This is especially so on the higher-income end of the market. While it is too early to say how far the latest emigration surge will go, this does pose a greater risk to the higher-priced end of the housing market,” the bank noted.
It said it believes unease over political uncertainty will subside.
”Furthermore, we are seeing certain market fundamentals improving, notably a strengthening rental market which would at some stage improve buy-to-let attractiveness, as well as sharply slowing residential building activity which will help to bring supply more in line with demand.”
Overall market recovery will depend on how interest rates pan out in the foreseeable future.
”We only anticipate interest-rate cuts in 2009, and after [that] the South African Reserve Bank stalling twice and then recommencing rate hiking,” the bank said. ”We believe that the market will be looking for very strong evidence that rates are set to decline before demand and activity levels gradually start to recover.”
Recovery in the demand for residential property is, therefore, only expected by late in 2008, the bank concluded. — Sapa