For those buyers who have finance, it’s still very much a buyer’s market. This is the message FNB home-loans strategist John Loos has given on the back of FNB’s just-released home buying estate agent survey.
The third-quarter survey suggests that the pain of the recession is very much with us as sellers have been pressured to sell.
About 25% of total sellers cited financial pressure and a need to downscale as a reason for selling.
This was higher than the previous quarter’s 20% reading and was seen most dramatically in the lower-income group, where a full 36% reported having to downscale.
Predictably, high-net-worth individuals came off best, though downscaling still came out top as their reason for selling. This according to FNB’s estate agent survey.
Also, the percentage of sellers forced to drop their asking price is high at 81%. The average estimated drop in price is -12%.
More than half of the agents surveyed believe that household incomes have got far behind average house prices.
Agents also point to tight bank lending criteria and the restrictive National Credit Act as negative factors for the market. The bottom line is that houses appear unaffordable.
The picture is a grim one. The only really positive reading is that agents aren’t reporting any surge in emigration — third-quarter emigration selling as a percentage of total selling was 6%, down from 7% in the previous quarter.
Residential demand has clearly been declining, though, as the second and third quarters indicated.
Pessimism in the market seems due to economic conditions and agents report that first-time buyers, as a percentage of total buyers, declined from 19% in the second quarter to 15% in the third quarter.
Single buyers are also losing market share to couples, perhaps predictably, as couples can pool financial resources. Couples, as a percentage of total buyers, increased to 87%, from 85% in the second quarter. This is higher than 2007 estimates, which put couples below 80% of total buyers.
Black buyers have increased their share of buying in 2010, but not dramatically so.
John Loos also pointed to a decline in the FNB Home Buying Confidence Indicator, which reflects agents’ near-term market expectations. A second successive quarter of decline in the Demand Activity Rating (scale 1 to 10), from 5,96 to 5,66 is also far from encouraging.
If you’re looking to buy, it really is a buyer’s market, but do consider the costs and make sure your finances are sound.
Household income growth is still weak and if you’re credit dependent, you could be cash-strapped if you buy now.
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