Residential property market trends

Apr 20, 2017 | Local Property, Slider

Will the residential market pick up in 2017? Experts and agents weigh in

The downward trend in the residential market could well have reached the bottom. Things may turn around in the year ahead but it’s still a long road according to the FNB Estate Agent Survey for Q4 2016. John Loos, household and property sector strategist for FNB, notes that although there was an uptick towards the end of last year, we will have to wait to see if this really means the market is bottoming out. “It is too early to say whether this one quarter rise is merely ‘noise’ or the start of a strengthening trend,” he says.

WHAT DO SURVEYED AGENTS PREDICT?

The FNB Estate Agent Survey is an audit of a sample of estate agents predominantly in South Africa’s major metro regions, published in January 2017. The key question in this survey was: “Does the agent expect activity levels to increase, remain the same or decline in the next three months?” The responses were aggregated into the percentage of agents expecting each of the three outcomes. In Q4 2016, the percentage of agents expecting a decrease in activity in the next three months was 25%, those expecting unchanged activity measured 50%, while the remaining 25% expected an increase. One of the questions in the survey referred to agents’ perceptions of residential market activity in their areas, on a scale of 1 to 10, with 10 being the strongest level of activity. The Residential Activity Indicator in the quarter rose slightly to 5.75, from the previous quarter’s 5.59.

The FNB Estate Agent Survey is an audit of a sample of estate agents predominantly in South Africa’s major metro regions, published in January 2017. The key question in this survey was: “Does the agent expect activity levels to increase, remain the same or decline in the next three months?” The responses were aggregated into the percentage of agents expecting each of the three outcomes. In Q4 2016, the percentage of agents expecting a decrease in activity in the next three months was 25%, those expecting unchanged activity measured 50%, while the remaining 25% expected an increase. One of the questions in the survey referred to agents’ perceptions of residential market activity in their areas, on a scale of 1 to 10, with 10 being the strongest level of activity. The Residential Activity Indicator in the quarter rose slightly to 5.75, from the previous quarter’s 5.59.

ON MORTGAGE LENDING

Loos says that new mortgage lending trend changes normally only follow an Activity Rating growth trend change with a considerable lag time. “Therefore, even if residential activity is gradually turning upwards, new mortgage lending could still be in year-on-year decline for the first half of this year,” he says.

SELLING WITHIN THE RESIDENTIAL MARKET

As an estate agent, your role is to guide your client through the process of buying and/or selling their property in the midst of a market that is slowly turning up. Here’s what you can do:

First-time buyers want a foot in the property market. Encourage them to save for a deposit first so that their home loan application is less likely to be turned down. A typical deposit should be 10%-20% of the purchase price.

Repeat buyers need bigger deposits. According to chief executive of Betterlife Shaun Rademeyer, those who have owned property before are now paying deposits of as much as 40%. The average deposit in 2016 was 22%.

Buyers should always consider location, regardless of whether the property will be an investment or a primary residence. Location is key to an attractive property that will grow in value. This fits in with the current trends towards mixed-use developments in metropolitan areas, where home owners are increasingly looking for a home within easy reach of shops, schools and work or at least on a major route.

An energy- and water-efficient home is more attractive. South Africans have become more conscious of the need to save water and be environmentally friendly. If your client is looking to sell their home, it is worth their while to invest in improvements that tap into this market.

Your clients should understand the dynamics of the housing market when making a sound investment decision. According to Golding, these include factors such as the ongoing migration of people, supply of new housing units and lifestyle trends.

“It is too early to say whether this one quarter rise is merely ‘noise’ or the start of a strengthening trend”

John Loos, FNB household and property sector strategist

Image: iStock by Getty Images, Words: Neesa Moodley