Slight stir in SA residential property market

Cape Town - The fourth quarter of 2016 showed estate agents surveyed in the FNB Estate Agent Survey as perceiving a slightly stronger level of activity in the residential property market.

This was even with the exclusion of seasonal factors.

The fourth quarter 2016 Residential Activity Indicator rose slightly to 5.75, from the previous quarter’s 5.59. A one quarter improvement in the Activity Rating doesn’t yet mean a lot, and it would take significant further improvement in activity levels in order to see any meaningful growth acceleration in house prices or in new mortgage lending, according to John Loos, household and property sector strategist at FNB.

"While there may be early signs of an improving economy to come in 2017, and with it improving residential activity, it will probably take some time before we return to some meaningful positive growth in actual transaction volumes and mortgage lending volumes in the residential market," according to Loos.

In the fourth quarter estate agents surveyed pointed to a slight improvement in activity levels in the residential market. The level remains weak, however, and it is too early to say whether this one quarter rise is merely “noise” or the start of a strengthening trend, added Loos.

On a year-on-year basis the rate of change remains negative.

READ: Property experts weigh in on 2017 outlook

In Loos' view, the survey may well give hints that estate agents are seeing a weakening trend “bottoming out”.

"The 2015/16 decline in the activity rating appeared to be largely demand driven, weakened by slowing economic growth rates as well as rising interest rates through 2014 to early-2016," said Loos.

"Even should residential activity gradually be turning, new mortgage lending could still be in year-on-year decline for the first half of 2017."

As at the third quarter of 2016, the SA Reserve Bank data for the value of new residential loans granted was in year-on-year decline to the tune of -11%.

"Using deeds data, we estimate that the year-on-year rate of decline for total volume of property transfers by individuals (“natural persons”) had reached -11% by the third quarter of 2016. The rate of decline in that portion of the transfers that were bonded had reached -4.6%," said Loos.