Residential property market volumes remain relatively well supported but are softening, even though sentiment varies by location and price segment, according to FNB’s latest Residential Property Barometer and estate agent’s survey.
Steeper-than-expected interest hikes and other forward-looking indicators suggested a less supportive environment for home buying activity. However, the shift in housing needs and growing competition among lenders should continue to support activity, said FNB economist Koketso Mano.
And while hiring intentions indices continued to suggest a recovery in headcount in certain industries, “we are concerned that the more intense bouts of load shedding may dim these expectations.”
The risk of a less transitory rise in inflation and higher inflation expectations, and the more aggressive policy tightening in developed country markets, was expected to result in the SA Reserve Bank further front-loading interest rate hikes this year.
“We now expect 50bps (basis points) hikes in July, September and November, bringing rates to 6.25 perecent by end of 2022. We pencil in another 25bps in January 2023, which will bring the rate to the pre-pandemic level of 6.5 percent,” said Mano.
The FNB House Price Index growth moved slightly lower in June, averaging 3.4 percent year/year from 3.8 percent in May, which took the 2nd quarter average house price growth to 3.7 percent, versus an average inflation forecast of 6.6 percent during the same period.
Slower price growth was due to softer demand amid higher living costs and the waning interest rate support.
“Nevertheless, the home buying market remains resilient, as reflected by the still strong market volumes. We maintain our expectation of average house price growth of 3.5 percent this year, lower than the 4.2 percent registered in 2021,” the bank said in the survey.
Average time properties spent on the market for sale lengthened to nine weeks and four days, from about eight weeks the previous quarter. This was below a long-term average of some 13 weeks but about a week longer than the post-pandemic average.
The FNB Estate Agents Survey showed signs of a softening market in the second quarter, corroborated by the lengthening time properties remain on the market for sale.
There was souring sentiment in KwaZulu-Natal, following the floods. This, with the impact of riots in July last year, was expected to have a lingering effect on the KZN property market.
The survey also reflected renewed resilience in the affordable market, and this was corroborated by internal applications data.
Estate agents’ sentiment, as measured by the proportion of agents who were satisfied with prevailing market conditions, receded marginally to 73 percent from 76 percent previously. This was largely driven by the relative pessimism in KZN, which saw sentiment receding to 62 percent from 75 percent.
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