2011 has been predicted as the year of jubilation to those South African citizens who could not afford to own property due to the so-called gap market (households earning between R3 500 and R15 000 per month).
According to a study conducted by the First National Bank, it’s been highly impossible for most South Africans to afford housing, but also couldn’t qualify for RDP houses while they also don’t qualify for bonds.
In the study released early last week, First National Bank’s latest (third quarter) Estate Agent Survey, noted that those with the financial resources “possess significant bargaining power”.
The survey suggests that this could be an achievement of the high quality to all South Africans who has been struggling to find balance between the high prices that the home sellers have been asking for.
“We had by-and-large expected the decline in demand because interest rate cutting had, as at August, all but ground to a halt, with only one 50 basis point reduction in the last 12 months.
“Part of any such decline during the winter months can also be seasonal, with the market tending to get a little quiet during this period.”
“However, when we calculate the year-on-year percentage change on the demand activity ratings, we see that third quarter growth in the demand rating dropped sharply to 0.2%, well down from 24.4% growth in the previous quarter.
“This suggests that the slowing perceived by agents is more than just seasonal.”
The survey further notes that estate agents continue to point to “unrealistic pricing” by sellers.
“Estimated average time of properties on the market was still a lengthy 15 weeks and four days in the third quarter… Furthermore, the percentage of sellers having to drop their asking price remained stubbornly unchanged… at 81%.”
For this majority of sellers, the average asking price drop was 12%.
The survey says the power that buyers have in the property market at present is being boosted by growing financial pressure on many sellers.
“When asked for the reasons as to why people sell, the survey respondents estimate that those selling in order to down-scale due to financial pressure remain the most significant group, accounting for 25% of total sellers.”
This was higher than the previous quarter’s 20%.
“It’s still very much a buyers’ market… at least for those buyers who have the finance.”
The survey says agents’ near-term expectations of property market performance “have begun to deteriorate”.
“Agents increasingly cite tight bank lending criteria as well as the National Credit Act as negative factors influencing their expectations, while they also perceive incomes not having kept up with price levels.”