The FNB residential property barometer for the first quarter 2008 unsurprisingly showed further decline in activity levels as estimated by estate agents in the major metro areas of the country, it reported on Monday.
At 4.96 (on a scale of 1 to 10), the first quarter's national activity level rating is the lowest quarterly level on record since the FNB residential property barometer survey was started back in 2003, and was down from 5.09 in the previous quarter.
Headline indicators accompanying the main barometer reading almost all pointed to further deterioration in Q1. Eighty-three percent of sellers were forced to accept a price lower than their asking price, while the average time that a house is on the market has risen to 12 weeks and 4 days from 11 weeks and 2 days in the previous quarter.
The deterioration is believed to be mostly the result of further interest rate hiking, rising inflation eating into real disposable income, and a general deterioration in sentiment caused by a slowing economy, political change at Polokwane in December and perhaps Eskom too, said John Loos, a property strategist at FNB.
The different factors mentioned above are believed to be impacting in different proportions on different segments of the market.
The coastal market is still recording lower activity estimates than inland Gauteng, and this is believed to be the result of rising interest rates impacting to a greater degree on non-essential holiday buying than on primary residential demand. Gauteng is more dominated by the latter form of demand, making it slightly less cyclical than the coast.
Rising consumer price inflation is believed to be impacting harder on the lower income end of the residential market.
"This is because essential items such as food and petrol have a larger weighting in lower income groups' expenditure 'baskets' than in the case of higher income groups, and these expenditure categories are where the most rampant price inflation has been in recent years," said Loos.
While the higher end looked healthier in the first quarter than the lower income end, the Barometer noted a rise in the percentage of sellers selling property in order to emigrate since the previous quarter, and this was especially so on the higher income end of the market.
"While it is too early to say how far the latest emigration surge will go, this does pose a greater risk to the higher priced end of the housing market," said Loos.
Going forward, Loos said the unease over political uncertainty would subside.
"Furthermore, we are seeing certain market fundamentals improving, notably a strengthening rental market which would at some stage improve buy-to-let attractiveness, as well as sharply slowing residential building activity which will help to bring supply more into line with demand," he said.
Key to the overall market recovery, however, would be the turn in interest rates.