CAPE TOWN - FNB’S HOUSE Price Index annual house price appreciation for March increased to 4.5 percent year-on-year, up from 4.2 percent in February as demand continued to outperform expectations, FNB senior economist Siphamandla Mkhwanazi said yesterday.
He said at the release of FNB’s latest Property Barometer that their estate agents survey showed 75 percent of interviewed agents reported “shrinking supply as sellers withdraw properties from market/reluctant to put properties up for sale”.
“Our internal demand-supply indicator, derived from the property valuer’s database, shows demand growing faster than supply.
“Low interest rates, the nature of the pandemic, and lenders’ willingness to offer financial support has created an incentive for owners to hold on to their assets, despite weak consumer fundamentals,” he said.
Data from the FNB Estate Agents Survey and FNB’s Property Valuers database both showed continued growth in demand and retreating supply.
Incidents of downscaling due to financial pressure remained elevated, and had increased slightly in higher-income property categories and had moderated in lower income categories.
Labour market weaknesses remained a concern, with employment data showing that job losses had migrated to more “white collar” workers.
Rental market pressures persisted: vacancy rates were climbing and rental escalations were slowing, with anecdotal evidence suggesting some of this stock was being released for sale.
Lower-end prices remained relatively strong, but were decelerating in line with the initial impact on labour markets.
“We expect this correction to continue, as employment takes time to recover. However, inherent stock shortages will likely keep property values afloat.
“Estate agents in affordable segments still see demand outstripping supply,” said Mkhwanazi.
Much of the reflation in the second half of last year was driven by middle segments, buoyed by low interest rates as well as demand for bigger spaces to facilitate remote work. Part of this was also tenants switching from renting to owning.
“It is unlikely there is much of this demand left in the tank – Statsitics SA data shows 66 000 professionals lost jobs in the fourth quarter of 2020, which does not augur well for mortgage demand,” he said.
Intensifying pressure in the rental market as more stock was released for sale and price growth in coming months was expected to also have a dampening effect on overall activity.
Prices in the upper-end had, over a prolonged period, adjusted lower, due to receding demand and rising incidents of selling due to emigration.
Properties in the top 1 percent price range fell an average 5.5 percent in 2020 and for 2021 “we expect less negative price growth, as owners delay selling decisions due to unfavourable selling conditions and emigration trends lower”.
Mkhwanazi said overall property prices had been unusually slow to adjust to weak consumer fundamentals, due in part to the Covid-19 crisis that had incentivised property ownership, as well as a concerted response from lenders that smoothed the impact on housing markets.
Richard Gray, chief executive of estate agent firm Harcourts South Africa, said in a statement that the real estate market had presented many South Africans with an opportunity to become homeowners and this was where the growth in the market had arisen.
“Many first-time buyers stepped into the housing market and were able to identify the long-term investment return. Our homes have been the one thing that has become so central in our lives over this time. The quarantines, lockdowns, feeling of safety and comfort in an unknown future. Those four walls have been our shield against everything else that is happening in the world,” he said.