John Loos, a household and property sector strategist, said some of the FNB residential indicators did not point to the future performance of the housing market but the broader economy and business cycle. Loos said FNB’s first quarter estate agent survey pointed to the likelihood of an improved economy in the near term.
He said there was a significant increase in the activity rating, on an actual and seasonally adjusted basis, in the first quarter of this year after a three-quarter decline up to the fourth quarter of last year.
FNB reported that the activity rating rose to 6.18points on a 10-point scale in the first quarter from a multi-year low of 5.29points in the fourth quarter of last year.
“This renewed quarter-on- quarter rise meant that, on a year-on-year basis, the indicator remained in negative rate of change territory to the tune of -2.06percent,” Loos said.
“However, this year-on-year rate of decline is significantly diminished from the previous quarter’s -9percent.”
Loos said the rate of change in the residential activity rating correlated reasonably with the rate of change of the SA Reserve Bank’s leading business cycle indicator.
He said the sudden improvement in the smoothed version of the activity rating’s year-on-year rate of change in the first quarter, to a slightly positive rate of 0.5percent, suggested that the sentiment may likely point to near-term strengthening in future economic growth.
“This would be supportive of the FirstRand improved real gross domestic product forecast of 1.8percent for 2018, up from 1.3percent in 2017.”
Loos said a significant improvement in general sentiment in the business and consumer sectors was key to an improvement in the economic growth performance this year, because both had been a major drag on investment and performance in recent years.
He said 19percent of the first-quarter estate agent survey cited “economic stress/pessimism” as a perceived factor affecting activity levels, which represented a significant drop from 36.7percent in the previous quarter and 51.3percent in the second quarter of last year.
Loos added that respondents who now cited “positive consumer sentiment” as a factor were now also far greater, at 56.7percent, from the mere 6percent in the fourth quarter of last year.
“Delving a little deeper into the detail of the first-quarter survey results, we find that 39.3percent of respondents pointed to the change in the country’s president as the factor behind their perceiving positive consumer sentiment.
“Therefore, the majority of the group pointing towards such positive consumer sentiment did so as a result of the country’s leadership change.”
Loos said this could have implications with a considerable lag for new mortgage lending, with the year-on-year growth in new mortgage loans granted possibly first slowing from 2.6percent in the third quarter of last year before accelerating later, perhaps noticeably in the second half of this year.