Still upbeat on the residential front
The residential property market is being buoyed by the lowered transfer duties for those properties that are still under R500k, and consumer confidence is at a 24 year record high.
This is according to the latest FNB residential property barometer for the first quarter of 2006, and property professionals are still extremely positive about the year ahead.
In terms of market activity it appears that middle to lower market is growing faster than the upper market, as that market sector is more affected by the reduced transfer duties announced by the finance minister in February.
Perhaps more importantly one in four buyers are first time buyers, while there is an increasing percentage of properties being sold at less than the asking price now at 60%. Thats the highest its ever been, and a continual trend, and the buyer is calling the shots. The buyer has more options, and developments have come through and there is more available stock.
Buyers are not prepared to pay unrealistic asking prices, while the average property remains on the market for about eight weeks slightly up on the last quarter, and it appears that buyers may have waited for the start date of the reduced transfer duties. The last three quarters have been fairly consistent. The average is in the region of eight weeks.
It also appears that the buy to let market is weakening, with this sector showing the lowest activity levels, mainly due to the fact that investors are not making the yields they were expecting.
The estate agents have reported that there is less activity in this sector. The upper end of the market is showing the greatest reduction in activity, while the lower end of the market is clinging onto its activity levels.
The letting agents are also reporting lower rental yields, and rentals are up by only 5% in the last six months, while property prices for that period have increased by 15%.
According to FNB, investors are getting out of this market and this may well drive the yields up as less stock is then available. FNB maintains that there is still a rental market, but at more realistic prices. Pretoria and the greater KZN area are showing the best gross yields.
And the perception of the property professionals is a positive one for residential property, for the three months, based generally on the transfer duty fees, pricing and stock issues. Its also about the youngness and quality of the stock that the professionals hold.
The current spate of public holidays may also affect the next reporting period.
Turning back to the barometer and Johannesburg, only the lower priced properties showed a 3% price increase, while the mid-priced dropped 12%, off a high base. In Pretoria there has been a big drop in the lower priced market and something that FNB dont pretend to understand.
In Gauteng it was Bedfordview that showed the biggest increase per annum at 57.2%. Worryingly so is that the average prices have dropped by 10%. In Cape Town the Pretoria trend is also evident in the drop in the lower-price market some 8%. Oak Glen was the winner in the Cape Town area at 40.5%.
