Johannesburg - Activity in the South African residential property market indicates that it could be moving from "sideways to slowing", according to the FNB South African Estate Agent Survey for the third quarter of 2015.
Agents indicated a decline in residential market activity rating and in viewers of show houses, suggesting slowing demand.
According to John Loos, household and property sector strategist at FNB, this has implications for near term mortgage lending growth.
"This shift to a slowing direction may finally be starting to reflect a multi-year stagnation in South African economic growth as well as gradual interest rate hiking by the SA Reserve Bank (Sarb), said Loos. "We saw a noticeable decline, even when eliminating seasonal factors."
On a year-on-year basis, the third quarter saw a significant decline in the residential activity rating for the first time in a few years.
"Simultaneously, two consecutive quarters of decline in the percentage of agents citing stock constraints as an issue in their lives, starts to suggest that supply constraints may be becoming less acute," added Loos.
Besides some possible demand weakening, “stock”, or “supply” constraints may also be alleviated by indications of significant growth in the reported number of new residential units completed in the second quarter.
Loos explained there are plenty of economic reasons why demand would start to weaken.
Most notably are the resumption of gradual interest rate hiking, but also an economy slow on growth and even having contracted in the second quarter.
More agents also indicated that “incomes have not to kept up with house prices”.
"Despite the indications of demand and activity weakening, to date the impact on the market balance doesn’t appear to have been severe," said Loos.
"Interestingly, the estimated average time of properties on the market declined from a previous quarter’s 12 weeks and one day, to 11 weeks and one day, after previously hovering for a few quarters at just above 12 weeks.
This decline is a mild surprise at a time when other indicators suggest declining demand and some alleviation of supply constraints."
The survey also showed that 87% of sellers still have to drop their asking price. The estimated average percentage asking price drop, on those properties where a price drop is required to make the sale, was -9% - slightly more than the -8% of early-2015.
Perceived affordability deterioration in recent quarters may be the reason for the first time buying percentage being slightly off 2014 highs, according to Loos.
First time buying was 25% of total buying in the third quarter 2015 survey, up from the previous quarter’s dip to 21%, but still lower than the high of 28% reached in the second quarter of last year.
"On the one hand, affordability deterioration may be a first time buyer constraint, but on the other hand the agents do point to significant first time buyer panic," said Loos.
This refers to when first time buyers believe that if they do not buy now they may not be able to afford a home in future.
As for buy-to-let home buying, it remained mediocre, declining from a previous quarter’s 9% of total buying to 8% in the third quarter 2015 survey.