Estate agents point to a slowing in residential activity levels

According to the latest FNB Estate Agent Survey, residential activity ratings not only points to a near term slowing in the residential market. It also suggests further slowing in the economy too, thus keeping recession risk at high levels.

The residential property market is very much a leading sector of the economy, or at least the existing home market is.  Trend changes in residential activity are highly sensitive to changes in the economic environment, and can even lead some of the most leading business cycle  indicators.

Of FNB’s suite of indicators, our FNB Estate Agent Survey is arguably the most appropriate leading indicator, and it would appear to suggest that the economy’s growth rate is set to get worse in the near term, keeping recession risk at high levels.

In the 4th quarter 2015 FNB Estate Agent Survey, their sample of estate agents surveyed point to a further slowing in activity levels in the residential market. The market still remains “comfortable” and well-balanced, and some of the limits of activity are due to supply (stock) constraints rather than demand constraints. But one we would expect that demand-side weakening would be playing an increasing role of late, and being something of a “leading” sector of the economy this activity rating is possibly pointing to further economic growth weakening in the near term.

While activity levels are still fairly solid, it is the indicator’s direction that is of concern. The Activity Rating’s year-on-year growth rate has slid from a +12.18% positive growth “high” in the 3rd quarter of 2014 to a -8.93% year-on-year decline by the 4th quarter of 2015.

This decline is not merely of concern from a Residential Property Sector point of view. It is of concern because of what it may be signaling in terms of the near term trend in South Africa’s economic growth performance, which is already weak. Real Economic Growth was a mere 1% year-on-year in the 3rd quarter, a rate which is insufficient to promote any significant job creation, and more likely to cause net job loss.

In short, while the Residential Market is still a little way off from being seen as “weak”, the direction of the Residential Activity Rating does point to estate agents as a group experiencing the mounting pressures on the South African economy’s growth.

Find the full report here: FNB Property Barometer - Estate Agent Survey

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