Why are property sales taking longer?

By the end of the fourth quarter the time a residential property remained on the market before being sold lengthened, and 88 percent of sellers had to reduce their asking price to finalise a sale despite estate agents reporting an improvement in activity levels. 

According to the latest FNB's estate agent survey, activity levels rose during the period to 6.7 on a 10-point scale from 5.91 in the previous quarter.

John Loos, a household and consumer sector strategist at FNB, said this suggested that a gradual strengthening in the market through 2012 and last year was still intact and the mild seasonally adjusted decline in the third quarter did not signal a trend change.

The estimated average time a property remained on the market rose to 15 weeks and one day in the fourth quarter from 14 weeks and five days in the third quarter.

Loos said this indicator gauged the pricing realism of sellers but stressed that fluctuations from quarter to quarter could be volatile. The smoothed trend line was more significant and continued to point to a broadly declining trend in the average time on the market since a high of 19 weeks and one day at the beginning of 2011.

However, he said 15 weeks remained lengthy compared with levels achieved in 2004/5 and the market largely seemed 'rational and calm' rather than booming.

Loos said the average reduction in asking prices was unchanged at 9 percent in the fourth quarter from the third but lower than the estimated 13 percent at one stage in 2011.

Most agents expected house prices to increase by an annual 5 percent this year.

FNB reported last week that its index showed average house prices rose 6.8 percent last year, a slowdown from 7.1 percent growth in 2012.

After adjusting for consumer price inflation, average real house price growth slowed to 0.8 percent from 1.3 percent in 2012.

Loos said it was the second successive year of slight positive real house price growth following four years of average real price decline.

FNB has forecast average nominal house price growth of 9 percent for this year but expects price growth to again slow next year based on its forecast that interest rates could start to rise in 2015.

Mortgage bond originator ooba said its statistics showed the average house price rose by 5.6 percent last year to R911 322 from R862 940 in 2012.

(Business Report)

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