Demand for residential property in the City of Cape Town is higher than that of the national average, the second quarter FNB Estate Agent survey revealed on Monday.

Estate agents surveyed put demand in the city at 6.18 on a scale of one to 10, a second consecutive quarter increase. This was above the national average rating of 5.87.

"However, the survey may be hinting at 'seller optimism', keeping prices unrealistically high," said Clinton Martle, FNB's Western Cape property leader sales manager in a statement.

In the survey, estate agents were asked about their perceptions on residential demand, rating it on a scale of one to 10.

When compared to the same quarter last year, demand activity rated 11 percent higher.

"This is the first time that we've seen positive year-on-year growth in the demand rating since the fourth quarter of 2010. This is also the highest demand rating since the first quarter of 2010," Martle said.

He said there still appeared to be a lack of pricing realism.

Two of the indicators for pricing realism appeared to be moving in contradictory directions. One of them was the time a property spent on the market before it sold.

"The broad trend in this average has been an upward drift since early 2010, to a second quarter average time of 20 weeks," he said.

"This would appear strange at a time when agents perceive demand strength to have improved."

Martle said the trend could be attributed to seller optimism.

This was reflected by a significant decline in the percentage of properties sold below asking price from 100 percent in the final quarter of 2011 to 80 percent in the second quarter of 2012.

"The apparent contradiction can perhaps only be explained by increased seller optimism, causing fewer sellers to drop their asking price because they are confident of achieving the price they want, and thereby causing the time on the market to remain long," Martle said.

Also, the percentage by which sellers had to drop their asking price had not increased, still hovering around 10 percent.

Martle said there was also improvement in the buy-to-let segment in the Western Cape, from a low of four percent in the third quarter of 2010, to a significant 14 percent in the second quarter of 2012.

As a result of increased buy-to-let buying, primary residential buying slipped back to 82 percent of total buying in the second quarter of 2012, down from a peak of 93 percent in the second quarter of 2010.

The percentage of first-time buyers contributed 21.5 percent of the total number of buyers for the two quarters, up to and including the second quarter of 2012.

The percentage of buying by couples decreased from a peak of 90 percent in the second half of 2010, to 75 percent in the second half of 2012.

In the Cape Metro, the percentage of sellers who sold their houses to upgrade, increased from 11 percent in the third quarter of 2011 to 19 percent in the second quarter of 2012.

"However, despite improved confidence in the Western Cape residential market, we must not fool ourselves as to the extent of the financial frailty of many other households that still exists," said Martle.

He said this was best reflected in the estimated percentage of sellers selling to downscale, due to financial pressure. This segment stood at a high of 21 percent in the second quarter.