The second quarter FNB Estate Agent Survey for the City of Cape Town brought about little in the way of fireworks, which isn’t entirely out of kilter with the rest of the country at present. However, the market hasn’t been without any improvements.
Certain facets of it are indeed better, according to the agent survey, for instance an apparent improvement in buy-to-let buying as well as first time buying.
Second quarter activity slightly down
The very first question which the sample of agents surveyed is asked is how they perceive residential demand activity levels. This is a subjective rating, on a scale of one to 10, and our City of Cape Town agents have put the demand rating at an average of 5.57, very much in line with the national average of 5.61.
The number is slightly down on the 5.71 level estimated for the first quarter survey, which was half expected due to seasonal factors. However, our economics team suggests that it may be more than merely seasonal, with the impact of the interest rate cuts late in 2010 starting to wear thin.
Comparing our estate agent activity level rating with the other major metro regions surveyed, we see the City of Cape Town very much in the middle of the pack, significantly higher than Ethekwini, similar to Joburg and Nelson Mandela Bay, but significantly lower than the Tshwane rating.
Nevertheless, while certainly not boom times, the demand rating remains considerably higher than the very weak bottom point of 4.21 reached in the second quarter of 2009, which was just as the national recession was coming to an end.
Pricing realism still lacks
Two indicators of price realism in the region still point to generally unrealistic asking price levels, given that residential demand remains mediocre. The first of these two indicators is the average time that a property remains on the market prior to sale. The panel of agents put it at 16 weeks and three days in the second quarter survey.
While an appropriate level is debatable, what we do know is that back in the healthier market days of 2006 the average time was closer to nine weeks. After the recovery experienced late in 2009 and early in 2010, where the average time estimate dropped back to 10 weeks and a day in the first quarter of 2010, we have seen it once again increasing broadly to settle at nearer to four months.
The second indicator of price realism emanating from the survey is the estimated percentage of sellers being required to drop their asking price. This percentage has risen to 98 percent in the second quarter survey, up from 96 percent in the previous quarter, the highest percentage on record since the survey started.
One may ask how it is possible that this percentage is higher than even the 2008/9 recession period where demand was weaker than now. We suspect that the answer may lie in the supply side, with the possibility that sellers may have become more optimistic in recent times, which means that they may be putting their homes on the market in greater numbers than was the case when interest rates were high and economic times were far worse than the present.
The estimated percentage by which sellers had to drop their asking price was 10 percent, very similar to the 11 percent estimate for the previous quarter.
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