HOME OWNERS STRUGGLING TO SELL THEIR PROPERTY

Business Report
August 14, 2007
By Roy Cokayne
Pretoria - Three out of four residential properties are now being sold for less than the asking price and the average time a home remains on the market before it is sold has increased from eight to 10 weeks. Jan Kleynhans, the chief executive of First National Bank (FNB) Home Loans, yesterday attributed changes in the market predominantly to the implementation of the National Credit Act in June and the cumulative effect of interest rate hikes over the past year. Market activity is now at its lowest level since the inception of the FNB Property Barometer survey in 2003.The percentage of properties being sold at less than the asking price is at its highest since the inception of the survey. Kleynhans said properties in the upper-priced segments continued to feel the pinch, with 81 percent selling for less than the asking price, compared with the national average of 76 percent.For the first time, the very active sentiment in the market was non-existent, while the not very active sentiment had increased from 9 percent to 22 percent in the first two quarters of this year. In addition, the proportion of first-time buyers entering the market had steadily declined from 32 percent in the middle of 2005 to only 16 percent in the second quarter of this year.The number of investors buying homes to let has decreased significantly from about 27 percent in the fourth quarter of 2003 to only 12 percent in the second quarter of this year. Despite these negative trends, estate agents have a positive outlook for the next quarter. But John Loos, a property strategist at FNB Commercial Banking, believed the negatives influencing the market - the implementation of the credit law, rising interest rates, the slowing global and domestic economy, and a lack of further transfer duty relief - would feed into the housing market for some time. "I think the market is on its way downwards until the first half of 2008. But it will be a soft landing. This year is probably going to be the worst year of the decade for the residential property market." The FNB barometer is a quarterly review of the residential property market based on the perceptions and forecasts of 150 estate agents in the major metropolitan areas.Kleynhans said first-time buyers were generally affected by affordability. The combination of the credit law and the recent interest rate hike had curtailed activity in this segment because of stringent affordability assessments and qualifying criteria. Overall, 43 percent of estate agents claimed applicants were struggling to qualify for home loans, he said. In the lower-priced segment, 67 percent claimed that qualification and affordability were "significant hurdles". Kleynhans said agents believe the credit act was good for the economy, but were concerned about its effect on their business. Agents operating in the lower priced segment were particularly worried.He said the speed at which home loan deals were finalised had slowed down, but estate agents were optimistic that the stumbling blocks with the credit law would be short-lived