By comparison, the coastal metro regions agents’ market perception remained more subdued.
Completed in February, the survey is of a sample of estate agents predominantly in SA’s major metropolitan regions of Gauteng, Cape Town, eThekwini and Nelson Mandela Bay.
The survey asked agents what their perceptions of residential demand in their areas were on a scale of one to 10.
The first quarter Gauteng Residential Demand Activity Indicator rose significantly from the previous quarter’s 5.86, to 6.51.
The combined coastal regions’ Demand Activity Indicator was almost unchanged at 5.39 in the first quarter from 5.38 in the previous quarter.
“We caution about the interpretation of the first quarter Gauteng improvement, as the first quarter is generally a seasonally strong period.
“But the difference between Gauteng and the rest of the major metro regions is now significant, and perhaps ties in with the Economists.co.za major provincial economic barometers, which suggest that the Gauteng economy has been the strongest of the major provincial economies recently,” FNB said.
In an attempt to eliminate seasonal factors, the survey calculated the year-on-year percentage change in the Demand Activity Indicator – this approach suggested an improving performance in the Gauteng region, with year-on-year percentage change improving from 1.2% in the previous quarter to 4.7% in the first quarter of 2012.
Examining the difference between the Gauteng demand activity rating and that of the combined coastal metros, it becomes apparent that as residential market recoveries are gathering steam, as was the case around 2004 and again in 2009/2010, agents in the coastal metros appear to experience market conditions more positively than those in Gauteng.
With something of a lag, however, Gauteng conditions appear to overtake those of the coastal regions, and the margin by which Gauteng’s Demand Activity Indicator exceeds that of the coastal regions has widened to a level similar to the stage of 2005.
In order to examine the balance between supply and demand, or otherwise put the level of pricing realism in the market, the survey asked agents to estimate the average time that properties remained on the market in their areas prior to being sold.
In the first quarter, Gauteng’s average time on the market declined from the previous quarter’s 18 weeks and 2 days, to 15 weeks, the survey revealed.
“From quarter to quarter, this figure can be volatile, but the smoothed trend line that we have created, using a statistical smoothing function, has also declined slightly as of late,” FNB said.
This average time on the market still remains high, however. And read in conjunction with the high percentage of sellers being required to drop their asking price to make a sale, the market can still be said to be unrealistically priced.
According to the survey, the percentage of properties sold at less than asking price was 87%, which was only a very slight improvement on the 88% recorded in the previous two quarters.
First time buyer demand in Gauteng remained high in the first quarter of 2012 at 26% – however, this was down from the previous quarter’s 28%.
However, one must bear in mind that this number can be volatile from quarter to quarter, but the smoothed trend line appears to show a flattening out after two years of steady increase in the first time buyer percentage, the survey noted.
What was interesting was that, while the Gauteng survey respondents indicated a solid improvement in residential demand in the first quarter, this did not mean that they were seeing low levels of financial stress.
They indicated very significant levels of financial pressure amongst homeowners, estimating that 21% of sellers were selling in order to downscale due to financial pressure in the first quarter of 2012.
Notably, there are a significant number of homeowners who are financially strong, and this is perhaps witnessed in the estimate that 17% of sellers are selling in order to upgrade.
In terms of expectations of demand in the near term, from late-2010 onward the survey points to a broadly declining trend in the percentage of agents expecting residential demand to strengthen in the quarter following the survey.
“This was probably to be expected, as interest rate reduction by the Reserve Bank slowed to a snails’ pace after a series of rapid cuts to August 2009. With little obvious to further drive the market stronger since 2010, agent expectations have gradually flattened out.
“This broad flattening trend in near term expectations is true for both Gauteng and the coastal regions. However, as at the first quarter of 2012, Gauteng agents surveyed returned a more positive expectation, with 31% of them expecting market activity to increase in the second quarter, compared to only 18% of respondents in the case of the Coastal Regions,” FNB said