Demand for residential properties increase

THERE is a very slight strengthening in demand for residential property, the FNB Property Barometer survey released yesterday found.

THERE is a very slight strengthening in demand for residential property, the FNB Property Barometer survey released yesterday found.

FNB property strategist John Loos said: "Demand is up further, albeit only marginally from quarter-to-quarter, but still very significantly on a year-on-year growth basis, and average time on the market is significantly down. Financial stress-related selling is also down, although it is safe to say that it is painfully high."

However, despite growth continuing, the year-on-year rate of growth in the demand activity rating declined from the previous quarter's growth, "which may be an early sign that a plateau in demand will be reached later in 2010 as the interest rate cutting stimulus wears off".

The Barometer survey had pointed to a slight decline in the percentage of blacks buying suburban property, compared with 2008, "but this is not significant, and the longer term trend still shows a steady rise in the black population group's importance in the 'suburbs'".

Loos said the survey indicated that far fewer estate agents believed that income levels were far behind home price levels than was previously the case.

He said FNB's own traditional affordability measures also pointed towards this. "However, we do not believe that the affordability issue has diminished in importance, but merely that it has changed in nature."

He said that while the average price/average income ratio had improved, and the cost of servicing debt had also declined somewhat due to rate cuts, the "new affordability issue" now related to the costs involved in owning and running a home.

"The most glaring example is Eskom tariff hikes, but don't discount the probability of water, sewage and municipal rates showing steady increases in coming years, as local government's strive to fund shortfalls and other non-electricity infrastructure investment is also required."

Loos added that these rising costs were in favour of smaller-sized homes and stands with less luxuries built in, while the mounting urban transport and space pressures heightened the importance of location. - Sapa

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