How Long Does it Take to Sell a House in South Africa?
The latest FNB House Price Index shows that the average house sits on the market for 12.1 weeks before being sold.
The index shows a year-on-year increase of 6.0% in March 2016, slower than the revised number of 6.2% in the previous month, and down from a high of 6.9% in October 2015.
In real terms, when adjusting for Consumer Price Index inflation, the rate of house price growth shows a decline (-0.8%) in February, from a revised +0.1% in January, due to rising CPI inflation, from 6.2% in January to 7% in February, with the March CPI data still to be released.
Examining the longer term real house price trends – adjusted for CPI inflation – FNB said that the level as at February 2016 was 5.6% up on the October 2011 post-recession low.
However, the average real house price level remains -18% below the all time high reached in December 2007 at the back end of the residential boom period.
Looking back further though, the average real price currently remains 69.4% above the January 2001 level, around 15 years ago, and a time back just before boom-time price inflation started to accelerate rapidly.
FNB said that a combination of gradually rising interest rates along with weak and deteriorating economic fundamentals has contributed to market weakness over the past several quarters.
“And after a Real GDP (Gross Domestic Product) growth rate of 1.3% in 2015, the FNB forecast is for slower growth of 0.5% in 2016. The further expected slowing in growth is on the back of ongoing global economic and commodity price weakness,” said John Loos, household and property sector strategist at FNB.
FNB pointed out that CPI inflation is projected to rise from 4.6% average in 2015 to 6.5% average for 2016, on the back of a now weaker rand, and higher food price inflation.
“The SARB is expected to continue to lift interest rates slowly, with Prime Rate peaking at 11.0% in the 1st half of 2017. Much, though, will depend on the rand’s fortunes and its potential inflationary impact,” Loos said.
Under these weak economic conditions, and their negative impact on household income growth, FNB’s forecast is for average house price growth to slow from 6% average in 2015 to a 4.8% average in 2016, and a still slower 3.1% in 2017.
“While still positive in nominal terms, these projected rates would be below CPI inflation, translating into negative growth in real terms. Such negative real house price growth would reflect both higher interest rates along with ongoing weakness in economic growth, employment and household income growth,” Loos said.
FNB’s data showed the average house price to be R1.053 million in March.
Additional FNB findings using data from a Q4-2015 survey:
- First time buyers as a percentage of total buyers – 26%
- Buy-to-let as a percentage of total buyers – 9% (up from 8% in Q2-2105)
- Average time of properties on the market (Weeks and Days) – 12.1 weeks
- Percentage of properties sold at less than asking price – 87%
- Percentage of properties on the market for 3 months or more 55% – up from 47% in Q22105
This article “How Long Does it Take to Sell a House in South Africa?” was issued by FNB Home Loans.