FNB Estate Agent Survey - Home Buying Market 1st Quarter 2014 Survey Results
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Transcript of FNB Estate Agent Survey - Home Buying Market 1st Quarter 2014 Survey Results
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FNB Estate Agent Survey
- Home Buying Market
1st Quarter 2014 Survey Results
9 April 2014
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Main Points
• The 1st Quarter Residential Activity Indicator rose, from the previous quarter’s 6.27, to 6.76.
• Year-on-year increase in the Residential Activity Rating in the 1st quarter of 2014 was +2.89%, slower than the previous quarter’s +6.5%. This is the 7th quarter of increase out of the past 9 quarters.
• We saw a further rise in the percentage of agents citing stock constraints as a factor influencing their near term expectations, to 18.5%, from a previous quarter’s 16%.
• From a 4th quarter 2013 estimate of 15 weeks and 1 day, the average time on the market in the 1st quarter 2014 survey declined to 13 weeks and 6 days.
• Percentage of sellers being required to drop their asking price to make a sale, also declined further from 85% previous to 81%.
• Average percentage asking price drop on properties where a price drop is required to make the sale diminished from -9% in the 4th quarter survey to -8% in the 1st quarter of 2014.
• In the 1st quarter survey, 30% of agents expected activity to increase in the next 3 months, down from 34% in the previous quarter, while 60% expected it to stay the same and only 10% expected a decrease in activity.
• Aggregating the various price growth/decline expectations over the next 12 months, the net expected price movement by agents is a modest +3.7%.
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Further Strengthening in Residential Activity Indicator
• The 1st Quarter Residential Activity Indicator rose, from the previous quarter’s 6.27, to 6.76.
• Seasonally-adjusted version of the Indicator also rose mildly further from 6.42 to 6.47 over the 2 quarters.
• The rise suggests that strengthening trend in the market through 2012 and 2013 is still intact.
• Activity Rating level remains in the “stable” bracket (a level from 4 to 6), but is now pushing closer to the “Positive” bracket of 7 to 8.
• • The 1st Quarter activity
rating is the highest rating since the 1st quarter of 2005
6.766.48
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Act
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Residential Market Activity Indicator
National Activity Rating (Scale 1 to 10) Seasonally Adjusted
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Rate of increase in Demand Activity Indicator slightly slower than previous
• Year-on-year increase in the Residential Activity Rating in the 1st quarter of 2014 was +2.89%, slower than the previous quarter’s +6.5%.
• This is the 7th quarter of increase out of the past 9 quarters.
-30%
-10%
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30%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Rate of Change in Activity Levels according to FNB Estate Agent Survey
FNB Estate Agent Survey Rating of Residential Activity - y/y% (Left Axis)Seasonally adjusted quarter-on-quarter % change (Right Axis)
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Key survey questions also point towards further improvement in price realism and the balance
between demand and supply in the 1st quarter of 2014.
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Stock Constraints intensify
• Along with the rise in residential activity levels over the past 2 years, which reflects a rise in residential demand, has come a rise in “stock constraints” experienced by certain estate agents.
• In the 1st quarter of 2014, we saw a further rise in the percentage of agents citing stock constraints, as a factor influencing their near term expectations, to 18.5%, from the prior quarter’s 16%.
• This comes after an already considerable rise in 2012’s stock constraint percentage over that of 2011.
16.0
18.5
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Q1-2008 Q1-2009 Q1-2010 Q1-2011 Q1-2012 Q1-2013 Q1-2014% o
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Agent Stock Constraints
Percentage of agents citing stock constraints as a factor influencing expectations of near term activity
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Average time of properties on the market declines
• One indicator of where the market is in terms of seller pricing realism/ balance between demand and supply is the estimated average time that properties remain on the market prior to sale.
• From a 4th quarter 2013 estimate of 15 weeks and 1 day, the average time on the market in the 1st quarter 2014 survey declined to 13 weeks and 6 days.
• This is the lowest average time on the market since the 1st quarter of 2010.
• This continues to point to a broadly declining trend in the average time on the market since 19 weeks and 1 day high in early-2011.
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Wee
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Average time that a property is on the market
Weeks and days that the average property is on the market before being soldSmoothed
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Less sellers dropping their asking price to make the sale
• Another indicator of seller pricing realism in the market, i.e. Percentage of sellers being required to drop their asking price to make a sale, also declined further from 85% previous to 81%.
• While moving in the right direction it must be said that this percentage remains far above the level of around 30% back in early-2004.
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Proportion of properties sold at less than asking price
Percentage of properties sold at less than asking price Smoothed
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The average required asking price drop is diminishing
• We also ask agents to estimate the average percentage asking price drop on those properties where a price drop is required to make the sale.
• This average drop diminished from -9% in the 4th quarter survey to -8% in the 1st quarter of 2014.
• This is now significantly less than the estimated average percentage drop of -13% in late-2011.
-11%-12%-12%
-11%-12%
-11%
-13%-13%
-11%-10%-10%-10%-10%-10%
-9%-9%-8%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%2010 2011 2012 2013 2014
Average Percentage Drop in Asking Prices
Average percentage drop in asking price by sellers required to drop their price to make the sale
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Slight improvement in perceptions of affordability
• What we had early in 2014 was only a very slight change to the average agent perception of residential affordability.
• There was a slight decline in the percentage of agents perceiving “income levels to be far behind house prices, from 12% in the preceding quarter to 11% in the 1st quarter 2014 survey.
• Those perceiving “income levels to be a little behind house price levels” also declined slightly from 48% in the preceding quarter to 47%, while the percentage of agents believing that “income levels have kept up with prices” rose from 40% to 41% over the 2 quarters.
• These agent affordability perceptions are vastly improved on a stage back early in 2008, where only 8% of agents believed that income levels had kept up with prices and 72% believed that income were far behind prices.
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Estate Agent Residential Affordability Perceptions
Income Levels have kept up with house prices Income Levels are a little behind house price levels
Income Levels are Far Behind House Price Levels
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%
Affordability Perceptions - Agents who believe income levels haven't kept up with
prices
Percentage of respondents stating that buyer income levels have got far behind price levelsSmoothed
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Near term agent expectations regarding activity remain modest
• Agent confidence regarding near term prospects remains noticeably above the low points of 2007/8 and 2011, but still not “overly strong”.
• In the 1st quarter survey, 30% of agents expected activity to increase in the next 3 months, down from 34% in the previous quarter, while 60% expected it to stay the same and only 10% expected a decrease in activity.
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Scal
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Near Term Estate Agent Expectations
Home Buying Confidence Indicator (Near Term Agent Expectations
Smoothed
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Interest rates are the key negative factor influencing agent near term expectations
• When asking agents for the factors influencing their near term expectations, “interest rates” were by far the most common factor.
• Interest rates were generally perceived as a negative factor.
• This was followed by 26% of agents citing stock issues as a factor, with the majority (18%) citing stock shortages (vs too much stock).
• The 3rd key factor on the list was “Economic Stress/General Pessimism”, which at 15% is now higher than the 11% citing “Consumer Positive Sentiment”.
•
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OtherSeller's Mindset
More Relaxed Lending Stance by …Buyer's Mindset
Strict Credit EnvironmentConsumer Positive Sentiment
Pricing and AffordabilityArea Specific Issues
SeasonalityEconomic Stress / General Pessimism
Stock IssuesInterest rates
%
Factors that influence perceptions of near term future activity levels
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Agent expectations on house price inflation also modest
• Agents have perhaps surprisingly low aggregated expectation of average house price growth over the next 12 months.
• The most popular survey response was a 1-2% price increase, which is the view of 20% of respondents, while 18% expect 3-4% increase, 14% expect a 5% rise, 10% anticipate a 6-9% growth rate, 9% a 10% increase, and only 1% foresee a double-digit rise.
• Aggregating the various price growth/decline expectations, the net expected price movement is +3.7%.
1%9%
10%14%
18%20%
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2%1%
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Percentage expecting more than 10% increase
Percentage expecting 10% price increase
Percentage expecting 6% – 8% price increase
Percentage expecting 5% price increase
Percentage expecting 3% – 4% price increase
Percentage expecting 1% – 2% price increase
Percentage expecting no change
Percentage expecting between -1% to -4% …
Percentage expecting -5% decrease
Percentage expecting more than – 5% decrease
NET EXPECTED PRICE MOVEMENT
Agent Expectations regarding price movements in the next 12 months
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Conclusion
• In summary, therefore, early in 2014, estate agents surveyed continued to point to a very comfortable and still- improving residential property market, a broad trend that has been in place since early-2012.
• They perceive the balance between demand and supply to be gradually improving, as reflected in a declining average time of properties on the market, stock constraints mounting, and gradually improving price realism.
• However, they do not yet point to a market that could be classified as “booming or irrational”,
• They do not appear to anticipate such a market in the near term, expecting house price growth of only 3.7% over the next 12 months, which would be below our expectations for consumer price inflation and thus negative in real terms.
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