Residential property market wake-up call in six charts

Data from the most recent FNB Property Barometer shows a residential property market that is not exactly what you would describe as being in rude health.

Sure, there are pockets that are performing well, but there are a number of warning signs for homeowners and property investors (including would-be ones).


1. Average loan amount has declined for the first time in 14 years

The report says the average home loan amount, which it estimates from Deeds Office data, declined by around 3% in the second quarter. This is the first decline since 2009 – 14 years ago!

It also references year-to-date tax data which shows that property transfer duties are 10.3% lower than the same period in 2022.

It says “in addition to lower demand, these indicators signify a downscaling trend by buyers, along with tightening of lending standards amid higher borrowing costs and affordability constraints”.

The bank’s market strength index, which relies on input from property valuers, “implies a measure of resilience in the lower price segments, presumably sustained by higher income households exploring more budget-friendly alternatives”.

Simply put, even the middle class is trading down.

Source: FNB Property Barometer

2. House prices have been in decline for 26 months

In real terms, in other words adjusted for inflation, the FNB house price index has been in decline for 26 months. The post-Covid-19 pandemic mini-boom saw prices jump by over 2% (after inflation), but the index has been negative in real terms for many, many years.

Of concern is just how weak the overall house price index is currently, even without factoring in inflation. In July, the index was up just 1.1% year-on-year.

Source: FNB Property Barometer

3. More than half of properties take three months or longer to sell

The barometer says its supply index “has trended higher in recent months, now suggesting that listings are higher on a year-on-year basis, in contrast to the demand index”.

In effect, more and more stock is coming onto the market, with little change in the way of demand.

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It adds that this is “consistent with our estate agents survey results, which show that buying activity is dwindling and the average time-on-market is stretching across the spectrum”.

This translates to properties being on the market for longer. FNB says “agents now estimate that 56% of properties listed for sale take three months or longer to sell, an increase from 33% in Q1”.

Source: FNB Property Barometer

4. Incomes aren’t growing with house prices

FNB says feedback it has received from estate agents “indicates a widening gap between income levels and current house prices”.

“Approximately 45% of surveyed estate agents assert that income levels have considerably lagged behind house prices, while 24% believe income has managed to keep pace.”


This means that more sellers have needed to “recalibrate their expectations and reduce their asking prices”.

The bank says that “although the average discount quantum on asking prices remains consistent, hovering around 10%,” more than eight out of every 10 sellers have had to lower asking prices in Q2, from 75% in Q1.

“Collectively, these indications suggest a subdued environment for house price growth.”

Source: FNB Property Barometer

All of this translates to a flat market, with the number of mortgage registrations back at their long-term average since 2010.

At the higher end of the market (anything over R2.5 million), price growth is declining. At over R3.5 million, prices are in decline, even without the impact of inflation.

Source: FNB Property Barometer

Source: FNB Property Barometer

Emigration and relocation continue to play a major role in the reasons owners of properties valued at over R2.6 million are selling.

For properties valued at between R2.6 million and R3.6 million, nearly one in five sales is due to emigration, while 15% are relocating (with the majority of these likely ‘semigrating’).

At over R3.6 million, 16% of sellers are emigrating, with another 16% relocating. At the R1 million property value mark, emigration is only responsible for 5% of sales, with relocation at 12%.

Read: Six projected home loan trends for 2023

In the Q2 barometer, FNB revised its house price growth forecast down to just 1.8% year-on-year for 2023, versus 2.1% at the start of the year. This is roughly half the 3.5% year-on-year level from last year.

It says this is due to “the weaker-than-expected GDP growth, which affects household income and demand, and the higher interest rates, which increase the cost of borrowing and dampen affordability”.

“In addition, tighter lending standards and sombre sentiment should weigh on home buying activity.”

More worryingly, it now sees house price growth of just 1.1% next year and 1.4% in 2025 (from 1.7% and 2.4%, respectively).

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