One in every fourhouses sold in the second quarter of this year were sold to allow the homeownerto downscale due to financial pressure, and 51 percent of those selling homesbecause of financial stress exited the home ownership market and moved into rentedpremises, according to the second quarter First National Bank (FNB) estateagent homebuying survey.
Economic and financialstress and general pessimism has shot to the top of the list of key factorsinfluencing the near-term expectations of estate agents, with 31 percent ofagents citing this as a key issue. John Loos, a Property Strategist at FNB HomeLoans, said this represented "a very significant" change in theprominence of the key factors influencing the expectations of estate agents.
In the first quarterinterest rates had been cited as the key positive factor influencing theexpectations of estate agents, but this factor was relegated to fourth place interms of importance in the second quarter.
Loos said the fact thatagents pointed to widespread financial stress while interest rates were so low"bodes ill for households when interest rates do ultimately rise oncemore. It would suggest the household sector has not yet recovered from the 2008/09recession."
Seasonality was thesecond most important factor in the second quarter, followed by the NationalCredit Act (NCA). Loos said residential property demand was seasonal and couldtypically weaken during the winter
months and the NCA wasgenerally seen as being negative because it was perceived as the "keyreason for the limited amount of loans still being granted". However, SaulGeffen, the Chief Executive of mortgage
originator ooba, saidbanks were continuing to relax their lending criteria and the average initialdecline ratio fell 5.8 percentage points to 47.1 percent last month from 52.9percent a year ago.
Geffen said thisindicated an increased proportion of home loan applications were beingapproved. Loos said the fourth-most important factor was interest rates and itwas generally still viewed as a positive factor because they were so low.However, a diminishing number of agents now regarded interest rates as apositive factor. Agents believe there has been a rise in significance ofselling "in order to downscale due to financial pressure" to 25percent of the total number of sellers in the second quarter from 22 percent inthe first quarter of this year.
The second quartersurvey pointed towards some slowing in residential demand.
Loos said this reasonfor selling must be seen as providing strong support for supply of property tothe market. Some would argue that a sale in order to downscale due to financialpressure should be followed by a purchase of a cheaper property shortly thereafter,negating the boost to supply of property after the initial sale. However, Loossaid that 51 percent of sellers selling for financial stress-related reasonsactually exited the market and moved into property rental "for the timebeing, thus leaving a gap" in the market. Loos said first-time buyersentering the market could fill a part of the gap left by those exiting, addingthe percentage of first-time buyers had increased further to 25 percent oftotal buying in the second quarter from 22 percent in the previous quarter.
However, Loos said arelatively low and unchanged 5 percent of agents cited lack of stock ofproperties on their books as a constraint. Loos said the second quarter surveypointed towards some slowing in residential demand while also suggesting adeterioration in buyer confidence and the financial position of householdsafter two relatively positive summer quarters.
The survey, undertakenlast month, involved a sample of estate agents predominantly from the six majormetros and aimed to obtain their perceptions of residential property marketconditions.
Source: IOLProperty - 17/6/2011