How long it takes to sell your house in South Africa right now

New data contained in the FNB Estate Agent Survey for the fourth quarter shows that high net worth homes are taking on average almost six months to sell amid a general cooling off in the property market in South Africa over the past while.

The lender compiles five ‘FNB Area Value Band House Price Indices’ which group areas according to their average home transaction values, using deeds data, and include all cities and towns in South Africa.

The five indices include:

  • Luxury Area – average R2.335 million
  • Upper Income Area – average R1.242 million
  • Middle Income Area – average R887,930
  • Lower Middle Income Area – average R583,858
  • Low Income Area – average R362,110

The fourth quarter 2017 results show some further slowing in the year-on-year house price growth rates of the three highest priced area value bands, but some further acceleration in the growth of the two lowest priced ones, FNB said.

It noted that the low income area index was again the strongest performer in terms of year-on-year house price growth, recording 14.2% year-on-year for the fourth quarter. This is an acceleration on the prior quarter’s revised 13.5%, FNB said.

“Moving one value band up, however, we perhaps see more reliable support for the view that the lower end has recently been showing relative strength, with some acceleration in the lower-middle income area value band’s year-on-year house price growth, from a third quarter 7.1% to 7.6% in the 4th quarter,” said property strategist, John Loos.

“This value band now boasts the second highest average house price growth.”

In the three area value bands above this, however, year-on-year house price growth slowed in the fourth quarter of 2017, the middle income area value band from 4.9% in the third quarter to 4.7%, the upper income area value band also from 4.9% to 4.7%, and the luxury area value band from 5.6% to 5.1%, Loos said.

On a quarter-on-quarter basis, a better indicator of recent price growth momentum than the year-on-year calculation, there has been a strong convergence of the three highest priced area value bands. The Luxury band showed quarter-on-quarter growth of 1.2% in the 4th quarter, while the upper and middle income bands showed slightly slower 1.1% growth.

Noticeably higher growth was seen in the lower middle income band, to the tune of 1.9%, and low income areas at 3.8%.

“The quarter-on-quarter house price growth rates for the top 3 value bands were all unchanged from their rates in the previous quarter, possibly suggesting that these market are heading towards “stabilization”, and the end of slowing house price growth,” said Loos.

The most significant year-on-year house price growth slowing in recent years has been in the luxury area value band, from an 11% high back in the final quarter of 2014 to the most recent 5.1%, followed by the upper income value band whose growth has slowed from 7.4% at the end of 2014 to 4.7%.

“But stabilising quarter-on-quarter growth rates of late may suggest that this year-on-year slowing is near its end,” Loos said.

Average time on the market

FNB said that upper end homes tend to “naturally” stay on the market for a longer time on average prior to sales than is the case at the lower priced end.

“However, from 2015 onward we began to notice a widening in the gap in average time of homes on the market between the luxury and upper income area segments on the one hand, and the middle and lower income area segments on the other hand,” said Loos.

In 2014, the lower income area segment (average value = R1.086 million) showed an average time of homes on the market of 11.54 weeks. This average time has shortened to a 9.43 weeks average for the entire 2017.

Middle income areas (average price = R2.067 million) saw average time on market go higher from a 10.18 weeks average in 2014 to 14.36 weeks in 2017.

The increase in average time on the market in the upper income area segment (average price = R2.955 million) was also significant, from 13.36 weeks in 2014 to 17.71 weeks in 2017.

But the most significant increase in average time on the market was to be found in the “high net worth” areas (average value = R6.193 million), rising from 15.86 weeks in 2014 to 23.25 weeks 2017.

“In short, since 2014, the higher up the income area ladder we go the more significant the rise in average time of homes on the market appears to have been from 2014 to 2017,” said Loos.

“Sentiment in South Africa early in 2018 seems improved, leading economic indicators have been pointing towards a strengthening economy in the near term, and it seems plausible that 2018 could be a mildly stronger year for all housing market segments.

“However, we believe that despite any economic improvement the household sector will remain financially constrained, searching for home affordability as a result, and that this will lead to the lower priced value bands continuing to outperform the higher end this year,” the strategist said.

Read: Foreigners and expats turn away from Cape Town property market

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How long it takes to sell your house in South Africa right now