A rise in demand for residential property appears to be matched by a rise in supply, a survey of estate agents released on Thursday showed. 

The average time of homes on the market before they sold lengthened to 19 weeks and one day in the first quarter of 2011 while 85 percent of sellers had to drop their asking price to make a sale.

"Our FNB Valuers, in their subjective ratings of demand and supply, have recently been pointing towards some mild strengthening in residential demand, but also a simultaneous strengthening in residential supply," FNB Home Loans strategist John Loos said in a statement. 

"This implies that, in their view, the supply-demand imbalance in the market (with supply being stronger than demand) has not been improving as of late." 

According to the FNB Estate Agent Survey for the home buying market, there had been a strengthening in demand for housing in the past two quarters, although this could be seasonal as it was summer. 

It could also be due to the two interest rate cuts late in 2010. 

The agent residential demand activity rating was 6.07 (out of 10) in the first quarter of 2011. This was up from 5.66 the previous quarter. 

"The agents surveyed in the first quarter also reported a very significant increase in the number of viewers at their show houses that they perceived to be 'serious buyers'," Loos said. 

However, they said the average time of homes on the market before they sold, had lengthened. 

In the previous quarter it was 15 weeks and six days. In the first quarter of 2011 it was up to 19 weeks and one day. 

The survey showed 85 percent of sellers had to drop their asking price to make a sale. It was previously 80 percent. 

"This may suggest that stronger demand has not yet led to an improved market balance, possibly because it is being matched by stronger supply of residential stock on the market." 

Loos said they did not yet have solid evidence of a stronger supply of houses, but there were signs. 

These included a decline in the last two quarters in the number of agents reporting stock constraints. 

Agents had also reported an increase in the number of people selling for "non-negative" reasons. 

These include selling to downscale because of retirement, selling to upgrade or relocate, or selling to move closer to work. 

"This apparent development on the supply side is all part of the long residential market healing process," Loos said. 

"One should expect that, after an improvement in demand there should at some stage be an improvement in seller confidence as well." 

This would, however, slow the return to a better market balance. - Sapa

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