THERE was a mild improvement in residential property demand activity levels, FNB said today as it released its property barometer for the first quarter of 2009. However, other areas of the survey results pointed toward a rather bleak picture, the bank said.

"It?s probably safe to say that the overall picture is far from convincing, we have a long way to go before we see a sustainable recovery," FNB property strategist John Loos told a presentation in Johannesburg. The property barometer is a survey of a sample of estate agents regarding their experience of markets conditions.

The main barometer question relates to the level of demand activity and agents are asked to rate the level of demand they experience on a scale of one to 10. Loos said that after an initial rise from a historic low of 4.1 in the third quarter to 4.6 in the final quarter of 2008, a further mild increase was experienced to a level of 4.8 in the first quarter of 2009. However, he pointed out that the average time that houses spent on the market had risen. "From a peak of 20 weeks and one day, the fourth quarter of 2008 saw the average time on the market fall markedly to 15 weeks and three days, but in the first quarter of 2009, the time rose once more to 17 weeks and four days," he said.

Loos said it was possible that the prospect of falling interest rates had made some sellers more confident, causing them to hang on for longer for a better price. Loos added that the proportion of first time buyers had declined quarterly. First time buyers were estimated at 15,1% of the total buying in the first quarter of 2009. This was lower than the previous quarter and well down on the better days of 2004 and 2005," he said. The buy-to-let market also showed no sign of making a turn for the better. "As a percentage of total buyers, buy-to-let buyers made up a smaller estimated 11% in the first quarter of 2009 compared to 12% in the previous quarter," Loos said. Loos said primary residential demand became more dominant in tough times. "Primary residential buying was up further to 83% in the first quarter of 2009, and we?re talking about established family buying here," Loos said. On the other hand, coastal holiday home buying showed further weakening, Loos said. Turning to the upgrading of property, Loos said although some people believed that renovation activity should be high in tough times, the survey had indicated otherwise. "Only 10% of homeowners were believed to be doing value-adding upgrades to their houses in the first quarter of this year." According to the survey, emigration selling had declined as a weak job situation in many of the popular emigration destinations was believed to be a big deterrent. "It?s a costly business to go all the way to London to get retrenched," Loos said.

Looking ahead, he said while a mild recovery in residential demand was anticipated as 2009 progressed, FNB was of the view that there was an oversupply of stock in the market which could sustain further price deflation for most of the year. Loos also predicted that the Reserve Bank?s Monetary Policy Committee would cut rates by 100 basis points tomorrow.