1. FNB Estate Agent Survey - Home Buying Market 1st Quarter 2014 Survey Results 9 April 2014

2. Main Points The 1st Quarter Residential Activity Indicator rose, from the previous quarter’s 6.27, to 6.76. Year-on-year increase in the Residential Activity Rating in the 1st quarter of 2014 was +2.89%, slower than the previous quarter’s +6.5%. This is the 7th quarter of increase out of the past 9 quarters. We saw a further rise in the percentage of agents citing stock constraints as a factor influencing their near term expectations, to 18.5%, from a previous quarter’s 16%. From a 4th quarter 2013 estimate of 15 weeks and 1 day, the average time on the market in the 1st quarter 2014 survey declined to 13 weeks and 6 days. Percentage of sellers being required to drop their asking price to make a sale, also declined further from 85% previous to 81%. Average percentage asking price drop on properties where a price drop is required to make the sale diminished from -9% in the 4th quarter survey to -8% in the 1st quarter of 2014. In the 1st quarter survey, 30% of agents expected activity to increase in the next 3 months, down from 34% in the previous quarter, while 60% expected it to stay the same and only 10% expected a decrease in activity. Aggregating the various price growth/decline expectations over the next 12 months, the net expected price movement by agents is a modest +3.7%.

3. Further Strengthening in Residential Activity Indicator The 1st Quarter Residential Activity Indicator rose, from the previous quarter’s 6.27, to 6.76. Seasonally-adjusted version of the Indicator also rose mildly further from 6.42 to 6.47 over the 2 quarters. The rise suggests that strengthening trend in the market through 2012 and 2013 is still intact. Activity Rating level remains in the “stable” bracket (a level from 4 to 6), but is now pushing closer to the “Positive” bracket of 7 to 8. The 1st Quarter activity rating is the highest rating since the 1st quarter of 2005

4. Rate of increase in Demand Activity Indicator slightly slower than previous Year-on-year increase in the Residential Activity Rating in the 1st quarter of 2014 was +2.89%, slower than the previous quarter’s +6.5%. This is the 7th quarter of increase out of the past 9 quarters.

5. Key survey questions also point towards further improvement in price realism and the balance between demand and supply in the 1st quarter of 2014.

6. Stock Constraints intensify Along with the rise in residential activity levels over the past 2 years, which reflects a rise in residential demand, has come a rise in “stock constraints” experienced by certain estate agents. In the 1st quarter of 2014, we saw a further rise in the percentage of agents citing stock constraints, as a factor influencing their near term expectations, to 18.5%, from the prior quarter’s 16%. This comes after an already considerable rise in 2012’s stock constraint percentage over that of 2011.

7. Average time of properties on the market declines One indicator of where the market is in terms of seller pricing realism/ balance between demand and supply is the estimated average time that properties remain on the market prior to sale. From a 4th quarter 2013 estimate of 15 weeks and 1 day, the average time on the market in the 1st quarter 2014 survey declined to 13 weeks and 6 days. This is the lowest average time on the market since the 1st quarter of 2010. This continues to point to a broadly declining trend in the average time on the market since 19 weeks and 1 day high in early-2011.

8. Less sellers dropping their asking price to make the sale Another indicator of seller pricing realism in the market, i.e. Percentage of sellers being required to drop their asking price to make a sale, also declined further from 85% previous to 81%. While moving in the right direction it must be said that this percentage remains far above the level of around 30% back in early-2004.

9. The average required asking price drop is diminishing We also ask agents to estimate the average percentage asking price drop on those properties where a price drop is required to make the sale. This average drop diminished from -9% in the 4th quarter survey to -8% in the 1st quarter of 2014. This is now significantly less than the estimated average percentage drop of -13% in late-2011.

10. Slight improvement in perceptions of affordability What we had early in 2014 was only a very slight change to the average agent perception of residential affordability. There was a slight decline in the percentage of agents perceiving “income levels to be far behind house prices, from 12% in the preceding quarter to 11% in the 1st quarter 2014 survey. Those perceiving “income levels to be a little behind house price levels” also declined slightly from 48% in the preceding quarter to 47%, while the percentage of agents believing that “income levels have kept up with prices” rose from 40% to 41% over the 2 quarters. These agent affordability perceptions are vastly improved on a stage back early in 2008, where only 8% of agents believed that income levels had kept up with prices and 72% believed that income were far behind prices.

11. Near term agent expectations regarding activity remain modest Agent confidence regarding near term prospects remains noticeably above the low points of 2007/8 and 2011, but still not “overly strong”. In the 1st quarter survey, 30% of agents expected activity to increase in the next 3 months, down from 34% in the previous quarter, while 60% expected it to stay the same and only 10% expected a decrease in activity.

12. Interest rates are the key negative factor influencing agent near term expectations When asking agents for the factors influencing their near term expectations, “interest rates” were by far the most common factor. Interest rates were generally perceived as a negative factor. This was followed by 26% of agents citing stock issues as a factor, with the majority (18%) citing stock shortages (vs too much stock). The 3rd key factor on the list was “Economic Stress/General Pessimism”, which at 15% is now higher than the 11% citing “Consumer Positive Sentiment”.

13. Agent expectations on house price inflation also modest Agents have perhaps surprisingly low aggregated expectation of average house price growth over the next 12 months. The most popular survey response was a 1-2% price increase, which is the view of 20% of respondents, while 18% expect 3-4% increase, 14% expect a 5% rise, 10% anticipate a 6-9% growth rate, 9% a 10% increase, and only 1% foresee a double-digit rise. Aggregating the various price growth/decline expectations, the net expected price movement is +3.7%.

14. Conclusion In summary, therefore, early in 2014, estate agents surveyed continued to point to a very comfortable and still- improving residential property market, a broad trend that has been in place since early-2012. They perceive the balance between demand and supply to be gradually improving, as reflected in a declining average time of properties on the market, stock constraints mounting, and gradually improving price realism. However, they do not yet point to a market that could be classified as “booming or irrational”, They do not appear to anticipate such a market in the near term, expecting house price growth of only 3.7% over the next 12 months, which would be below our expectations for consumer price inflation and thus negative in real terms.

15. End