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Buy-to-let buying remains weak, with the FNB Estate Agent Survey pointing to only very slight improvement, and agents don’t appear to expect much to change in the near term.

In an environment where the household sector is under significant financial pressure, basics are key, and primary residential demand is king. This is visible in ongoing weakness in buy-to-let demand for residential property, as reported in the FNB Estate Agent Survey.

The 1st Quarter 2012 FNB Estate Agent Survey points to an only marginal improvement in buy-to-let buying. Agents are thus suggesting that there has been very slight improvement in the level of buy-to-let buying, given that overall buying volumes in the residential market have also risen mildly in recent years.

For the time being, buy-to-let buying remains weak although having improved very mildly. The buy-to-let market awaits the combination of a more attractive yield on residential property, which would be driven by stronger rental inflation, a better household sector financial situation, and for some aspirant investors significantly better capital growth prospects.

Weak buy-to-let buying, however, does lay the foundation for the ultimate recovery of the rental market by constraining supply. At present, it would appear that the agents surveyed believe that significant strengthening in the rental market may be some way off. What do the surveyed estate agents say? In the survey we ask them to state whether they expect buy-to-let demand to increase (which gets a rating of +1), stay the same (rated as zero) or decline (rates as -1).

The FNB Buy-to-let Market Confidence Indicator is the average of these different ratings, and would suggest that the survey panel as a group is biased slightly towards strengthening buy-to-let demand in the near term. The level suggests no expectation of “fireworks”, with the confidence rating having declined since 2009.

John Loos

Household and Property Sector Strategist

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