Reasons Why South Africans Are Selling Their Homes
The FNB Estate Agents Survey results for the first quarter of 2019 has shed some light on the current market activity and sentiment.
The survey reveals the biggest reasons people are selling is due to:
- life stage down-scaling - 23%;
- due to financial pressure - 15,9%
- 14,2% in the number of people selling up and leaving the country.
According to the lender, estate agents did not perceive further slowing in housing demand in the first quarter of 2019. Their average estimate for "serious viewers per show house prior to sale" was 9.97 viewers per show house, virtually the same as the estimate of the prior quarter.
This, however, still languishes behind the historical average of 11.95 viewers since 4Q06, noted FNB economist, Siphamandla Mkhwanazi.
In addition, agents did not perceive a further weakening in the balance between demand and supply in the first-quarter survey.
The average time of homes on the market moved sideways at 15 weeks and 3 days from 15 weeks and 6 days in 4Q18, putting a break on a broadly rising trend since the end of 2015. "This is significantly lower than the most recent peak of 17 weeks and 6 days in 3Q18.
"Notwithstanding, this suggests that current demand levels are still insufficient to mop up available supply of housing stock on the market, when compared to the long-term average of 13 weeks and 4 days since inception of the survey question in 4Q04," said Mkhwanazi.
Reasons for selling
Estate agents perceive "Downscaling because of life stage" as still the most prominent reason for selling a property in South Africa, with such sales accounting for 23% of all sales, flat from the previous quarter, FNB said.
However, emigration-driven sales now account for 14.2% of all sales, a big jump from 10% in 4Q18.
"In fact such sales, according to estate agents, have doubled in the past two years and are, as expected, more prominent in the coastal areas and in upmarket segments," Mkhwanazi said.
On a slightly positive note, although downscaling due to financial pressure has become increasingly prominent in the past year, the estimated proportion of such sales eased to 15.9% in 1Q19, from 19% in 4Q18, FNB said.
Of those who sell due to financial pressure, an estimated half opt for the rental market, and the other half opts for a cheaper property. The proportion of those who opt for rentals has, over the past year, been rising, only retreating in 1Q19 at approximately 49.01% from 68.01% in 4Q18, the lender said.
"However, these trends do not appear to have benefited the rental market, as vacancies are reported to be increasing and rental inflation continues to languish below inflation. One explanation could be that households are consolidating in the rental market, opting for shared space," said Mkhwanazi.
Similarly, the survey showed a rising trend of communal living property purchases. FNB define this as people buying property jointly with friends or other extended family members with a view to living together to share expenses/repayments.
The 1Q19 results show that 15.9% of respondent agents are seeing this trend increasing in their respective markets, up from 12.7% in 4Q18.
"This consumer behaviour is not surprising when viewed in the context of housing expenses outpacing wage growth, and consistent with other manifestations of consumer pressures in adjacent markets, such as the passenger car market wherein total volumes are declining but the proportion of SUVs (family-oriented cars) is rising," said Mkhwanazi.