23% downscale due to life stage Home > News> Market> 23% downscale due to life stage -------------------------------------------------------------------------------- 06 Nov 2013 The FNB Reasons for Selling Q3 2013 survey reveals that while the need to “downscale due to financial pressure” and the desire to “upgrade homes” are still key drivers of residential property selling, it is South Africa’s ageing middle-to-upper income classes that remain the most important driver of residential selling. According to the survey, 23 percent sell as they downscale with life stage, 16 percent downscale due to financial pressure, 3 percent (emigrating), 8 percent (relocating within SA), 17 percent (upgrading), 12 percent (moving for safety and security reasons), 12 percent (change in family structure) and 9 percent (moving to be closer to work or amenities). According to the survey, 23 percent sell as they downscale with life stage, 16 percent downscale due to financial pressure, 3 percent (emigrating), 8 percent (relocating within SA), 17 percent (upgrading), 12 percent (moving for safety and security reasons), 12 percent (change in family structure) and 9 percent (moving to be closer to work or amenities). Writing in the report, FNB household sector and property strategist, John Loos explains that the oldies continue to be the strongest drivers of residential sales as these sellers want smaller homes either because they are getting older or because their offspring have left home. This figure was 21 percent in Q2 and has remained at above the 20 percent level since 2011, and is sharply higher than the lowly 12 percent in Q2 2008. Loos points out that this percentage of sellers is high partly to do with South Africa’s ageing population, especially in the middle and upper income groups, and also has much to do with the stage of the economic and property cycle. “Members of this group of sellers are not necessarily under financial pressure, and can often bide their time to a certain extent while the market is very weak.” He says that seemed to be the case around 2008, where many could stay out of the selling market until such time as they felt they could obtain a better price for the sale of their home. Then, as the market gradually improved following the 2008/9 recession, they indeed came out in larger numbers, it would appear – they therefore tend to be “pro-cyclical” Loos says selling to downscale due to life stage could probably be expected to continue to drive solid demand for various forms of retirement property, as well as for smaller properties in the mainstream market in the coming years. Downscaling due to financial pressure The survey points to those selling due to financial pressure having dropped to 16 percent from 18 percent in the previous quarter. Only 3 percent were selling in order to emigrate and this percentage has remained steady since Q3 2013 and has recorded 4 percent from Q1 2011 until Q2 2013. He says this percentage is no reason for panic, pointing out that as some resurgence in house price growth in recent times would probably make it significantly easier for households to trade out of properties without incurring too serious a financial loss. However, such situations become far more troublesome when interest rates rise, as residential demand and prices are often suppressed, the number of sellers under financial pressure increases, and losses when trading out can become more significant, he explains. As such, one would still like to see this percentage of sellers downscaling due to financial pressure diminish further before the next interest rate hiking cycle. Furthermore, Loos says there has been an increase in the percentage of financial stress-related sellers believed to be planning to buy a cheaper home as opposed to moving into the rental market. In Q2 2011, agents estimated that 51 percent of this group were planning to rent a home versus 49 percent planning to buy and in Q3 2013, 64 percent plan to buy while only 36 percent plan to rent. Selling in order to upgrade and emigration While some sell in order to buy cheaper and small homes or rent, 17 percent plan to upgrade (19 percent in Q2 2013). Only 3 percent were selling in order to emigrate and this percentage has remained steady since Q3 2013 and has recorded 4 percent from Q1 2011 until Q2 2013. This is particularly of interest with South Africa in a period of seemingly heightened social tension, and due to the fact that our surveys back in 2008 suggested that this motive for selling was one of the largest drivers of residential supply. Loos adds that for now, deterioration in sentiment towards South Africa still does not appear to have brought about any noticeable renewed emigration surge. – Denise Mhlanga
Posted on: Tue, 12 Nov 2013 13:42:02 +0000
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