Home owners' changing reasons for sales

Sellers seemingly downscaling owing to financial pressure now only 11%.

SIKI MGABADELI / Moneyweb – interview with John Loos

The fourth-quarter FNB Estate Agent Survey, which looks at the selling side of the residential market, shows a very strong situation with a further decline in the percentage of sellers who are deemed to be downscaling owing to financial pressure. It's down to 11%, the lowest percentage since the survey in question started late in 2007.

JOHN LOOS: Well, it's part of the broader Estate Agent Survey and what we want to get a grip on is why people – those who are selling their primary residences – are doing it? There are about eight categories, the main ones being selling to downscale owing to financial pressure, selling in order to upgrade – that’s another big one. And there is selling owing to life stage; you are getting older or your kids have left home. There are a couple of other smaller ones, including emigration-related selling. There are about eight categories and it gives one a lot of insight as to where one is in the cycle and how strong this market is. 

For instance, if you went back to 2009, it concerned the very, very weak situation where 34% of sellers at that stage in one quarter were estimated to be downscaling owing to financial pressure. So the fact that it has gradually over the last number of years declined all the way to 11% shows a radical improvement. Well, it's obviously a function of interest rates since 2009, but also a decline in the debt-to-disposable-income ratio. So the household sector has to an extent got its house a bit more in order.

SIKI MGABADELI: OK. Those who are downscaling – are they buying cheaper properties, are they renting, what are they doing?

JOHN LOOS: That’s the other thing now. We sort of have a follow-up question to that. Of those downscaling owing to financial pressure are they renting or are they buying? Back when we started this question in 2011, 49% were buying, 51% going down to rent, which suggested a weaker situation or less confidence in the market. Now it's turned around – 53% are estimated going to buy and that would mean about 47% renting. So it has swung very much in favour of buying in the last few years as well.

SIKI MGABADELI: I see you continue to see strength in those who are downscaling owing to life stage – I'm being very polite because I don’t want to use the other word.

JOHN LOOS: I use it – the old user, basically. Ja, 23% are selling due to life stage now. These seem to be quite cyclical – they are not necessarily under financial pressure so they can wait for a better market. In 2008 at one stage they were down at about 12% of total sellers. So they have risen over the last few years as you would expect, I guess. But interesting – I just don’t have a long enough history to see where it was in the boom years and so on. But I think this driver of selling is going to be a big one for quite some years because, if you look at the growth in the various age cohorts in South Africa, the fastest growing age group – not the biggest one yet – is those in their 50s and 60s. So we are sort of going down the ageing population road, and this drives a very sizeable percentage of 23% of sellers. at the moment.

Source – Moneyweb / SIKI MGABADELI / John Loos

John Loos is household and property sector strategist at FNB.