The 1st quarter 2016 FNB Estate Agent Survey shows a decline, once again, in the percentage of sellers selling in order to upgrade homes, reports FNB Home Loans household and property sector strategist John Loos.
This points to mounting financial limits, and increased household caution. However, there is still no significant rise in financial stress-related home selling. The largest motive for selling remains the ageing segment of the household sector downscaling to smaller properties “due to life stage”.
A key indicator of perceptions of “relative opportunity” for skilled labour between South Africa and other countries is the percentage of sellers selling in order to emigrate. This motive for selling remains moderate, but has been gradually ticking higher.
What has been evident in answers to questions related to reasons for selling, is that household’s spending on non-essentials appears to be diminishing.
The broad picture
The broad picture emanating from the FNB Home Selling Estate Agent Survey remains one of signs of growing financial constraints and weakening household sector confidence, but not yet of any meaningful increase in financial stress.
It appears that such increasing constraints/weakening confidence are leading to a gradually more conservative spending approach by the household sector, and this is reflected in a decline in the percentage of sellers selling in order to upgrade to a better and more costly property. This possibly ties in with currently weak consumer confidence as per the FNB Consumer Confidence Index.
Although a large group of sellers “selling in order downscale due to life stage” are downscaling due to no longer requiring the properties they have lived in up until recently, it is possible that weakened household confidence levels, and the resultant need for greater financial conservatism, has sped up this move to downscale for many.
A further possible sign of a greater level of conservatism is possibly visible among those sellers selling in order to downscale due to financial stress, with 2015 having seen a higher portion of these sellers expected to “rent down” (“buying down” being the other option) when compared to 2014.
One key indicator of perceived “relative opportunity” between South Africa and other countries, for skilled labour, is that of “selling in order to emigrate”. In the current time of weakening economic performance, poor household sector confidence levels (as reflected in weak consumer confidence surveys) and a very weak rand, it would perhaps not be too surprising to see this category’s percentage rising. Indeed, it has been rising, but by its historic standards dating back to the beginning of 2008 the level still remains fairly moderate.
In short, signs of the effects of a tougher economic and financial environment impacting on the household sector have been gradually becoming more prominent. We know that consumer confidence is weak, so a more cautious approach to home buying and selling is to be expected. The economy appears to still be on its long term path of stagnation moving into 2016, and the expectation is for further gradual interest rate hiking by the SARB (Reserve Bank).