Residential Maintenance and Upgrades
The worst thing for a property is to be empty. I have often said this to prospective buyers and sellers alike in order to emphasize the idea that a residential home requires continual cleaning and maintenance.
Those properties that remain empty or unlived in for extensive periods of time seem to depreciate faster than those lived in. As with ourselves as we progress through life we are either forging ahead or regressing but never standing still.
The FNB Report of Residential Maintenance and Upgrades in South Africa measures this activity across 5 categories or levels of home maintenance and upgrades. The top level is "Value Adding Home Upgrades". This category according to FNB's Estate Agent Survey showed a weakening from 25.5% in the 4th quarter of 2017 to 22.85% in the 1st quarter of 2018, further down on 26% recorded in the fist half of 2017.
This is symptomatic and in line with tighter financial times where home owners delay upgrades they may have otherwise undertaken. The next category is the percentage of homeowners "fully maintaining their property and making some improvements".
Here we see an interesting increase from 27% in the 3rd quarter of 2017 to 34% in the 4th quarter and then to 40,7% in the 1st quarter of 2018. The next level down is "not improving but fully maintaining the home". This category has risen slightly to 29,3% in the 1st quarter of 2018 from 28% in the prior quarter, and therefore remains largely static.
The next level down is defined as the "percentage of homeowners attending to basic maintenance only". This is not a good place to be as it means that the home is deteriorating over time. This estimated percentage was 8,7% for the past two quarters.
The bottom category of home maintenance measured is defined as those owners allowing their homes to "get run down" and is measured at a largely insignificant 1,85% in the 1st quarter of 2018. Believe it or not, we witness some of these homes even at the top end of the residential property market.
The more than significant increase in the second category of making some improvements makes sense when we consider the reasons why people typically make improvements.
For the last 3 quarters the Speculative Motive has risen from 9% to 21% and to 29.3%. This shows us that they are either looking to sell in order to make a profit or sell in order to possibly downgrade due to life stage changes or financial pressure.
Either way the people within this segment are making the improvements in order to realize a sale. With the current leading business cycle indicators pointing to near term economic improvement this speculative type investment may well prove to be the smart money.
The majority of people (61.4%) make the improvements for their own personal use and enjoyment. This is no surprise and makes perfect sense. A smaller percentage (12,9%) make the improvements because they "cannot afford to buy elsewhere".
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