The idea of selling a home at pricing below what was paid is often met with resistance by home-owners so it is fascinating the look at some national statistics produced by FNB to provide some insight into what actually happens. To produce this data FNB take deeds office data for property transactions by natural persons, which they believe to be residential dominated.
They then determine which of these properties were resold at pricing below their previous purchase price and compare these to those that were sold at a capital gain. Although there has been very low average house price growth, the data shows no significant increase in the percentage of properties resold at prices lower than their previous purchase price.
Of the total properties resold in July 2018 nationally only 9,6% were resold at lower prices than the previous purchase price. This is only slightly higher than the 8.7% of May and the 8.9% of June. If a six month moving average is used to identify a trend line in the data, we see for the six months to June 2018, 9% of homes traded at a capital loss and for the six months to July 2018, 9.2% were sold below the price they were bought at.
This indicates a marginal increasing trend. Consider however that for the six-month period to November 2009, that highly stressed period many of us remember, 20.6% of homes were sold at a capital loss. This is a significantly worse scenario than what we are currently experiencing and it helps us to keep things in perspective. The financial stress in the economy is therefore nowhere near as severe as the 2008 to 2009 period.
Of the homes sold at capital losses, 2.1% were resold at 0-5% below the previous purchase price, while 6.9% were resold at greater than 5% below the previous purchase price. On the upside we see that for the six months to June 2016 the homes sold at 10% or more above the purchase price were 78.2% and two years later, for the six month period to July 2018, this figure had only marginally declined to 77%.
The supply strength index has delivered its 15th consecutive month of increase indicating little to no stock shortages in the residential property market. In fact the reported percentage of estate agents experiencing stock shortages has declined from 24.9% in the 1st quarter of 2015 to a mere 4% by the 2nd quarter of 2018.
The FNB Estate Agent Survey measures the number of serious visitors to show-houses. This is an implicit indicator of residential property demand and has shown a steady downward trend from a peak recorded in the 2nd quarter of 2013 at 16.69 visitors to the 10.42 recorded in the 2nd quarter of 2018.
Little to no signs of speculative buying behaviour are currently evident. A measure of this is the frequency at which a property is bought and then sold. FNB measure the properties bought and sold within a 12 month period and found that only 3.4% were in this category and is low compared to the recent peak of 13.78% recorded in June 2015.
Lastly secondary home buying, whether for investment or holiday has declined from 14.47% of total home buying in the 1st quarter of 2017 to 9.91% of total home buying as at 2nd quarter of 2018.
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