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Property Talk

Property Talk

Date: 2014-07-25
Why would you want to sell? A good question and one that has been asked extensively as part of FNB's national quarterly estate agent survey. If I was to provide you with the eight main reasons of why South African's sell their residential properties, would you be able to identify the most important of these that drive seller behaviour?

In no particular order, these main reasons are:

1) Downscaling due to financial pressure

2) Downscaling with life stage

3) Emigrating

4) Relocating within SA

5) Upgrading

6) Moving for safety and security reasons

7) Change in family structure,

8) Moving to be closer to work or amenities.

These eight reasons cover the spectrum of seller motivation and provide some surprising results. The winner, by a long shot and representing 26% of all sellers as at the end of the second quarter of 2014, happens to be "Downscaling due to Life Stage".

These sellers are typically selling larger homes because their children have left home and they are getting older. They are therefore choosing to move into a smaller home more suited to their lifestyle.

This group has grown steadily since its recent low point of 12% in the 2nd quarter of 2008. This group is pro-cyclical in that they are not financially stressed and can wait for the property market cycle to improve before selling.

This is exactly what has happened over the past 6 years as we have moved from a low-point in our market cycle in 2009 to a much-improved version in 2014. This current relative strength of the property market has therefore provided the selling opportunity these people have been waiting for.

The next two most important drivers of seller motivation are "Upgrading" with an 18% share of sellers and "Downscaling due to financial pressure" with a slightly lower share of 14%.

The group of sellers upgrading has steadily improved over the past 6 years while the group downscaling due to financial pressure have steadily decreased over this same period from an unusually high spike recorded at 34% in 2009.

Once somebody has sold, who is downscaling due to financial pressure, they either rent or buy a smaller property. We have seen over the past few years that the percentage of these people looking to buy a smaller home has increased from 49% in 2011 to 61% in the 2nd quarter of 2014, while those looking to rent has generally decreased from 51% in 2011 to 39% currently.

FNB's forecast for the next year is that we can expect to see an increase in the selling to downscale due to financial pressure as the interest rate cycle ticks up and the economic landscape becomes tougher.

At the same time it is being forecast that upgrade related selling will decrease. One category I like to watch is emigration selling of residential property. Having peaked at 20% in 2008, this driver of selling behavior has decreased dramatically over the past 6 years to its current 2.8%.

The latest round of strikes that have characterized 2014 to date may well have a profound effect on this measurement as people grow weary of dealing with labour disputes.

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.