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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2014-10-10
The recently published FNB Estate Agent Survey provides an excellent insight into the current market information we have on the 8 main reasons people sell residential properties in South Africa. We like to track this information on a quarterly basis as major changes in the underlying reasons why people are selling helps us to fine-tune our marketing campaigns and recognize the development of trends as they become evident.

The 8 main reasons for selling provided in the survey are "Downscaling due to financial pressure", "Downscaling with Life Stage", "Emigrating", "Relocating to Elsewhere in SA", "Upgrading", "Moving for Safety and Security Reasons", "Change in Family Structure" (Death, Divorce, etc.), and "Moving to be Closer to Amenities". If you have ever sold a residential property and your reason was not categorized within one of the above I would like to know about it, as this list seems very comprehensive to me.

The largest percentage of sellers, currently at 24%, fall into the category of "Downscaling due to Life Stage". Typically these sellers are getting older and their children have left home. It is also indicative of an aging middle to upper income class bracket. At the current levels we are also around the record highs considering only 12% of sellers were selling to downscale due to life stage in the 2nd quarter of 2008. This indicates that this group of seller's is pro-cyclical in that they hold back on selling until the general market conditions improve. They are typically not financially stressed and prefer to sell in the good times rather than the stressed times of the property market cycle.

The next two most important categories are "Downscaling due to financial pressure" at 15% and "Upgrading" at 18%. Although 15% is still a significant number of sellers making the decision to sell because of financial stress, the general trend for this group has been down since the 2008/2009 financial crisis. For the past four quarters this group has been recorded in a very narrow range of 14%-15%. Of the people downscaling due to financial pressure it is interesting to note how many of these will choose to buy another (typically more affordable) property rather than rent. The 3rd quarter survey indicated 61% electing to buy again and only 39% opting for the rental option after selling. This is also typical of a more buoyant property market where financially stressed sellers end up "buying down" rather than "renting down".

Financially secure sellers planning to upgrade to a "better" home have grown steadily since 2009, and have for the past 7 quarters exceeded to group that are downscaling due to financial pressure. The gap between the two is reasonably stable and also indicative of a stronger property market. Depending on what happens to our interest rates over the next year, we can expect this gap to narrow again if the cost of finance increases substantially.

Emigration as a reason to sell remains historically low at under 3%, despite the recent labour market upheavel that has impacted on our economic growth so dramatically this year.

The remaining four reasons, namely relocating in SA, moving for safety reasons, change in family structure and moving to be closer to amenities, remain surprisingly stable over time and make up the 40% balance of why sellers decide to sell.

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

Andreas Wassenaar
Seeff KZN Chairman
Principal - Seeff Dolphin Coast