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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2015-02-27

If you are in business servicing the property market then there is no doubt you are very busy. The market is moving quickly from a buyer's market to a seller's market, with prices hardening and the days of getting discounts off asking prices coming to an end. The next phase will be shortages of stock and competition amongst buyers to outbid each other for certain scarce properties. This is currently being experienced by those trying to buy vacant land along the Dolphin Coast. The dramatic increase in vacant land pricing over the past few months has been a long time coming and will support the pricing of the stock of existing homes. The strength of the property market is currently reflected in the Home Maintenance and Upgrades market, which is vastly improved on the 2008 levels.

FNB's Estate Agent survey measures the renovations market across five categories, namely: 1) The percentage of home-owners investing in their properties with a view to adding value (the top tier home-improvement group); 2) Percentage of home-owners maintaining the property and making some improvements; 3) Not improving but still maintaining the home; 4) Only attending to basic maintenance and 5) Allowing the home to get run down. As can be expected, the financial crisis of 2008/9 saw the quick increase in the lower three categories where home-owners immediately cut back on all home improvement and maintenance.


As the general property market improves, the level of value adding improvements increase. The last two quarters of 2014 saw the sharp improvement to 15.5% in the value adding renovations being done by home-owners. This is a big improvement from the low point of 3% measured in the 1st half of 2013. It is still well below the boom period peak of 43% measured in the beginning of 2004, but the trend is upwards. The middle tiers of home maintenance and improvement remained similar and the lower level of the percentage of home-owners attending to basic maintenance only, decreased from 9,5% to 7,5%. The lowest level, those home-owners allowing the property to get run down remains largely irrelevant at 1%. FNB's published Home Investment Confidence Indicator, as measured in the 4th quarter of 2014, is the highest since the 3rd quarter of 2007.


As people feel better and more confident about the future and general property market, they tend to invest more in their properties. The latest available retail sales of hardware related products figures were up by 7.7%, far exceeding the general retail sales figures which were only up by 2.7%. Price inflation of the Hardware, paint and glass product category was steady at 5.3%. It is interesting to understand the reasons why people undertake home improvement projects and the results of the FNB survey indicate the 77% of home-owners do it for their own use, while 12% do it because they "can't afford to buy elsewhere". Only 7% currently do it for short-term speculative reasons as compared to 24.5% in early 2006.

As a property market recovers and prices start to move upwards, we can expect some pricing to run ahead of the market. This will largely be driven by scarcity. The mistake some sellers will make is to think that the rate of increase will continue and will be disappointed when the market punishes them for over-pricing. Fortunately our current market is defined by limited speculative buying activity. The existing demand strength is driven by end-user buyers migrating into the area.

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


Andreas Wassenaar

Principal - Seeff Dolphin Coast

Cell: 082 837 9094

andreasw@seeff.com