Whatshot
Property Talk
Property Talk
Date: 2017-10-19
Have you ever wondered what the biggest reasons are that motivate home owners to decide to sell their properties The quarterly FNB Estate Agent Survey provides interesting insights into these reasons. In terms of this report as at the 3rd Quarter of 2017 the single largest reason for sellers selling is "to downscale due to life stage".
This is the group of seller's who no longer need a larger home as they age because their children have left home, or they no longer want to maintain a large home at their age. Currently 26% of all sellers are estimated to be selling in order to downscale due to life stage.
The next two highest percentages as reasons for selling were provided as those selling "in order to downscale due to financial pressure" and those "selling due to a change in family structure (e.g. divorce)". Both of these were estimated at 14% each of total selling.
What is interesting is that these older sellers become the buyers in the step down market and become a very important source of demand in those markets. When the macro-economic environment is tougher such as it has been, the first time buyers who are typically younger and less financially secure tend to postpone their investments into the property market and either rent as an alternate and remain in their parent's home for longer.
The number of buyers over the age of 50 has increased recently to 33.06% of total buying. This tends to indicate that around a third of buyers are made up of this older demographic of which many may be downscaling due to life stage.
The percentage of sellers selling in order to upgrade is currently at 11% of all home sellers. This is a big drop from the peak of 20% reached in the 4th quarter of 2013, just before interest rates started to rise in January 2014.
The estimated percentage of sellers "selling to downscale due to financial pressure", currently at 14%, is however not significantly different to what it has been over the past few years, providing us with some insight into the current resilience by home owners to weather the macro-economic storms and political uncertainty we have faced over the past two years.
Another key statistic that reveals financial pressure in the market is the number of people who are selling in order to downscale due to financial pressure, whether they then either "rent down" or "buy down".
What is clear is that over the past three quarters the number of people choosing the rent down option has increased steadily while the number of people buying down has decreased steadily. Because the rental option is often the cheaper and lower cash flow risk option, a rise in this measurement tends to indicate lower levels of confidence amongst the group of financially pressured sellers.
On a regional level, when we view the "Financial pressure related downscaling" percentages, by the major metro regions, we see Cape Town as by far the financially healthiest metro with only 8.3% of sellers downscaling due to financial pressure. Johannesburg is the worst with 15.9% and Ethekweni is at 12.8%.