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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2018-02-09

Home Maintenance

You are either actively moving forward and pressing ahead or regressing. Standing still means you are moving backwards. This is specifically true for home maintenance. On-going home maintenance and upgrades is something that is essential to maintaining the value of a property and interesting to measure on a macro-economic level.

Using FNB's recent report on residential maintenance and upgrades they confirm that there was a slight weakening in the levels of home maintenance and upgrades from the beginning of 2017 to the end of the year. FNB use five categories or levels of home maintenance and upgrades when measuring this activity. The top level is "Value adding home upgrades".

This category improved slightly from 25% to 25.5% in the 4th quarter of 2017 from the prior quarter but was slightly below the 26% recorded in the first quarter of 2017. The next level down in home maintenance is the percentage of homeowners "fully maintaining their property and making some improvements." This category has seen a decline in 2017 from 36.5% for the first two quarters, to 31% in the 3rd quarter of 2017 and then to 30.5% in the 4th quarter of 2017. The next level down is the "percentage of owners not improving but still fully maintaining homes", which has seen a rise from 27.5% in the 1st quarter of 2017 to 31% in the 4th quarter of last year. The fourth level is referred to as the "percentage of homeowners attending to basic maintenance only".

This level actually means that a home is going backwards and will deteriorate over time and lose value relative to other properties in the area. For the first quarter of 2017 this measure was 9.5% and ended the 2017 year at 11%.

The fifth and final category measured is referred to as those owners that are allowing their homes to "get run down". Although still fairly insignificant this did increase from 0.5% in the 1st quarter of 2017 to 2% in the 4th quarter of last year. The increase in the lower two levels of home maintenance over the course of 2017 suggests a higher level of financial pressure on home owners.

At this stage the overall deterioration in home maintenance is small. FNB produce a "Home Investment Confidence Indicator" in an attempt to measure how the market feels about investing in the stock of residential property. On a scale from -1 to +3 it is currently measured at 1.67, which is marginally down from the 1.74 measured in the 1st quarter of 2017. The recent multi-year peak in this measure was recorded in 3rd quarter of 2015 at 1.79.

The stagnation of home maintenance investment is also indicated by the measure of real retail sales by Hardware, Paint and Glass products retailers. For the three months ending in November 2017 this category had declined by -0.8% year-on-year.

The overwhelming majority of home owners undertake home improvement activities for their own use (69.5%), while 16% of property owners do it because they can't afford to buy elsewhere. Currently only 15% of home improvements are done for speculative purposes in order to sell in the short term.