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Property Talk

Property Talk

Date: 2018-11-16

Reasons for Selling

In property transactions the reasons for selling are often important motivators for a seller to negotiate around and can give insight into the chance of a transaction resulting. The FNB Estate Agent Survey provides for 8 categories of reasons for selling and these we like to track and understand in order to anticipate where the market may be trending.

Of the eight major reasons, four are considered "pro-cyclical". These reasons should recede in significance as the housing market weakens and increase as it strengthens. These four reasons are "Selling in order to upgrade", "Selling in order to downscale due to life-stage", "Selling in order to relocate to another region", and "Selling in order to relocate closer to work or other amenities".

As you can imagine in tougher economic times, fewer people sell in order to upgrade, those looking to sell due to a life-stage change may well delay their selling decision for a period, less relocation occurs when GDP growth is down and people become slower to sell in order to move closer to amenities or work.

Currently the percentage of sellers selling due to these four pro-cyclical reasons is provided as 47,61% in the 3rd quarter of 2018, down from the 49.34% of the prior quarter and significantly down from the 61% recorded in the 2nd quarter of 2014.

This definite downward trend witnessed over the past four years indicates a clearly weakening residential property market. In the 3rd quarter 2018 the estimated percentage of sellers selling in order to upgrade was 9,57%, having declined for 2 consecutive quarters from 13% at the beginning of 2018.

This is far below the 20% recorded in the 4th quarter of 2013. It is interesting to note that the percentage of sellers looking to downscale due to changes in life stage tends to be relative constant at its current level of 24.53%, but even this measure is somewhat down on the 29% recorded at the start of 2017.

Selling due to changes in life stage remains the single biggest one of the 8 major reasons for selling. The impact of the economic slowdown has affected the level of selling in order to relocate to other parts of the country.

Given that South Africa has been in a recessionary environment, we can understand the decline from 10,02% of sellers in the 1st quarter of 2018 to 7.27% in the 3rd quarter. The "Selling in order to mover nearer work or amenities" has also declined from 10% in the 1st quarter of 2014 to 6,24% by the 3rd quarter of 2018.

The estimated percentage of sellers selling to downscale due to financial pressure was 16.3% in the 3rd quarter 2018, up marginally from the 15% in the previous quarter and higher than the 11% low recorded in the 3rd quarter of 2015. This is still significantly lower than the 34% high reached in the 2nd quarter of 2009.

"Selling in order to Emigrate" is one that is interesting to watch given our unsettled political landscape. There has been a gradual rise in this metric to 8.6% recorded in the 3rd quarter 2018. This is far higher than the low of 2% recorded in the 4th quarter of 2013, but well below the 20% spike of 2008.