Whatshot
Property Talk
Property Talk
Date: 2018-11-23
Impact of overall economic growth on SA home owners
The renovations market is sensitive to the general property market cycle. The interesting measurement by FNB in their quarterly National Estate Agent Survey of the five broad categories that define the levels of maintenance and improvement undertaken by home owners provides an excellent overview of where the property market is within its overall cycle and the impact of overall economic growth on South African home owner's behaviour regarding maintenance, renovations and upgrades.
The top level is "Owners investing a great deal in improvements, renovations and adding upgrades to their homes". This important top tier category has been hardest hit with the 3rd quarter 2018 recorded response being only 11% of home owners, down from 16% in the 2nd quarter and significantly down from the 26% peak reached in the first half of 2017.
The next level down is "Owners are maintaining their homes well and making some improvements". This category has seen only a mild decline from 42% in the 2nd quarter to 40% in the 3rd quarter of 2018. The low in this category was recorded at 30,5% in the 4th quarter of 2007 at the time of the global financial crisis.
The next level down is labeled "Owners who are not spending a great deal on improvements / value added features but are still fully maintaining their homes". This category was reflected as being 33,5% of respondents in the 3rd quarter of 2018, mildly higher than the 30% recorded in the 2nd quarter, but quite a bit higher than the 25,5% recorded in the 2nd quarter of 2017.
The fourth level down is "Owners are really only attending to basic maintenance issues" and this category saw a slight increase from 12% in the 2nd quarter to 14% in the 3rd quarter of 2018, but this category is up from a low of 9,5% recorded at the beginning of 2017. The fifth and last category is "Owners are doing little to maintain their homes and are letting them get run down" rose from 1% to 2% in the 3rd quarter.
The deterioration of the last two categories is important as it can alert us to a deterioration of an area or suburb. The above maintenance picture underpins the overall financial stress being experienced nationally by homeowners.
FNB's Home Investment Confidence Indicator has deteriorated consistently over the last 6 quarters and more rapidly over the past four quarters indicating the impact of this financial pressure. Hardware retailers such as Build It or Mica would have felt the impact with slower sales over the past year. The Hardware, Paint and Glass Products Retail measurement from Stats SA shows real year-on-year sales growth fall to -2,7%.
For those homeowners that are feeling the financial pressure and wondering what to do, the one thing we can be sure of is that the market cycle will change and improve. Often when we are at low ebb in our cycle, people cannot see positive aspects and tend to be overly negative. For estate agents such as ourselves we are already seeing the signs of increased activity in the market.