The FNB Property Barometer: Reasons for Selling Homes report reveals that 22 percent of sellers are downscaling with life stage and this is expected to remain the largest percentage of total sellers for the foreseeable future.
The FNB Property Barometer: Reasons for Selling Homes report reveals that 22 percent of sellers are downscaling with life stage and this is expected to remain the largest percentage of total sellers for the foreseeable future, due to the strong growth in the number of people reaching “retirement-age”.
John Loos, FNB household and property sector strategist, the “oldies” who sell in order to downscale due to life stage continue to be the largest single source of sales, according to the FNB Estate Agent Survey for the first quarter of 2014.
In fact, in 2013 the oldies recorded the highest percentage of sellers in 2013 at over 20 percent of total sellers.
| Reasons for selling (As % of total sales) | Q1 2013 | Q2 2013 | Q3 2013 | Q4 2013 | Q1 2014 |
| Downscaling due to financial pressure | 15% | 18% | 16% | 14% | 15% |
| Downscaling with life stage | 23% | 21% | 23% | 21% | 22% |
| Emigrating | 2.7% | 3.1% | 2.7% | 2.0% | 3.4% |
| Relocating within SA | 9% | 8% | 8% | 8% | 7% |
| Upgrading | 16% | 19% | 17% | 20% | 18% |
| Moving for safety and security reasons | 11% | 10% | 12% | 12% | 11% |
| Change in family structure | 14% | 12% | 12% | 14% | 12% |
| Moving to be closer to work or amnenities | 10% | 8% | 9% | 9% | 10% |
Loos says this form of downscaling refers to those sellers who desire a smaller home, usually either because they are getting older or because their offspring have left home.
“While many in this group can postpone their sale when the market is weak, as was the case around 2008/9, in reasonably good market times, when they are more confident of getting their price, we should expect this group to be the major force behind residential sales.”
Loos notes that the high degree of sales by this group is being partly driven by South Africa’s changing demographics. International Housing Solutions (IHS) estimates indicate that over the five year period 2008 to 2012, the noticeably faster growth in age cohort numbers took place in the 50+ cohorts, with most of these groups’ growth rates exceeding 20 percent over the period.
It is plausible that the ageing population process could drive the life stage related selling rate still higher in the coming years.
This source of selling is likely to boost supply in the larger sized home segment of the market, while boosting demand for smaller homes and of course retirement property.
Other reasons for selling
In the first quarter of 2014, the second highest percentage of sellers were those selling in order to upgrade recording 18 percent down from 20 percent in the third quarter of 2013, with those downscaling due to financial pressure recording 15 percent of total selling up from 14 percent in the previous quarter.
Other reasons include emigration which recorded a low of 3.4 percent – this percentage has stayed below the five percent mark since 2013.
The high percentage of selling in order to upgrade is a reflection of confidence levels related to the future ability of households upgrading to be able to afford a higher priced, often more luxurious, home.
However, the question remains as to what portion of this confidence is misplaced, given the currently abnormally low interest rates by South Africa’s standards, low levels which appear unlikely to last, explains Loos.
The percentage of sellers selling in order to downscale due to financial pressure was 15 percent in Q1 2014 and Loos says they expect this percentage to increase should interest rates rise further.
However, Loos says increased confidence in residential property continues to be reflected in a further rise in the percentage of financially stressed sellers, downscaling due to financial pressure, who are believed by estate agents to be intending to buy a cheaper property as opposed to renting.
From Q1 2014’s 63 percent, the percentage of this group of sellers intending to buy a cheaper property has risen to 66 percent, now well up on the 49 percent estimate back in Q2 2011.
Other reasons include emigration which recorded a low of 3.4 percent – this percentage has stayed below the five percent mark since 2013.
According to Loos, emigration selling is not driven by absolute sentiment towards South Africa but by “relative sentiment”, implying that potential emigrants weigh up their perceived future opportunities locally versus those abroad.
Loos adds that while the ageing population remains the most important source of home selling, should interest rates increase, coupled with weak economic growth, they expect a decline in the percentage of sellers selling in order to upgrade, along with a moderate rise in those selling in order to downscale due to financial pressure. – Denise Mhlanga
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