South African banks see value adding upgrades and home maintenance as important when it comes to protecting the value of security backing a mortgage loan.
The percentage of homeowners fully maintaining their property and making some improvements has increased significantly from 27 percent in 2008 to 45 percent in Q3 2013.
According to John Loos, FNB household and property sector strategist, during the recessionary period in 2008/9 and after that, low levels of maintenance on distressed properties had become problematic for the banking sector, because it effectively meant that in many cases homes had not held the value required to fully back the value of the mortgage loan.
However, the FNB Residential Maintenance and Upgrade Q3 2013 survey shows improvement in home maintenance levels since 2009.
Since 2004, estate agents surveyed reported a decline in the percentage of homeowners investing in their properties with a view to adding value.
This percentage was 3 percent of total homeowners in the areas of these agents by the first half of 2013, from the 43 percent at the beginning of 2004 and as at the third quarter of 2013, this figure is now 9 percent, explains Loos.
He notes that the percentage of homeowners fully maintaining their property and making some improvements has increased significantly from 27 percent in 2008 to 45 percent in Q3 2013.
The percentage of owners not improving but still fully maintaining homes, rose from levels of between 20 and 30 percent around the recession of 2008/9 to 39 percent of total in Q3 2013.
However, Loos notes the percentage of homeowners attending to basic maintenance recorded only 5 percent in 2013 – at the beginning of 2004, this was 6 percent rising to 34 percent in Q1 2009.
But the percentage of homeowners allowing their homes to get run down remains a small percentage, hovering near to the 2 percent mark, he says.
Loos points out that the improvement in levels of home maintenance and improvements may have had an impact on the growth rate in retail sales for Hardware, Paint and Glass Products in real terms, which recorded 6 percent year-on-year (y/y) for the 3 months to September 2013 from 0.4 percent growth rate as at February.
According to Statistics South Africa Q3 2013 data, estate agents surveyed indicated a significant increase in additions and alterations recorded by major municipalities.
In Q3 2013, the y/y growth in square metreage of residential additions and alterations completed was 23.56 percent, while plans passed were 4.61 percent observed by agents in the form of value adding upgrades.
As to why owners undertake home improvements, agents surveyed by FNB still point to limited speculative building behavior.
In Q3 2013 the estimated percentage of homeowners making improvements in order to sell for speculative purposes rising from a lowly 3.5 percent of the total in the previous quarter to 8 percent (this was 24.5 percent in early-2006).
According to the survey, 72 percent still do it for their own use, while 19 percent do it because they can’t afford to buy elsewhere.- Denise Mhlanga
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