Friday, December 14

Property sales due to emigration are increasing

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First-time home buying is decreasing, as is foreign buying, but emigration-related selling is now gradually growing.

First-time home buying is decreasing, as is foreign buying, but emigration-related selling is now gradually growing.

These are some of the trends FNB’s research has revealed this month, giving insight into what can be expected in the country’s property market.

First-time buying: this accounted for only 17.6% of total home buying nationally, lower than the 20.28% of the previous quarter and “well off” the high of 28% in the second quarter of 2014. This is the opinion of the bank’s property economist, John Loos.

“A broad multi-year decline in this percentage started in the second half of 2014, in response to gradual interest rate hiking from early 2014 to early 2016, as well as some years of economic growth weakness.”

However, while first-time buying levels are weak, Loos says they are better than those in 2008/9, when the recession saw levels at only 12%. 

Still, it does not appear these buyers are convinced about the improving economic conditions of 2018. 

It is possible though that last month’s interest rate cut may still “bring them out in greater numbers”.

Gauteng remains the best-performing region for first-time buyers with greater Joburg seeing figures of 21.59% for the past two quarters, and Tshwane metro “a massive” 30.75%.

eThekwini had a rate of 20%, Nelson Mandela Bay 10.5%, and Cape Town a “very low” 6.46%.

Loos predicts a national improvement of first-time home-buying this year. 

Foreign buying: these, including South African expats, have continued to decrease.

Using a two-quarter moving average in order to reduce quarterly volatility in the data, Loos says the estimate was 4.33% of total home buying for the last three months of 2017 and first three months of 2018.

A small percentage of FNB Estate Agent Survey respondents also said there was less foreigner buying in the first quarter of this year. Most though, at 87%, reported unchanged levels.

There has also been a decline in the number of buyers from the African continent, according to the survey.

“We have seen a multi-year decline in this percentage, from a 31% (of total foreign buying) high as at the first quarter of 2016 to 21.29% by the first quarter of 2018.

“This implies that African continent foreigner home buying has slowed faster than overall foreigner home buying in recent years, arguably a reflection of tougher African economic conditions in recent years,” Loos says. 

There was a slight increase in the estimates of expat buying of local property goes, although levels are still low.
Loos attributes the overall decline to dampened investor sentiment towards the country last year, caused by the economic stagnation, uncertainty over future economic policy, and ratings downgrades.

“However, we have started 2018 with a noticeably more positive mood in South Africa.”

Emigration-related selling: this selling accounted for only 7.4% of total home selling from January to March, an estimate unchanged from the final quarter of 2017. 

However, it has been gradually rising since the final quarter of 2013, when the figure was 2%.

Emigration-related selling was “fairly well spread” across all income areas, Loos says.

“There has been an improvement in general sentiment in South Africa. So why have we not seen decline in the highly sentiment-driven emigration-related home selling rate yet?

“Part of the answer is probably that there is a lag time before we begin to see the impact of improved sentiment on emigration-related selling, because emigration has a long planning phase.

“The relocation decisions of those first quarter 2018 emigration-related sellers were probably made a considerable time ago.”

This figure is expected to decline in the months to come, but not as far as 2% – not just yet anyway.

“Although sentiment appears to be greatly improved in South Africa early in 2018, economic performance plays a key role in emigration levels. And while we anticipate a mildly improved real economic growth rate of 1.8% in 2018, such a growth rate remains weak.”

Leisure home buying down 
Other findings of FNB’s research: 
Up:
Second home buying.
Buying properties for another person/household.
Asking price realism.
Down:
Holiday/leisure home buying.
Buy-to-let purchases – although investment homeselling is also low.
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