FNB has released its latest property barometer, looking at the reasons why South Africans are choosing to sell their homes.
According to the FNB’s John Loos, over the past year thee main factors have led to an improving financial stress situation, meaning fewer South Africans are having to sell their homes due to affordability reasons.
“The three positive contributing factors are, first and foremost, an ongoing decline in the household sector’s debt-to-disposable income ratio; secondly, mildly improving economic growth which strengthens Household Sector Disposable Income growth; and, thirdly a mild reduction in interest rates in 2017 and 2018 to date,” he said.
As a result, financial stress levels in the housing market thus remain very much ‘under control’, said Loos.
“It must be understood that a part of the reason why these stress levels remain moderate relative to a decade ago is due to the most recent interest rate hiking cycle being far more moderate, with prime rate peaking at 10.5% in January 2016 as opposed to 15.5% back in mid-2008,” he said.
“However, arguably a very significant difference between now and a decade ago has also been a dramatic drop in household sector vulnerability, due to a major decline in the level of indebtedness as measured by the household sector debt-to-disposable income ratio.
“As at the 1st quarter of 2008, the debt-to-disposable income ratio reached an all-time high of 87.8, implying that the household sector was at its most vulnerable to interest rate moves in recorded history.
“By the end of 2017, this ratio had declined very significantly to 71.2, lowering that vulnerability considerably since 2008,” he said.
Reasons for selling
Based on FNB’s data, ‘downscaling due to financial pressure‘ was only the the fourth biggest reason why South Africans sold their homes in the first quarter of 2018 (12.1%).
By contrast, choosing to ‘downscale due to their life stage‘ is still by far the biggest reason why South Africans are selling their homes (25%), followed by a ‘change to the family structure‘ (15%), and ‘upgrading‘ (13%).
Factors which are typically seen as ‘negative’ reasons for selling were notably far down the list, with safety and security (11%) and emigration (7.4%) named as the fifth and seventh biggest reason respectively.
This ranking changes only slightly when looking at individual income groups, with lower-income households naming ‘upgrading’ as the biggest reason why they were selling their homes (18%), while High Net Worth Individuals (HNWIs) named ‘downscaling‘ as the biggest reason why they were selling (29%).