South African property owners are selling up – desperately looking for service delivery

 ·4 Apr 2024

South African homeowners are desperately looking for decent service delivery in the country, with a desire for improved utility and municipal services topping the list of reasons to move for the fifth consecutive quarter.

This was revealed in the latest FNB Property Broker Survey for the first quarter of 2024.

The survey polls commercial property brokers in major metros – Johannesburg and Ekurhuleni (Greater Johannesburg), Tshwane, eThekwini, Cape Town and Nelson Mandela Bay – to gauge sentiment and influencing factors in the property market.

Respondents are asked to present their views on key factors influencing “movement and sales activity” within the Owner-Occupied Property market – a specific focus is estimating the share of transactions attributed to various reasons for sale.

The cumulative percentage exceeds 100%, as property owners might relocate or sell for multiple reasons. “It isn’t an exact science, therefore, but gives a broad picture,” said FNB property strategist John Loos.

Quarter 1, 2024

Selling to look for more reliable utilities/services (like electricity and water or well-maintained infrastructure) has been the key motive for selling since the first quarter of 2023.

The current share of transactions citing this reason is at 43.7% – up from 37.5% in Q4 2023, but lower than the peak of 49.3% in Q1 2023.

Graphic: 1st Quarter 2024 FNB Property Broker Survey

“We believe that various infrastructure and services deterioration in various areas and regions has been driving this,” said Loos.

The late-2022 surge in load shedding is seen as the likely key factor in the early-2023 spike. Loos said that this motive began to diminish after this, which they had suspected had to do with “less load shedding.”

However, the recent increases indicates that the cause is not limited to just load shedding.

“South Africa’s mounting water issues and other services/infrastructure shortcomings may be playing a significant role too,” said Loos.

Graphic: 1st Quarter 2024 FNB Property Broker Survey

Another key driver is selling due to financial pressure, as people search for more affordable alternatives. Although, this was perceived to be mildly lower in the previous quarter, declining from 30.9% to 26.69%.

“We had expected an increase in this motive’s prominence, given a likely lagged financial impact on many companies’ finances from interest rate hiking,” from the previous year, said Loos.

“This is not to say that financial pressure hasn’t intensified in recent years – it may well be that the surge in the search for better local government and utilities-related services and infrastructure may be ‘drowning out’ this motive somewhat,” added the property expert.

Another potential indicator of the easing or tightening of financial constraints is the percentage of selling to relocate to “bigger and better premises”, which saw a mild decline from 21.58% to 19.15%.

“This renewed decline would suggest that our earlier speculation, based on a previous rise in this motive’s prominence, that the apparent end of interest rate hiking in May last year may have been leading to some mild improvement in sentiment in this market, may have been premature,” said Loos.

Overall, Loos said that the survey shows no clear direction in terms of selling motives related to financial pressure or constraints.

Later in 2024, “FNB expects some mild interest rate cutting… [which is expected] to lead to some decline in the financial pressure-related selling motive, and possibly a rise in selling in order to upgrade to a better premises, or to relocate closer to a business’ market,” Loos said.

Read: These are the 5 suburbs rich South Africans want to live in

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