Another sign that South Africans are struggling financially

New data shows that home renovations in South Africa are on the decline as people save their pennies to ride out the flat economy.

The FNB Estate Agent Survey has begun to record a mild weakening in agent perceptions of home maintenance and upgrades, following a broad improving trend through 2013 to late-2015.

Using a 2-quarter moving average to smooth the data mildly, FNB depicts agent perceptions regarding levels of home maintenance, using five categories/levels of home maintenance and upgrades in the survey.

The ‘top’ level is that of “Value Adding Home Upgrades”.

“After a noticeable improvement in this category through much of 2013 to 2015, recent quarters’ surveys have begun to show a tapering off in the percentage, from a high of 26% in the 3rd quarter of 2015 to 22.5% in the 2nd quarter of 2016,” noted property sector strategist at FNB, John Loos.

The start of a decline in the level of these costly value adding upgrades is plausible in the current time of almost recessionary economic conditions, and with interest rates gradually rising, the analyst said.

“Consumer Confidence remains extremely low in 2016, as consumers become increasingly aware of, and concerned about, the weak economic and unstable socio-political environment. One should expect these consumer concerns to drive a more conservative approach to home investment.”

The next level ‘down’ is the percentage of homeowners “fully maintaining their property and making some improvements”. This category has also seen a slight decline of late, from 42.5% for the 2 quarters up to an including the 4th quarter of 2015, to 39% by the 2nd quarter of 2016, FNB said.

The level below that, namely the “percentage of owners not improving but still fully maintaining homes”, continues its decline, from a high of 37.5% back in the 3rd quarter of 2014 to 21% by the 2nd quarter of 2016, the financial services firm said.

This all translates into a recent rise in the category that one would always like to see being low, i.e. the “percentage of homeowners attending to basic maintenance only”, a level which in effect means the home will ‘go backward’ over time, said Loos. This estimated percentage was 7.5% for the 2 quarters up to an including the 4th quarter of 2015, but has risen to 17% by the 2nd quarter of 2016.

Those owners allowing their homes to ‘get run down’, in the areas surveyed, returned a fairly insignificant 1% in the 2nd quarter, FNB said.

In prior quarters, FNB had previously said that the decline in the top “upgrade-related” category, but not yet at that stage in the ‘bottom’ basic maintenance or “letting home get run down” categories, pointed to the household sector having begun to run into financial limits, causing a more conservative spending approach, but not yet experiencing a noticeable increase in full blown financial stress.

However, the more recent start of a rise in the lower category “only attending to basic maintenance”, suggests some rise in the levels of financial stress too, the bank said.

The decline in the highest three categories of home investment, “Value adding upgrades”, “Maintaining and making some improvements”, and “Not Spending but still maintaining homes”, in recent quarters has contributed to a 3-quarter decline in the FNB Home Investment Confidence Indicator.

A settling down in the level of home investment, after prior strong improvement, may also have become evident in real sales growth of Hardware, Paint and Glass Retailers, FNB said.

“In past years, this retail sales category has been one of the strong growth areas of retail, as households increased their home investment levels. But the rate of growth has broadly stagnated since a year ago,” loos said.

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Another sign that South Africans are struggling financially