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Watch the 'selling to emigrate' category - property expert

Jan 13 2016 21:30
Carin Smith

Cape Town - The current stagnating performance of the South African economy and heightened social tensions, make the category of home owners "selling in order to emigrate" the one to watch, according to John Loos, household and property sector strategist at FNB Home Loans.

He regards this category as an important "sentiment barometer" to watch, given what he calls "the current period of weak confidence in South Africa, influenced by a multi-year economic growth stagnation and heightened social tensions".

This category has seen its percentage of total sales edge up slowly since late-2013, but remains fairly modest still, in his view.

The category of "selling in order to emigrate" as a percentage of total home selling was estimated at 4.4% in the fourth quarter of 2015 as indicated by the latest FNB Estate Agent Survey.

This is higher than a low of 2% of sales late in 2013, but remains far below its 20% peak late in 2008 during the recessionary market at the time.

"While the current climate could be expected to lift emigration-related selling, a mediocre global economy, and extremely high property values in some of the key emigration destinations, possibly serves to contain the pace of emigration somewhat," said Loos.

He said the impact of the economic slowdown doesn’t appear to have affected the level of selling in order to relocate to other parts of South Africa just yet.

At 9% of total selling in the fourth quarter 2015 survey, this percentage remains elevated on the 6% low reached back in 2009.

"This was around the last recession and greatly limited new employment and business opportunities at the time," according to Loos.

Another category of interest to watch is older people downscaling to smaller properties.

"A huge percentage of 'oldies' continue to downscale to smaller properties, not necessarily due to financial trouble, but perhaps feeling the cost of running a 'large' home, which is no longer seen as being that necessary - as in the case of sellers downscaling due to their stage of life," said Loos.

They are usually sellers who are getting older or whose offspring have left home.

According to Loos this creates a perception of financial limits being reached, which could set further growth limits on the residential market from here on.

In his view this group of older home owners still sees the market as a good seller’s market and are making use of the window of opportunity to offload larger properties.

"We would anticipate some decline in this percentage in the not too distant future, however, as some adopt a 'hold' approach in weaker market times," said Loos.

He said this group could also be considering cost escalations associated with a large property, including security costs and municipal rates and tariff increases, insurance, maintenance and running costs.

fnb  |  money  |  sa ecnomy  |  property

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