Reasons for Selling - What this tells us (The Bugle)

The reasons for selling, at any given time within our property market cycle, can provide us with an insightful perspective of where the property market is at and where it is heading. FNB measure this through their quarterly estate agent survey, the latest findings of which were published on 19^th October 2012. 

The categories of reasons for selling are expressed as a percentage of sales and ranked according to the third quarter figures: (1) Downscaling with life stage – 21%; (2) Downscaling due to financial pressure – 20%; (3) Upgrading – 16%; (4) Change in family structure – 15%; (5) Moving for safety and security reasons – 11%; (6) Moving closer to work or amenities – 8%; (7) Relocating within SA – 7%; (8) Emigrating – 3%.

Selling in order to downscale due to financial pressure remains stubbornly high at 20% but is significantly lower than its peak of 34% in the 2^nd quarter 2009. The positive aspect is that this means that these households are actively looking to reduce their debt exposure and rebuild their balance sheets. This does mean less expenditure in the short term but a healthier outlook from a more financially secure base in the medium to longer term. As many as 16% of sellers are looking to upgrade, which is significantly above the 2008/9 recession lows of around 7%. The net difference between those downgrading vs. those upgrading has narrowed substantially, which is positive and reassuring.

The reasons for selling, furthermore varies according to the income category of the seller’s, as measured by the average house price. High Net Worth individuals record lower percentages of selling in order to downgrade (currently 18%) than the middle to lower income sellers (currently 22-23%), but the gap has narrowed significantly since 2009 when the lower income segment peaked at 38%. 

We also note from the data that those sellers that are selling in order to downscale are becoming more inclined to buy something else as opposed to renting By the 3^rd quarter of 2012, 59% of these sellers were looking to buy a cheaper property, while only 41% were looking to rent as an alternate to ownership. It is interesting to note that Emigration selling is currently at a relatively low 3%. Foreign buyers of domestic residential property has shifted somewhat from the traditional Europe and UK based buyers, to African buyers, now estimated to be 21% of total foreign home buyers in SA. This is not surprising considering the weak Eurozone and UK economic performance.

(Author: Andreas Wassenaar, Published in The Bugle, 24Oct2012)