Home Maintenance and Improvements (The Bugle)

Home ownership comes with responsibilities. The on-going maintenance of a property is something every homeowner quickly realizes is essential for the maintenance and improvement of its value over time. The levels of investment in homes by owners is measured by FNB in their national estate agent survey and provides interesting insight into the state of the renovations market and the reasons homeowners make home improvements. From a banking point of view the levels of home maintenance are important as it protects the value of security backing a residential mortgage loan. Distressed properties typically lack maintenance and often deteriorate to such an extent that the cost of repairs exceeds the value of the property. Many people are surprised at the state of properties that end up for sale at a liquidation auction and the end result is bad for the original owner and the mortgage bondholder. The best strategy for anybody who finds themselves in a compromised financial position and unable to afford the bond repayments and maintenance requirements of a property, is to sell the property at whatever the market will pay as quickly as possible.

There has been a gradual increase in the level of home maintenance since the 2009 recession. The most important category in the survey conducted was the “percentage of home owners investing in their properties with a view to adding to its value”. From 2004 this category declined reaching a low of 3% in the first half of 2013. It has since improved to 9% as of the third quarter survey, but is critically below the 43% recorded in the beginning of 2004. The next level down is the category described as “fully maintaining their property and making some improvements”. We have seen a significant improvement here from a low of 27% recorded in 2008 to 45% in the 3^rd quarter of 2013. When money becomes tight people cut back on maintenance, as the result of doing this is often delayed and not immediately apparent. There is a period where you can get away with it, but the problem is then that it costs far more to bring the property back to the level it was at, had it been regularly maintained. 

The next level is described as the “percentage of owners not improving but fully maintaining homes”. Here we have seen a large improvement from approximately 20% in 2009 to 39% by the 3^rd quarter of 2013. The lower two categories are the “percentage of home owners attending to basic maintenance only” and those homeowners who are allowing their properties to “get run down”. The basic maintenance group increased from a low of 6% in 2004 to 34% as at the 1^st quarter of 2009 as the recession took hold and household disposable income evaporated. Since then it has receded back to 5% as at the 3^rd quarter of 2013. The owners permitting properties to become run down remains small at 2%. Stats SA publish the retail figures for the “Hardware, Paint and Glass Products” category and the improved attitude of homeowners to maintenance issues can be seen in the performance of the national sales figures of this category (up 6% in the 3^rd quarter) relative to total retail sales. The reason for making home improvements is overwhelmingly (72%) for the owner’s own use, while 19% do it because they cannot afford to buy elsewhere and 8% do it to sell for speculative purposes.

(Author: Andreas Wassenaar, published in The Bugle 11 Dec 2013)