At least 22 percent of property sellers were downscaling due to financial pressure with 27 percent of sellers in the lower income end of the market.

At least 22 percent of property sellers were downscaling due to financial pressure with 27 percent of sellers in the lower income end of the market. Of the total percentage of these sellers, 20 percent are High Net Worth (HNW) segment, 22 percent upper income, 21 percent middle income and 27 percent from the lower income end of the market.

Of the total percentage of these sellers, 20 percent are the High Net Worth (HNW) segment, 22 percent upper income, 21 percent middle income and 27 percent from the lower income end of the market.

This is according to the FNB Home Buying Estate Agent Survey that revealed that although a high number of sellers were recorded in the total percentage of sellers downscaling due to financial pressure, this segment has healthy fundamentals in terms of demand and supply when compared to the HNW segment.

The lower end of the property market (with average value of R679 000) showed the strongest demand-supply fundamentals of the four suburban income segments in 2011.

The segments are HNW areas (average price R3.7 million), upper income areas (average price R2.2 million), middle income areas (average price R1.2 million) and lower income areas (average price of R679 000).

Writing in the report, FNB Home Loans property strategist, John Loos says the lower income segment recorded the highest average agent demand rating for the year and was the only segment to see its demand rating for 2011 at a higher level than 2010.

Lower priced homes average estimated time on the market did not rise in 2011 when compared to 2010.

Of the sellers downscaling with life stage, HNW recorded the highest number of sellers at 25 percent, upper income 23 percent, middle income 20 percent and 17 percent were from the lower income end of the market.

The report indicated that of total percentage of sellers emigrating, 5 percent from each comprise the HNW and upper income segments while 3 percent for each was from the middle and lower income segments.

Eight percent of the HNW segment sold to relocate within South Africa, 6 percent was from the upper income earners and 8 percent each were the middle and lower income earners.

Sellers were also upgrading in 2011 according to the report, with 15 percent of sellers coming from HNW and 15 percent from upper income segments, while 17 percent for each were sellers from the middle and lower income segments.

A number of sellers who moved for safety and security reasons were HNW (10 percent), upper income (11 percent), middle income (11 percent) and lower income (10 percent).

The change in family structures saw 12 percent selling from HNW, 13 percent from the upper income segment, 11 percent from middle income and 11 percent from the lower end of the market.

A number of sellers moved for safety and security reasons HNW (10 percent), upper income (11 percent), middle income (11 percent) and lower income (10 percent).

Some sellers were reportedly selling in order to move closer to work or amenities and of these, 6 percent were HNW, 6 percent upper income, 9 percent middle income and 7 percent lower income earners.

Loos explains that through 2010 and 2011, the HNW segment demand rating has been significantly weaker than the other three segments.

FNB’s perception is that the HNW segment is more economy-dependent, with high net worth households receiving greater portions of their overall incomes from business/investment income and discretionary remuneration, which perform weaker in tougher economic times such as those of the past four years.

“Tough financial times in the household sector as a whole should also be expected to drive demand towards the more affordable parts of the market, also benefiting the lower end more”

He says increases in municipal rates and utilities tariffs bills will affect the top end of the market far more severely.

In 2012, the lower end of the property market will continue to perform better than the high priced segment.

The bank emphasises that all segments are expected to see something of a slowdown in 2012 noting that the consumer price inflation rate will remain above the 6 percent target limit for the entire year.

The survey revealed that the lower income segment homes average estimated time on the market remained unchanged at 13.8 weeks while the other three segments showed an increase.

The middle income averaged 15.5 weeks (13.5 weeks in 2010), upper income Segment 18.4 weeks (15.4 weeks in 2010) and the HNW 20.6 weeks (17.8 weeks in 2010).

Loos says higher income areas normally do have a higher average time on the market than lower income ones.

“The upper income and HNW segments appear to have shown a more significant increase in average time on the market in 2011 than the other two segments.”

He says when it comes to financial strength the middle income segment with average price around R1.2 million took the honours when comparing the levels of selling in order to downscale due to financial pressure with selling in order to upgrade, between the different segments.

The survey revealed that the total percentage of 2011 sales of people downscaling due to financial pressure was 22 percent, of that, HNW

FNB says the Affordable Segment which includes a group of lower-priced metro areas recorded average price was R375 460 in 2011 with an estimated average price growth of 6.5 percent in 2011, higher than the 6.1 percent recorded for 2010.

In 2012, the lower end of the property market will continue to perform better than the high priced segment.

In 2011, the lower income value band (average price R726 943) grew by of 4.6 percent, the middle income areas (average price R1.110 million) grew 4.8 percent and the upper end metro suburbs (average price R1.87 million) rose by 5 percent.

Loos says higher segments tend to lack more in terms of pricing realism, implying that while price growth may have been slightly better for those properties transacting in the higher segments, much of the relative market weakness is seen in longer average times that properties stay on the market.

The luxury area price index (average price R2.89 million in 2011 with maximum price cut-off of R5 million) similar in average price to the HNW areas as defined by estate agents on average by -7.6 percent following a +2.9 percent rise in 2010.

Loos adds that the HNW segment has been the underperformer in the major metro housing market as this segment is less interest rate sensitive than the lower end of the market and less credit-dependent than the lower end. – Denise Mhlanga