19 Sep 2013
The FNB Estate Agent Survey points to improved home maintenance levels.
According to the bank survey, during the financial crisis of 2008/9, and in the aftermath, the low levels of maintenance on distressed properties had become a problem for the banking sector, because it effectively meant that in many cases homes had not held the value required to fully back the value of the mortgage loan.
However, this has since changed as agents now report an improvement in the levels of home maintenance.
Writing in the report, John Loos, FNB household and property sector strategist explains that since 2004, estate agents have reported a decline in the percentage of homeowners “investing in their properties with a view to adding value”.
This was 3 percent of total homeowners from the 43 percent as at the beginning of 2004 at the height of the boom.
Loos points out that value adding upgrades aside, things have improved significantly, noting that the percentage of homeowners “fully maintaining their property and making some improvements” has increased to 43.5 percent in the first half of 2013 from 27 percent in 2008.
The percentage of owners not improving but still fully maintaining homes has risen between 20 and 30 percent around 2008/9 to 39.5 percent in the first half of 2013.
According to Loos, the percentage of homeowners attending to basic maintenance only increased significantly around the time that banks’ non-performing home loans were skyrocketing, from 6 percent at the beginning of 2004 to 34 percent as at the first quarter of 2009 and declined to 11.5 percent by the first half of 2013.
Many of these homeowners have moved to higher levels of maintenance while those homeowners allowing their homes to “get run down” remain a small percentage of nearly 2 percent.
Loos points out that home investment confidence has improved when one looks at the results, with many homeowners not improving but still maintaining homes and maintaining property and making some improvements.
“The noticeable renewed increase in these two categories of home investment since around mid-2012 may have had an impact on the growth rate in retail sales for hardware, paint and glass products in real terms, which recorded 5.2 percent year-on-year (y/y) for the 3 months to June 2013.”
On why homeowners undertake home improvements, agents surveyed say the estimated percentage of homeowners making improvements were doing that in order to sell/for speculative purposes (3.5 percent of the total from the 24.5 percent estimate in early-2006) and 74 percent did it for their own use, while 22.5 percent do it because they “can’t afford to buy elsewhere”.
Loos adds that the homeowner investment market would seem to be rational currently with very little in the way of short-term speculative behaviour, with most improvements being done for own use by owners. – Denise Mhlanga
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