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Why South Africans are selling residential property
The percentage of residential properties being sold in South Africa because the owners are downscaling due to financial pressure, has increased, according to the latest FNB Property Barometer, released on Tuesday.
The estimated proportion of such sales jumped from 16% in the first quarter of 2019 to 19% in the second quarter.
For FNB this corresponds to its view that household finances are under pressure. Furthermore, of those who sell due to financial pressure, 60% now rather opt to rent rather than buy a cheaper property.
At the same time, this does not appear to have benefited the rental market yet, as vacancies of flats have continued to rise and rental inflation is still muted, according to the report.
Overall, however, the biggest reason people are selling residential property in South Africa (23%), is still that they are downscaling due to their stage of life.
As for emigration-driven sales, these have become more prominent over the past two years, the report found.
According to estate agents, these are estimated to have steadied around 13.4% of sales in the second quarter of 2019, marginally down from 14.2% in the first quarter of 2019.
Selling due to emigration appears to be more prominent in the higher end of the market, although there are indications that it has spilled over to the lowest ends of the market as well.
The increase in sales in the lower and middle ends of the market could, in part, be explained by upper-income owners disposing of their investment properties, according to the report.
Supply and demand
The FNB Market Strength Index estimates the residential property market to be moderately oversupplied, particularly in the middle to upper income areas.
By property type, the index indicates that sectional title properties are over supplied, while demand and supply of freestanding properties are relatively evenly balanced.
The average time of homes on the market improved to 14 weeks and 1 day, from 15 weeks in the fourth quarter of 2018. According to the report, this could be because buyers are rushing to take advantage of bargains.