During the property boom years, homeowners who felt the itch to move could do so far more easily than the property owners of today.
First-time home buyers, in particular, are hanging onto their properties for longer. Lightstone Property data from 2017 shows that first-time property owners are hanging onto their properties for around 12 years, whereas during the property boom years between 2003 and 2005 the average was seven years. Repeat owners are holding onto their properties for between seven and nine years, as opposed to three years during the boom years.
John Loos, property strategist at FNB, says the higher cost of selling and transferring properties is one reason homeowners are hanging onto their properties longer. “Since 2000, property values have escalated by well over 300%. Disposable incomes have not gone up at the same rate, which makes purchasing a property less affordable for the majority of people. Then you have estate agents’ commissions of around 5%, transfer duties, conveyancing and other fees associated with the purchase of a property, which makes it more expensive to buy.”
The speculative boom in properties came to an abrupt end after the financial collapse of 2008, although South African property values were shielded to a large extent from the kind of price corrections evident elsewhere in the world. “A decade ago a significant number of people were buying and flipping properties within one or two years to make a profit, or to upgrade. Those days are gone. Disposable incomes as a percentage of property prices were better 15 or 20 years ago. There’s been no big price correction in the property market as yet, and banks are stricter in lending money compared to the boom years, which makes affordability a key issue in the decision to hold onto properties longer,” says Loos.
FNB’s latest Estate Agent Survey canvassed estate agents on the reasons clients were selling their homes. Four years ago, roughly 20% said they were selling to upgrade. Today the figure is 10%, which Loos says is indicative of the deteriorating economic climate. Also on the increase is the number of people selling due to financial pressures, now accounting for 16% of sellers – although this is substantially lower than the 34% at the peak of the financial crisis in 2009. Other reasons for selling are emigration and downscaling due to ‘life stage’ – generally, older people moving into smaller, more secure residences.
The residential property market is valued at R5.3 trillion, with a total of 6,6 million residential properties. Roughly a third of these are bonded to the banks.
Banking Association SA (Basa) figures from 2016 show that roughly 4.4% of bond accounts are in default, though fewer properties are being sold as a result of sale-in-execution orders granted by the courts. Roughly two-thirds of scheduled sales in execution were cancelled before the auction date, suggesting that banks are being more accommodative towards customers in default.
“The property boom years are behind us, and I think the trend of people staying longer in their houses is here to stay for the foreseeable future,” says Loos.
Data from Lightstone shows Standard Bank steadily increasing its share of residential mortgage advances, while Absa has shown a slight decrease in advances since 2013. FNB, Nedbank and Investec have all shown modest growth in their mortgage books since 2013.