Johannesburg - The reasons given for selling residential property indicate that prospects for the market are positive.
Selling to upgrade was the reason given in 20 percent of total sales, according to the FNB estate agent survey for the fourth quarter of last year.
The figure is now only marginally behind the 21 percent of sellers disposing of their properties to downgrade in line with their life stage.
In the third quarter, 17 percent of sales were the result of upgrading and 23 percent were life-stage downgrades.
In addition, the percentage of people selling because of financial pressure declined to 14 percent in the fourth quarter from 16 percent in the third quarter last year.
The figure for financial pressure selling in the first three quarters of 2012 was constant at 20 percent before it began declining in the fourth quarter of that year.
John Loos, a household and property sector strategist at FNB, said last week that an analysis of the reasons for selling appeared to confirm that the residential property market was still at a relatively strong stage of the property cycle, which was the result of some gradual improvements in the financial situation of the household sector since the end of the 2008/09 recession.
“The improved financial situation is reflected in the declining trend in the percentage of sellers selling in order to downscale due to financial pressure,” he said.
However, Loos stressed it was important to warn against complacency because much of the improved financial situation of households was due to very low interest rates. The household sector remained vulnerable to interest rate increases because of high levels of indebtedness.
But Loos said the financial situation was relatively good for now and was perhaps also driving improved confidence.
He said improving confidence in the residential property market was better reflected in the rising trend of selling to upgrade, because this type of behaviour arose more through choice than necessity.
Loos said this continued the gradual trend that started in 2009 after this reason for selling hit a low of 7 percent early in that year.
Confidence in the market was also reflected by the high percentage of selling to downscale due to life stage, a motive that receded in tougher times because these sellers could wait it out for better times.
He added that increased confidence was perhaps also reflected in the 63 percent of financially stressed sellers downscaling due to financial pressure who were believed by agents to be intending to buy a cheaper property instead of renting.
Loos said that while this 63 percent estimate by estate agents was not significantly lower than 64 percent in the previous quarter, it remained much higher than the 49 percent estimate in the second quarter of 2011.
He said FNB did not see the low level of emigration selling – at 2 percent in the fourth quarter – as a sign of confidence or of positive sentiment.
“Rather we see it as a reflection of labour market weakness in certain developed countries which are known to be popular emigration destinations.
“While residential market confidence has been good of late, general sentiment in and towards South Africa has been battling a little,” he said. – Business Report