FNB reported that the estimated percentage of secondary home buying had risen to 14.47 percent by the first quarter of this year after slumping to a low of 10.84 percent in the second quarter of last year from the multi year high of 14.14 percent of total home buying in the fourth quarter of 2014.
FNB household and property analyst John Loos said the estimated percentage of home buying believed to be secondary home buying had increased mildly, as had certain of FNB’s other residential demand side data, but it remained too early to draw any strong conclusions.
Loos said that secondary home buying was typically more cyclical than primary residential buying, largely because of its non essential nature, but a rise in the estimated percentage of secondary home buying would be reflective of an improving economic or interest rate period.
He said that the increase in secondary home buying was interesting, given the very flat economic period in recent years typified by very low economic growth and weak consumer confidence.
But Loos also stressed that interest rate hiking had stalled a year ago, which could gradually have been a boost to confidence, while there had also been speculation in some circles about possible interest rate cuts, although this was not FNB’s core view.
FNB said buy-to-let home buying remained the major driver of secondary home demand and accounted for 9.5 percent of total home buying in the first quarter of this year compared to 8.41 percent in the previous quarter and multi year low of 7.52 percent in the second quarter of 2016.
The bank said the estimated percentage of holiday home buying rose to 3.77 percent of total buying in the first quarter of this year from the multi year low of 1.77 percent in the fourth quarter of 2015 while buying a home for a family member or relative to live in had remained at about 1 percent.
It said deeds data indicated that secondary properties accounted for an estimated 16.24percent of total individually owned properties in January this year compared with 16.2 percent.
Loos said this small but positive year-on-year growth of 0.23 percent in January this year compared to the slightly negative growth of 0.24 percent in the same month last year.
He said they did not expect “fireworks” in the secondary homes market.
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“While there certainly have been signs of economic improvement to come, South Africa’s myriad of structural economic constraints lead us to expect an economic growth improvement in 2017 to not far above 1 percent, which would remain a mediocre number,” he said.
Loos added that while the shift from upward to sideways movements in interest rates in March 2016 was positive for buyer sentiment, they did not anticipate rate cuts this year and the personal effective income tax rate continued to rise.
“All in all, therefore, South Africa’s household sector is likely to remain constrained for the foreseeable future,” he said.