Financial pressures are forcing 20% of property owners to sell their homes and downscale found FNB when it surveyed estate agents.
“Although the estimated percentage of sellers ‘selling in order to downscale due to financial pressure’ is significantly lower than the second quarter 2009 peak of 34% of total selling, the third quarter 2012 percentage of 20% of total sellers downscaling due to financial pressure remains in my books a very high one. And the percentage remains stubbornly sticky around the 20% mark over the past year or so,” said FNB’s household and property sector strategist, John Loos, in a statement.
Loos viewed this as a positive move pointing out that it showed homeowners were taking proactive steps to reduce their financial debt obligations in order to rebuild the household balance sheet prior to defaulting on debt. But he warned that many could still be ill-equipped to deal with other pressures: “The figure continues to suggest that South Africa’s household sector remains far from ready to take on the next interest rate hiking cycle when it comes.”
The survey also revealed that not everyone was under financial pressure and that 16% of sellers as at the third quarter of 2012 sold their homes in order to upgrade. “The question, though, is how financially strong are these sellers that are upgrading? Or is it in many instances the abnormally low interest rates currently at play?” asked Loos.