South Africans cautious about buying property – index

Johannesburg – Existing home owners and potential home buyers are holding off on property plans until there is more certainty about the economy and its impact on their finances, research revealed.

Absa’s Homeowner Sentiment Index (HSI), which surveyed a sample of 1 000 existing and prospective home owners in major urban areas in the country, indicates sentiment levels have been on a decline since the end of 2016. Absa expects the index to remain under pressure for the remainder of the year.

Consumers started 2016 with a positive outlook on the residential property market, sentiment improved until the third quarter of the year, the report said. But as economic activity deteriorated in the last part of the year, consumer finances took a knock which dropped confidence levels. By the last quarter of 2016, 81% of respondents were positive about property market conditions.

This dropped to 75% for the first quarter of 2017, following the credit downgrades. By the second quarter the index was at 74%. Respondents indicated that they were concerned about the economy, politics and the credit downgrade, according to the report.

The survey measures the level of positive sentiment people have regarding property transactions, whether it be buying, selling, investing, renting and renovating property and market conditions. Absa detailed the views of consumers across each measure.

Buying sentiment

Buying sentiment dropped from 71% in the last quarter of 2016 to 60% in the first quarter of 2017. It has since improved to 64%.

Of respondents 32% believe property is a good investment, and 31% say prices are low and there are bargains.

A third of respondents said they are concerned about the recession which is influencing their decision to buy. Two thirds of respondents were negative about whether this is an appropriate time to buy.

Selling sentiment

Selling sentiment dropped from 48% in the last quarter of 2016 to 42% in the first quarter of the year. It has since declined to 34%.

About 41% of respondents say they are not selling because prices are low and they won’t get the price they want. About 13% are not selling because of the recession. Only 11% believe property is a good investment.

Investing sentiment

More than three quarters (78%) of respondents are positive about investing in property. This is up one percentage point reported in the first quarter of the year. But this is still lower than the 83% reported in the fourth quarter of 2016.

About 43% of respondents say it is a good time to invest in property, 18% believe prices are low and there are bargains in the market. And 13% believe there is a demand for rentals.

But 20% say now is not a good time to invest in property because of the state of the economy.

Renovating sentiment

About 68% of respondents are positive about renovating property, up from 66% reported in the previous quarter but still lower than figures reported for the second half of 2016.

A total of 75% of respondents believe that it is an appropriate time to renovate and do alterations to their property. This is because 40% of respondents say renovations add value to their property. And 18% believe it is good to constantly upgrade property.

Only 36% of respondents are not renovating because of the cost associated with it, and 11% are discouraged by the economy.

Buy versus rent

About 68% of respondents believe it is better to buy than to rent. This is because a third of respondents say it is better to pay off a bond than to rent and pay off someone else’s bond. Less than a quarter (24%) say the prices are relatively low and there are bargains. And 21% believe property is a good investment.

Of the 32% who believe renting is better, 19% believe renting is cheaper, 11% say property prices are relatively high and 8% are concerned about the economy. Only 8% rent because it is a flexible option and does not require a long term commitment.

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