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Monday Feb 19, 2018

Secondary home-buying down

Secondary home buying is being put on the backburner as South Africans continue to struggle with the economic climate, the latest FNB Estate Agent Survey for the fourth quarter of 2017 has revealed.

Even though these purchases have not "fallen through the floor", the latest survey has pointed to their continued decline.

However, as general sentiment and leading economic indicators appear to be improving, FNB's John Loos says non-essential secondary home- buying "may improve slightly" this year.

"In the tougher economic times of recent years, it was arguably to be expected that secondary home-buying would be placed more on the backburner by many, given its non-essential nature. And as 2017 progressed this appeared increasingly to have been the case."

According to the 2017 Q4 survey, secondary residential property-buying reached a multi-year high of 14.47% of total home buying back in the first quarter, the highest estimated percentage since the end of 2009. Since then, the estimate has declined for three consecutive quarters to reach 11.99% by Q4 of 2017.

"These levels are far below the pre-2008 boom levels, which exceeded 20% at times," Loos says.

The buy-to-let category, the main segment of secondary home-buying, showed a slight increase on Q3's 8.23% of total home buying, to 8.55% in the final quarter. But the second half of 2017's average of 8.4% remained lower than the first half of the year's 9.7%.

"This meant a continuation of single-digit buy-to-let buying estimates, which have been a feature for most of the time since 2010, and these are levels far below the above-25% estimates seen back in 2004 at the height of the housing boom."

Loos says agents pointed to a slightly higher estimated level of investment properties being sold due to their having achieved lower-than-expected investment income, expressed as a percentage of total home selling.

But it goes further, he adds. "We did see a slight rise in the estimated percentage 'sold below previous purchase price' during 2017, from 3.25% average for 2016 to 6.5% average for the entire 2017. We also saw an increase in the estimated percentage being 'sold at purchase price' and not above, from 16.75% for 2016 to 22% for the entire 2017."

This translates into a rise in the percentage of homes being resold at either purchase price or below, from 20% in 2016 to 28.5% in 2017.

Despite this, there is a rise in the number of investment buyers, says Pam Golding Properties chief executive Andrew Golding.

"Increasingly South Africans, including first-time buyers, are reflecting a growing desire firstly to own their own homes and secondly, to invest in property not only for a sound medium to long term capital investment, but also to secure a steady rental income stream."

This investment type is also favoured during times of economic and political uncertainty because it is a real, tangible asset.

"Major investment in Cape Town CBD... is a serious commitment which suggests massive confidence in the future of these areas. The Western Seaboard has been one of the fastest-growing areas in the Cape in the past 15 to 20 years, with the emergence of suburbs such as Century City, Parklands and Sunningdale.

"The Century City, Royal Ascot and Big Bay developments are in secure environments and are about 80% developed. Resales on these developments are very active and sellers are receiving a good return."

Nationally this year buy-tolet investors, as well as firsttime buyers and repeat buyers scaling down, are expected to drive the demand for properties at the low end of the market, such as in the R400 000 to R600 000 price range, adds Berry Everitt, chief executive of the Chas Everitt International property group.

Bonny Fourie
Weekend Argus (Saturday Edition)

Independent Property appears every Saturday in the Weekend Argus

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