select
|

Home maintenance and upgrades increase in the second quarter of 2015

(by John Loos*)

During the first half of 2015, the FNB Estate Agent Surveys showed a further improvement in agent perceptions of home maintenance and upgrades, continuing a noticeable improving trend that dates back to late-2012.

Using a two-quarter moving average to smooth the data mildly, we depict agent perceptions regarding levels of home maintenance, and we have five categories/levels of home maintenance and upgrades in the survey.

The top level is that of value adding home upgrades. After a very weak period around 2011 to 2013, the survey respondents have more recently reported a rising trend in the percentage of these homeowners investing in their properties with a view to adding value through 2014 and the first half of -2015.

From a lowly 3 percent of total homeowners estimated to be doing value adding upgrades in the first half of 2013, we have seen this percentage rise to 21 percent by the second quarter of 2015. This remains far from the 43 percent achieved back in 2004, but is nevertheless a strong number, and is the highest estimated percentage since the third quarter of 2008.

The level of these costly value adding upgrades has understandably taken the longest to recover of the five categories, because the first priority, following the financial shock of the 2008/9 recession and interest rate peak, was for many households merely getting standard home maintenance restored to full levels in cases where this had been deferred.

The next level down is the percentage of homeowners fully maintaining their property and making some improvements. This category appears to have settled, no longer showing a rising trend. However, this is not necessarily due to home owners shifting into lower levels of home investment but possibly due to a portion shifting up into the value adding upgrades category. In the first half of 2015 this category recorded an estimated percentage of 41 percent, which is the same as its average for 2014 as a whole.

The next level down, namely the percentage of owners not improving but still fully maintaining homes, showed a decrease from a previous quarter’s 29 percent to 27 percent in the second quarter of 2015, the third successive quarter of decline.

This all translates into a slight second quarter increase in the category that one would rather want to see declining, that is, the percentage of homeowners attending to basic maintenance only, which in effect means the home will deteriorate over time. This percentage rose from 9.5 percent in the first quarter of 2015 to 10.5 percent in the second quarter.

Those owners allowing their homes to get run down, in the areas surveyed, returned a fairly insignificant 1 percent in the second quarter.

Although the second highest category, maintaining and making some improvements, saw its percentage decline slightly, together with value adding upgrades, the second quarter saw a rise in the combined percentage of the top two levels of home investment, and this has resulted in a further improvement in the overall perceived level of home maintenance and upgrades.

This is reflected in a further second quarter strengthening in the FNB home investment confidence indicator.

This indicator is represented on a scale of -1 to +3. The indicator has shown a steady increase over the 2013 to 2015 period, to reach a level of +1.74 in the second quarter of 2015.

This first quarter level is the highest level since the first quarter of 2007.

The rising trend in home maintenance levels continues to be seemingly reflected in the numbers for retail sales for hardware, paint and glass product retailers. For the three months up to and including April, real sales in this category of retail grew by 9.7 percent year-on-year, far outstripping overall retail sales growth.

This category of retail has outpaced total retail sales growth through much of the 2013 to 2015 period, and this is believed to be a result of the recovery in home investment levels in recent years.

Finally, with regard to the reasons why people undertaking home improvements are doing it, our agent survey still points to limited speculative building behaviour, to the tune of 9.5 percent of total home improvements.

This remains low when compared to the 24.5 percent estimate back in early-2006. The overwhelming majority (75 percent) still do it for their own use, and 14 percent do it because they can’t afford to buy elsewhere.

The home maintenance and upgrades market remains vastly improved from 2008/9 levels, and as at the second quarter of 2015 it appeared to remain on its steady strengthening path which it has been on since around 2013.

Agents do perceive a very slight increase in the only attending to basic maintenance category, but it is too little and too early to be of concern. More significant is their perception of further increase in the top level of home investment, namely value adding upgrades, along with further increase in the top two levels combined, namely value adding upgrades and maintaining and making some improvements. This keeps the overall home investment confidence indicator rising.

Given what has recently happened to consumer confidence, though, near term trends in home investment will be interesting to watch. The FNB-BER Consumer Confidence Index for the second quarter of 2015 dropped to its lowest levels in around 15 years, and this could signal a more cautious approach to consumer spending levels in general.

In addition, we expect interest rate hiking to resume in the near term as CPI inflation accelerates back up to near to the SARB upper target limit.

When tougher financial times arrive, due either to a weak economy or rising interest rates, Home maintenance and upgrades are often deferred to a later date, as more pressing expenditure pressures take preference.

All of this could possibly mean that the upward trend in home maintenance and upgrade levels could slow, or come to an end, later in 2015. So far so good, though. The situation continues to appear healthy, with good levels of maintenance, significant upgrades, and not a lot of speculative activity.

* John Loos is the household and property sector strategist at FNB Home Loans.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
    • 20 Jun 2018
      The average size of bond granted in SA has grown 7,7% in the past 12 months to R934 000, according to BetterBond, the country’s biggest bond originator.
    • 19 Jun 2018
      In the current market, letting out a property can be a good option as rental demand remains strong, especially in the northern suburbs of Johannesburg. This is according to Chris Renecle, MD of Renprop. However he says that before homeowners let their property out, there are five key points they should make sure are covered before they market the property for rent and sign any lease agreements.
    • 19 Jun 2018
      The Capetonian dream is to live by the ocean with the iconic mountain making an appearance somewhere in the horizon. But, that dream comes with a hefty price tag that many simply cannot afford. But, should you venture some kilometres out of the city centre, entirely new realms of beachside bliss await you …
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK