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
Characters remaining

    Latest Property News
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    • 20 Feb 2018
      A major shift in the ageing paradigm has precipitated an equally dramatic transformation in the retirement sector, with modern accommodation options worlds away from the conventional model.
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us