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More properties selling below purchase price

The percentage of properties sold below their original purchase price increased to 12 percent in January this year from 9.8 percent in August last year.

This is based on a residential-dominated sample compiled by FNB on the deed office property data registered by individuals for properties that exchanged hands for R10 million or less.

John Loos, a household and property sector strategist at FNB, attributed this increase of resale price deflation to the lagged impact of the hike in interests rates by a total of two percentage points from early 2014 and early last year and the stagnation in broad economic growth from 20112 until last year.

The estimated percentage of homes sold at prices below the previous purchase price had risen mildly in recent months.

But he said this should not be surprising, given that FNB?s average house price inflation had recently slowed year-onyear and it was to be expected to see some increase in the percentage of homes whose resale price had deflated.

FNB said of the 12.3 percent of homes that were sold in January this year for prices below their original purchase price, 2.9 percent were sold at zero to 5 percent below the previous purchase price and 9.4 percent at more than 5 percent below their previous purchase price. selling at more than 5 percent below their previous selling price.

Loos stressed the estimated 12.3 percent of homes that sold for less than the prior purchase price was still ?a relatively moderate? percentage by historic standards. Following the recession and interest rate peak of 2008/09, the estimated percentage of house resale price deflation peaked at 23.5 percent of homes sold in September 2009 with 20.6 percent

In the extreme property boom times prior to 2008, the percentage of properties resold at deflated prices dropped to as low as 2.3 percent of total sales by June 2006, he said.

The most recent estimate in January this year of 12.3 percent of total homes being resold at deflated prices was somewhere between what was historically ?a strong level? and what was ?a weak level?.

Of the 87.7 percent of residential properties that were sold in January this year for more than their previous purchase price, 73.6 percent were sold for 110 percent or more than the previous purchase price, 8.6 percent at 105 percent to 109 percent of their previous purchase price and 5.5 percent at 100 percent to 104 percent of their previous purchase price.

Although the rising trend in the incidence of resale price deflation was not yet at high levels, it was important for both mortgage lenders and homeowners.

| business report |


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