Financial stress, divorce, empty buy-to-lets: Why so many SA property owners are selling

The percentage of homeowners selling their properties because of financial stress reached 23% by the third quarter of 2020.

According to the FNB Property Barometer November 2020, owners with properties below R750,000 accounted for 30% of sellers. Those offloading properties priced between R2,6 million – R3,6 million came in second, recording a high of 27%.

Financial pressure forcing many to sell

Siphamandla Mkhwanazi, FNB senior economist says sales as a result of financial stress increased between Q1 and Q3. In Q1 2020, those downscaling due to financial pressure accounted for 18%.

He says most of the properties were priced below R750, 000. Of those sellers, 62% indicated that they would be buying cheaper properties with 38% saying they would be renting.

Read also: It’s getting cheaper to rent property, with Western Cape most expensive – average rent snapshots

“We expect this to come down a bit as economic activity picks up. However, it is also possible that pressure builds up in higher priced brackets,” says Mkhwanazi.

He explains that if the labour market pressure spreads to white-collar occupations, this could affect the high end of the market. So far, this group has been relatively insulated from financial pressures.

Reasons for selling Q3 2020 <R750,000 R750,000-R1,6m R1,6m-R2,6m R2,6m-R3,6m >R3,6m
Downscaling due to financial stress 23% 30% 23% 18% 27% 18%
Upgrading 12% 21% 12% 9% 8% 4%
Downscaling with life stage 22% 13% 22% 24% 27% 28%
Security concerns 8% 5% 10% 10% 5% 6%
Emigrating 10% 3% 8% 13% 13% 17%
Relocating 9% 9% 8% 10% 8% 12%
Change in family structure 10% 7% 12% 11% 11% 13%
Moving to be closer to work or amenities 6% 12% 7% 6% 2% 2%

Source: FNB

Lifestyle changes

Estate agents say the main reasons for selling are downscaling for lifestyle changes and in some instances financial stress. Others relocate for a better lifestyle or upgrade to bigger properties says Dr Andrew Golding, Pam Golding Property group CE.

He says post-hard lockdown, there’s been an increase in relocation for business purposes, retirement or to be close to family.

According to Susan Watts, broker/owner of RE/MAX Living Cape Town, there is huge pressure on affordability in all market segments.

“Some people became richer and others became poorer, hence the movement within the property market. While many are selling due to financial stress, others can now get their foot in the door,” says Watts.

Read also: Buying property now more affordable – insights from BizNews Property Talk

Some homeowners are also selling their investment properties along with a decline in rental property demand. This is according to Louis Kruger, Kruger Attorneys and Conveyancers Incorporated director.

Low interest rates and falling house prices are fuelling home buying at the moment. Many tenants are turning into homeowners, resulting in buy-to-let investments reaching double digit vacancy rates and flat rentals.

He says divorce is another reason for selling. “Whether the divorce is caused by financial stress, working from home, depression resulting from the pandemic is not clear.”

Kruger says many sell to upgrade to bigger properties to allow for a conducive work-from-home environment or home office.

Emigration sales down

According to FNB, emigration sales reached 10% from nearly 18% during the same period in 2019. Nearly 70% of property owners aged between 35-44 years were selling in order to emigrate.

It’s unclear whether the moderation in emigration is temporary because of Covid-19 or it signifies a shift in the market. “However, it’s unlikely that we will see pre-pandemic levels. This is purely because prospects of finding employment are now lower compared to the pre-pandemic period, says Mkhwanazi.

Read also: Emigration alarm: SA’s rich get set to leave in droves – IRR

Globally, unemployment figures increased as a result of the pandemic. “If the trend does pick up again, it will exert further downward pressure on property prices, primarily in the upper end.”

LeadHome data shows that post-lockdown, selling to emigrate was below 10% of total selling. This indicates that lockdown may changed individual retirement and emigration plans. In addition, movement between countries is more difficult currently, according to the agency.

Read also: It’s getting faster to sell property in SA, but buyers are making very cheeky offers

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