How South African feel about property right now

The ABSA Homeowner Sentiment measures how South Africans feel about the property market. The latest index has revealed that property market sentiment declined further in the third quarter of 2018.

Homeowner Sentiment Index (HSI) results

The overall national HSI score, which reflects the percentage of survey respondents with positive sentiment regarding residential property market conditions in the country, was marginally lower at 72% in the third quarter of 2018 compared with 73% in the second quarter.

The main positive and negative sentiment-related factors mentioned by survey respondents were as follows in the third quarter of the year (percentage of respondents in brackets):
- Positive factors: Property is a secure asset (38%) and still increases in value (22%).
- Negative factors: The land reform aspect is detrimental to property investment (28%), the economy is in recession (19%) and there is continued political uncertainty (17%).

Homeowner sentiment sub-indices results
The 5 sub-indices measured were all lower in the third quarter of 2018 compared with the first and second quarters, indicating that consumers remained well aware of market conditions and influencing factors, which made them more wary of engaging in property-related transactions up to the third quarter of the year.

Buying property
Positive property-buying sentiment was down to 57% in the third quarter of the year from 61% in the preceding quarter and came to its lowest level since the first quarter of 2016. The further drop in buying sentiment was mainly related to tough economic conditions, mentioned by 64% of survey respondents.

The main reasons put forward by respondents for buying property:
- Property still increases in value and is a good investment (33%).
- Property prices are relatively low and there are bargains in the market (30%).

Selling property
The positive sentiment towards selling property dropped to 37% in the third quarter from 43% in the second quarter. The main reasons mentioned in the third-quarter survey for not selling property were related to tough market and economic conditions (71% of respondents).

The following reasons were mentioned in favour of selling property:
- Property prices are still relatively high and you may get an acceptable price when selling (27%).
- Property still increases in value and is a good investment (12%).
- Many people want to own property, which is supportive of selling (10%).

Investing in property
The positive sentiment regarding property as an investment declined somewhat further to 75% in the third quarter from 77% in the second quarter. The aspect of land reform was indicated by 24% of survey respondents as the main factor for not investing in property, followed by tough economic conditions and uncertainty about the future (21% of respondents).

Reasons in favour of property investment were:
- Property remains a good investment (34%).
- Property prices are relatively low and there are bargains in the market (18%).
- There is good return on investment property (14%).

Renovating property
A total of 72% of survey respondents displayed positive sentiment in the third quarter of 2018 regarding renovating property, compared with 79% and 74% in the first and second quarters respectively. The main reason mentioned in the third quarter for not being in favour of renovations, is the factor of affordability (29% of respondents).

Reasons in favour of renovating property were:
- Renovation increases the value of a property (36%).
- Constant upgrading of a property is important, especially if wanting to sell (15%).

Buying rather than renting property
The positive sentiment regarding buying rather than renting property was marginally lower at 67% in the third quarter of the year compared with 68% in the second quarter. The main reasons mentioned in the third-quarter survey for renting rather than buying property are the tough economic conditions (34% of respondents) and renting property is cheaper (28% of respondents).

Reasons in favour of buying rather than renting property were:
- It is better to buy and pay off your own mortgage bond than rent and pay someone else's bond (28%).
- Property prices are relatively low and there are bargains in the market (26%).
- Property still increases in value and is a good investment (17%).

Outlook
Since the start of the second quarter of 2018 consumers' financial positions have been adversely affected by higher taxes and sharply rising fuel prices, with the aspect of land reform and a poorly performing economy that currently continues to impact property market sentiment over a wide front.

Financial institutions' credit risk appetites and lending criteria will be reflective of these conditions, with these factors expected to continue contributing to subdued residential property market sentiment towards year-end and into 2019.

The abovementioned factors and subsequent property market sentiment will be reflected in levels of market activity, buying patterns, transaction volumes, property price growth and the demand for and growth in mortgage finance.