`Oldies` drive housing supply

`Oldies` drive housing supply

Downscaling due to "life stage" is emerging as a major driver in residential property supply at present according to the third quarter FNB Estate Agent Survey.

John Loos, property market strategist at FNB Home Loans said that this referred mostly to those households whose children had grown up and left home, as well as to those who were ageing and for whom a large home may no longer be "practical".

"When we started questioning agents as to the reasons that people were selling homes, back at the beginning of 2008, they estimated that 14% were doing so in order to downscale due to 'life stage'. Since then, this reason for selling has steadily risen, reaching its highest level yet of 23% in the third quarter of 2011."
As the survey was only initiated in 2008, it doesn't provide much insight into whether the growth is cyclical or not.

Loos said however that it was conceivable that these households were holding back on selling in 2008 due to the extremely weak nature of the market at that stage, with a recession in play as well as high interest rates at the time. One would think that such sellers, many of whom were in no hurry to sell, may have bided their time until the market strengthened, and perhaps they were now coming out of the proverbial woodwork in greater numbers due to property times being a little better compared with 2008.

However, one would expect sellers that sell for many other reasons, barring those doing so due to financial pressure, to also possibly hold back on selling until market conditions improve, so as a percentage of total selling it isn't clear that the short term property cycle fully explains the rising percentage of "life stage sellers".

A few other factors should be considered according to Loos. Two important ones are an ageing population, especially the middle and upper income sections that drive the formal property market, along with sharply rising housing costs.

Indeed, HIS Global Insight estimates of population by age cohorts point to the 60 to 64 year old age group having been the fastest growth group over the past five years, growing by 22.2% cumulatively from 2006 to 2010. The 50-59 year-olds on 19.7% and 50-54 year olds with 18.6% growth were not far behind. The 50-and-above age cohorts are only approximately 27.5% of the total 20 year and above population. But the steadily growing percentage of "life stage downscaling" may be reflective of these cohorts being the fastest growth cohorts in SA.

"The second major possible contributor is the steadily rising costs related to housing, and by this we mean municipal rates and utilities tariffs. As at August 2011, the overall Consumer Price inflation rate was 5.3%." Loos said that by comparison, the CPI for Housing was rising by a higher 6.8% year on year.

Loos said that the combination of faster-growing over-50 age cohorts in SA relative to younger cohorts, along with more recent sharply rising home-related rates and utilities tariffs, was believed to be a key contributing factor to a rise in estimated percentage of sellers selling in order to "downscale due to life stage".

50% of South Africans have bad credit records but they can get bonds

50% of South Africans have bad credit records but they can get bonds

Just under 50% of South Africans have poor credit records - but, if they take the right steps, they can still get bond finance.

According to the latest records, almost half of all economically active South Africans have some form of "credit challenge" that makes it difficult for them to qualify for home loans or other finance from the banks, says Rob Lawrence, national manager of Rawson Finance.

"We are regularly asked by bond applicants to try and sort these matters out. Fortunately, Rawson Finance and the other originators now have arrangements with organisations dedicated to rehabilitating people whose credit records would normally prevent them from borrowing again.

"Depending on the severity of the original misdemeanour, the process can take anything from three to 12 months. But the ultimate success rate is high, so it's definitely worth tackling the challenge."

He says certain issues can be quickly put right. For example, if a credit bureau's investigation reveals that clients generally pay their bills but do so irregularly or late, this implies that the problem is not so much lack of funds but poor organisation. The rehabilitation organisation can assist them to budget and plan better and so improve their credit profiles. They could then become creditworthy within six months.

If, however, clients have had court judgments against them on account of unpaid debts, this will be recorded permanently. It can then take up to a year to get recession orders from the courts and have any judgments cleared, provided the original debts have been repaid.

Certain debt defaulters have garnishee orders against them. These are imposed by the courts and make it compulsory for their employers to deduct fixed sums each month to pay over to creditors. Lawrence says any bond applicants in this situation will not be considered for loans until their debts are paid up.

" If the credit bureau's records show that at some stage applicants' debts had to be written off by creditors, it will take at least a year to get them rehabilitated - and, again, this will involve repaying the debt in full."

Lawrence says although many South Africans' debt repayment performances are not something they can be proud of, he and his team understand how it is possible for people to land up in these predicaments and are always willing to help debtors rehabilitate themselves with the help of their associate rehabilitation services organisations.

"The message we have to give is that people shouldn't despair, nor should they abandon plans to become homeowners. There is almost invariably a way out of these difficulties, especially if the original fault was due to hardship rather than a deliberate attempt to avoid payment , " says Lawrence.

Weekend Argus (Sunday Edition)