`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".


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