One of the most encouraging set of statistics to come out of the latest, ‘always excellent’, FNB Estate Agency Survey, says Bill Rawson, Chairman of the Rawson Property Group, are those relating to selling as a result of financial pressure.
The FNB survey, says Rawson, shows that towards the end of 2008 and early 2009 as many as 32% of sellers were going this route to relieve themselves of financial pressure. More recently, however, the FNB figures show that this percentage has been almost halved (to 18%) and the trend seems set to continue.
Conversely, he says, the FNB statistics also reveal that the number of sellers putting their homes on the market so as to upgrade has risen from a low 6% or 7% during the high interest rate period to 14% recently.
Rawson says that he agrees with the FNB economist, John Loos, that these two reasons for selling (to cope with difficult finances or to upgrade) are probably the two most important indicators of the average householder’s financial position in South Africa today.
“Although, as Loos has suggested, the level of downscaling due to financial pressure remains high, the general outlook seems now, to me, to be much improved and far more positive.”
The figures quoted, says Rawson, should, however, be read in conjunction with the FNB’s report on household debt and credit-worthiness: the latter, he said, remains the main factor limiting many potential home buyers’ ability to obtain bonds.
Loos, says Rawson, credits the recent ‘abnormally low’ interest rates for bringing about a big improvement in household debt repayments – but he goes on to point out that household debt vulnerability is now evident countrywide and has even been mooted as a primary factor behind social unrest.
“Loos,” says Rawson, “has rated the household debt risk as being ‘very high’ and his figures bear this out: the household-debt-to-disposable-income ratio is now 76%, which is only some 7% below the all-time 2008 high of 82,7%.”
Equally relevant in this regard, says Rawson, is that since 2004 the Debt Service Risk Index has been significantly above the high historic average of 5,3 (on a scale of one to ten). Recently it has been hovering around the 6 to 7 mark — which, says Rawson, is far too high for an emerging economy.
“In a country where over 30% of the adult male population is not regularly employed, this high level of debt indicates an ingrained vulnerability,” says Rawson. “We have to remember that, historically, households that borrow high in low interest rate periods are likely to hit problems when interest rates rise.”
So – when are interest rates likely to go up?
Rawson says that a guestimate at this stage could see rates beginning to move upwards by the third or fourth quarter of 2014.
“Even if that does not happen,” he says, “it does not alter the fact that household debt, which regrettably is still on a rising trajectory, has created an instability which economists deplore and which is prejudicial to conscientious saving and home purchasing, i.e. to the traditional South African cautious spending attitude.”
For further information contact Bill Rawson on (021) 758 7100 or alternatively you can email him at bill@rawsonproperties.com.
