Homeowners were spending less on major property improvements and renovations in the fourth quarter of 2007 compared with the same period in 2006, according to the First National Bank (FNB) Residential Property Barometer.
At the end of 2006, about one in three homeowners were investing in their homes by making major improvements and doing renovations, thereby adding to the value of their property. This figure dropped to about one in five in the fourth quarter of 2007.
Rising interest rates and the introduction of the National Credit Act in June 2007 would certainly have had an influence on this trend, FNB said.
The hardest-hit owners were at the lower end of the market (about R600 000 and below), while the higher price level (R3-million or more) appeared immune. In the middle segment (average price of R1, 2-million) owners were still doing basic maintenance, but slowed in terms of major renovations.
Approximately 20% of homeowners make improvements in order to increase the value for which they can sell their homes in the short term. This is more prevalent in the lower and middle house price segments than it is in the upper-priced property market.
Approximately 36% of homeowners doing property improvements cannot afford to buy elsewhere and hence want to upgrade the property in which they currently live, FNB said.
Meanwhile, the value of South African recorded building plans passed at constant 2000 prices in November decreased by a telling 16,1% year-on-year from an 8,4% dip in October, Statistics South Africa data on Wednesday showed.
Non-residential building plans dropped by a whopping 33,2% year-on-year in November, while the fall in the residential sector was recorded at 17,5%. This comes off dips of 24, 9% and 11, 1% respectively a month ago.
Real building completions were reported down 14% year-on-year in November from a 10, 2% increase in October. Residential completions were down 14, 8% year-on-year and non-residential completions were down 12, 4%. Additions and alterations were down 13%.
The real value of recorded building plans passed by larger municipalities (at constant 2000 prices) during the first 11 months of 2007 decreased by 2,7% (-R1 192,9-million) compared with the first 11 months of 2006.
Decreases were reported for non-residential buildings (-7, 8% or –R695, 2-million) and residential buildings (-3, 3% or -R813, 8-million). An increase was reported for additions and alterations (2, 8% or R316, 2-million) for the same period.
Residential building activity has come under a significant amount of pressure due to slowing housing demand and electricity shortages, and this is expected to continue well into 2008. However, infrastructure development should remain fairly buoyant.
Authored By: FNB HomeLoans