Slight recent deterioration in levels of home maintenance and upgrades but no strong direction
The picture emanating from various data sources is one of weakening in the levels of home maintenance and upgrades recently, but there is no strong direction as yet.
The FNB Estate Agent Survey has recorded a very mild weakening in agent perceptions of home maintenance and upgrades in the second quarter of 2017, after a brief prior second-quarter strengthening.
Using a second-quarter moving average to smooth the data mildly, FNB depicts agent perceptions regarding levels of home maintenance, and they have five categories/levels of home maintenance and upgrades in the survey.
The “top” level is that of “Value Adding Home Upgrades”. After a mild improvement in this category in the latter stages of 2016, the percentage remained unchanged at 26% in the second quarter of 2017.
Given the recent “recessionary” conditions, it would be realistic to expect some decline in the level of these costly value adding upgrades, but as yet the sample of estate agents surveyed has not seen the onset of such a decline.
Consumer Confidence remains extremely low, as consumers become increasingly aware of, and concerned about, the weak economic and unstable socio-political environment. FNB would thus expect these consumer concerns to drive a more conservative approach to home investment in general.
The next level “down” is the percentage of home owners “fully maintaining their property and making some improvements”. This category has seen a very slight decline of late, from 36.5% for the two quarters up to an including the first quarter of 2017, to 35.5 in the second quarter of 2017.
The following level down, namely the “percentage of owners not improving but still fully maintaining homes”, has also seen a slight decline, from 27.5% in the first quarter of 2017 to 25.5% in the second quarter of 2017.
This all translates into a mild rise in the category that one would always like to see being low, i.e. the “percentage of home owners attending to basic maintenance only”, a level which in effect means the home will “go backward” over time. This estimated percentage was 12% for the two quarters up to an including the secnd quarter of 2017, which is a rise from 9.5% in the first quarter of 2017.
Those owners allowing their homes to “get run down”, in the areas surveyed, returned a fairly insignificant 1% in the second quarter, insignificantly higher than 0.5% in the prior quarter.
A rise in the two lower categories “only attending to basic maintenance” and “allowing homes to get run down” can suggest some rise in the levels of financial pressure, or constraints. But first quarter’s rise in these categories is insufficient to conclude the start of a trend.
FNB Home Investment Confidence Indicator edges slightly lower
The slight decline in two of the highest three categories of home investment, “Maintaining and making some improvements”, and “Not Spending but still maintaining homes”, in the second quarter (and rise in the lowest two categories) has contributed to a first-quarter decline in the FNB Home Investment Confidence Indicator, following on two previous quarters’ rise.
This indicator is represented on a scale of -1 to +3. The indicator had a steady increase over the 2013 to 2015 period, to reach a level of +1.79 in the third quarter of 2015. That level was the highest level since the first quarter of 2007.
Thereafter, however, FNB have seen less clear direction, including a fourth-quarter decline into 2016, a second-quarter rise in the summer quarters of 2016/17, and now a first-quarter slight decline.
Hardware retail points to weakening in home maintenance and upgrades
Further hint of slowing in the level of home maintenance and upgrades also emanates from a view of growth in Real Retail Sales by Hardware, Paint and Glass Products Retailers.
Using a three-month moving average for smoothing purposes, this category of real retail sales declined slightly by -1% year-on-year for the three months to April 2017, and -1.6% year-on-year in April alone. This represents a slowdown from +2.7% 3-month moving average in November last year.
Various data related to the Home Maintenance and Upgrades market shows little more than hints of weakening. However, viewing all of this data together, given that the Estate Agent Survey data, Hardware Retail Sales data, as well as Building data all show some mild weakening of late, the perception that some weakness may be emerging in the Home Maintenance and Upgrades market becomes more believable.
The situation remains significantly better than 2008/9 recession levels. However, a recently renewed recessionary environment, and weak consumer confidence levels should be expected to lead to greater household spending caution and lower levels of home maintenance and upgrades on average.