There was a slight improvement in levels of home maintenance and upgrades early this year. This was more on the maintenance side than on the upgrades side.
Although agents surveyed perceived average home maintenance and upgrade levels to be stronger early in 2018, the perception was one of slight weakening in “value adding upgrades” to homes.
The FNB Estate Agent Survey recorded a mild strengthening in agent perceptions of overall home maintenance and upgrades levels early in 2018.
Using a two-quarter moving average to smooth the data mildly, FNB depicts agent perceptions regarding levels of home maintenance, and with five categories/levels of home maintenance and upgrades in the survey.
The “top” level is that of “Value Adding Home Upgrades”. This category showed a weakening from 25.5% in the fourth quarter of 2017 to 22.85% in the first quarter of 2018, further down on 26% highs reached in the first two quarters of 2017.
The next level “down” is the percentage of home owners “fully maintaining their property and making some improvements”. This category has risen noticeably over the past two consecutive quarters, from 27% in the third quarter of 2017 to 34% in the final quarter of last year and then to 40.7% in the first quarter of 2018.
The following level down, namely the “percentage of owners not improving but still fully maintaining homes”, has seen a slight rise in the 1st quarter of 2018, from 28% in the previous quarter to 29.3%.
This has translated into a mild decline 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 8.7% for the two quarters up to and including the first quarter of 2018, down from 11% in the prior quarter.
Those owners allowing their homes to “get run down”, in the areas surveyed, returned a still fairly insignificant 1.85% in the first quarter of 2018, slightly lower than the 2% estimate for the previous quarter.
A slight rise in the second and third categories, i.e. those “fully maintaining and making some improvements” and “not improving but still fully maintaining homes”, in the first quarter 2018 suggests that, while households are still relatively conservative (reflected in a lack of growth in “value adding upgrades to homes), financial pressure on households as a group is not necessarily increasing.
FNB Home Investment Confidence Indicator edges slightly higher
The slight increase in two of the highest three categories of home investment, “Maintaining and making some improvements” and “not improving but still fully maintaining homes”, in the first quarter of 2018 (and decline in the lowest two categories over the same period) has contributed to a second successive quarter of increase in the FNB Home Investment Confidence Indicator, following on a prior decline earlier in 2017. From a revised 1.67 in the third quarter of 2017, this indicator rose to 1.68 in the final quarter of 2017 and then to 1.71 in the first quarter of 2018.
This indicator is represented on a scale of -1 to +3. It had a steady increase over the 2013 to 2015 period, and now hovers at relatively strong levels. The recent renewed rise may prove to be a small boost for Hardware Retail Sector Sales growth early in 2018.
Reasons for making home improvements
With regard to the reasons for why people undertaking home improvements are doing it, FNB’s agent survey pointed to the speculative building motive being a little more significant going into 2018.
For the two quarters up to the first quarter of 2018, the Speculative Motive rose from 9% as at the third quarter of 2017 to 21% in the final quarter and then further to 29.3% in the first quarter of 2018.
The overwhelming majority of 61.4% still do the improvements for their own use, while 12.9% do it because they “can’t afford to buy elsewhere”. The latter two motives have declined in significance in recent quarters, though, as the speculative motive has risen in prominence.
The FNB Estate Agent Survey questioning relating to the Home Maintenance and Upgrades market showed mild strengthening going into 2018. It points to a Household Sector that remains solid financially, with a high level of full home maintenance, but nevertheless relatively cautious and not “splashing out” on value adding upgrades.
The home maintenance situation remains far stronger than it was during the 2008/9 recession levels, which is important from a mortgage lender perspective, lenders wishing to see the value of the security backing their loans being maintained as far as possible.
With Leading Business Cycle Indicators having recently been pointing to possible further economic strengthening in near term, it is plausible that further strengthening in the home maintenance levels in the coming quarters is evident.