FNB has released its latest ‘Property Insights – Owner-Serviced Property Selling Motives’, a continuation of their fourth quarter 2020 results of their FNB Commercial Property Broker Survey which covers a sample of commercial property brokers in the six major metros of South Africa – City of Joburg and Ekurhuleni (Greater Johannesburg), Tshwane, eThekwini, City of Cape Town and Nelson Mandela Bay.
Focusing on the key drivers of movement and sales activity in owner-serviced properties, the survey results show financial pressure to still be (by far) the biggest single driver which became noticeably more prominent in the second quarter of 2020 as Covid-19 lockdowns hit. This driver has remained ‘elevated and rising’ in the fourth quarter survey.
FNB asks respondents for their perceptions of the major drivers of ‘movement and sales activity’ in the owner-serviced property segment. These respondents estimate the percentage of movement and sales that they believe would take place for a particular reason with the total percentage of all reasons adding up to more than 100% due to businesses selling or relocating for more than one reason.
This is not an exact science, but it provides a broad picture that portrays that the highest percentage of owner occupiers are perceived to be selling or relocating, influenced by financial constraints or pressure i.e., 65.33% in the fourth quarter 2020 survey, which is a further rise from the third quarter’s 56.7% as well as approximately 22 percentage points higher than the 43.1% recorded in 2020’s first quarter.
The most recent level would appear to be significant with the other two significant motives being ‘relocating to be closer to the business’ (27.2%) and ‘looking for a location with better access to transport, logistics and commuter nodes’ (21.75%).
However, sales and relocation for ‘bigger and better’ premises remain at a low 12.9% in the fourth quarter survey. This is mildly higher than the 9% of the prior quarter but it remains far below the 22.4% estimate from 2019’s third quarter.
This percentage declined in prominence as economic and financial times toughened prior to the Covid-19 lockdown but declined far more noticeably in the second quarter of 2020 as lockdown caused the recession to go deeper. The fourth quarter mild increase is perhaps reflective of economic and property market trading activity largely normalizing following the second quarter hard lockdown, but with financial constraints still containing it to relatively low levels.
Examining where, by region, the greatest level of financial pressure-related selling or relocation is perceived to be, it turns out to be the Gauteng regions, as was the case in the previous quarter, Tshwane being the highest at 77.5% of sellers, followed by Greater Johannesburg with 66.7%.
The three coastal metros appear better by comparison with Cape Town recording 60.4% of sellers perceived to be selling for financial pressure-related reasons, eThekwini (60.3%) and Nelson Mandela Bay (57%). However, all five regions’ percentages remain elevated compared to just prior to lockdown, and all five rose in the fourth quarter of 2020.
The fourth quarter broker survey points to financial pressure amongst property owner-occupiers remaining ‘elevated’ even after the lockdown had been eased, following the hard lockdown of the second quarter of 2020. The estimated percentage of sellers selling to downscale due to financial pressure remains relatively high compared to the pre-lockdown surveys, and still rising. The percentage believed to be selling to upgrade to a better property remains low compared to pre-lockdown surveys, although it has risen mildly since the second ‘hard lockdown’ quarter.
This is perhaps reflective of economic and property market activity having largely normalised post-lockdown, but with financial constraints still being high.
This latest survey results point to lagged economic and financial impacts of the Covid-19 lockdown period persisting, as expected to do for a lengthy period which adds support to the view that ‘full’ post-lockdown economic recovery will be slow.