Using a two-quarter moving average to smooth the data mildly, agent perceptions are depicted regarding levels of home maintenance, and there are five categories/levels of home maintenance and upgrades in the survey.
The 'top' level is that of value adding home upgrades. After a very weak period around 2011-2013, the survey respondents have more recently reported a rising trend in the percentage of these home-owners investing in their properties with a view to adding value through 2014 and 2015 to date.
From a lowly 3% of total home-owners estimated to be doing value adding upgrades in the first half of 2013, we have seen this percentage rise to 26% by the 3rd quarter of 2015. This remains lower than the 43% achieved back in 2004, but is nevertheless a strong number, and is the highest estimated percentage since the 2nd quarter of 2007.
The level of these costly value adding upgrades took a very long time to recover following the 2008/9 recession, because the first priority, following that financial shock, was for many households to get standard home maintenance restored to full levels in cases where this had been deferred.
The next level down is the percentage of home-owners fully maintaining their property and making some improvements. This category appears to have 'peaked', and appears to be declining mildly, from 42.5% at the beginning of 2015 to 37.5% in the third quarter. However, this is not necessarily due to home-owners shifting into lower levels of home investment but possibly due to a portion shifting up into the 'Value Adding Upgrades' category.
The next level down, namely the percentage of owners not improving but still fully maintaining homes, has shown a slight decrease from 29% at the beginning of 2015 to 26.5% by the third quarter.
This all translates into a slight 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, which in effect means the home will go backward over time. This estimated percentage was 9.0% in the third quarter of 2015, slightly lower than the 10.5% of the prior quarter and the 9.5% at the start of the year.
Those owners allowing their homes to get run down, in the areas surveyed, returned a fairly insignificant 1% in the third quarter.
Although the second highest category, i.e. maintaining and making some improvements, saw its percentage decline slightly, together with value adding upgrades the third quarter saw a rise in the combined percentage of the top two levels of home investment, and this has resulted in a further improvement in the overall perceived level of home maintenance and upgrades. This is reflected in a further third quarter strengthening in the FNB Home Investment Confidence Indicator.
This indicator is represented on a scale of -1 to +3. The indicator has shown a steady increase over the 2013 to 2015 period, to reach a level of +1.82 in the third quarter of 2015. This third quarter level is the highest level since the fourth quarter of 2006.
The improving trend in home maintenance levels continues to be in part reflected in the numbers for retail sales for hardware, paint and glass product retailers. For the three months up to and including July, real sales in this category of retail grew by 4.6% year-on-year, still outstripping overall retail sales growth of 3%.
This category of retail has outpaced total retail sales growth through much of the 2013-2015 period, and this is believed to be the result of the recovery in home investment levels in recent years.
Finally, with regard to the reasons for why people undertaking home improvements are doing it, our agent survey still points to limited speculative building behaviour, to the tune of 9.5% of total home improvements. This remains low when compared to the 24.5% estimate back in early 2006. The overwhelming majority (78%) still do it for their own use, while 12% do it because they can't afford to buy elsewhere.
