FNB Estate Agent Survey - Reasons for Selling 1st Quarter 2014 Survey Results

1. FNB Estate Agent Survey - Reasons for Selling 1st Quarter 2014 Survey Results 11 April 2014

2. Main Points • As in previous surveys of recent years, the “oldies” who sell in order to downscale due to life stage continue to be the largest single source of sales, according to the FNB Estate Agent Survey for the 1st quarter of 2014. • The largest percentage of sellers, i.e. 22% is still believed to fall into the category “Downscaling due to Life Stage” as at the 1ST Quarter 2014 FNB Estate Agent Survey. • The percentage of sellers selling in order to upgrade their home was estimated at 18% of total selling in the 1st quarter survey. This is slightly down on the 20% of the previous quarter’s survey. • The other “financial strength (or weakness)”-related motive for selling residential property is selling “in order to downscale due to financial pressure”. This motive was estimated to account for 15% of total sellers in the 1st quarter 2014 survey, which is marginally up from the previous quarter’s 14%. • At 3.4% of total sellers, emigration-driven selling remains relatively low

3. Downscaling due to Life Stage • The largest percentage of sellers, i.e. 22% is still believed to fall into the category “Downscaling due to Life Stage” as at the 1ST Quarter 2014 FNB Estate Agent Survey. • This form of downscaling refers to those sellers who desire a smaller home, usually either because they are getting older or because their offspring have left home. • The 22% estimate for the 1st quarter is slightly higher than the 21% of the previous quarter, but the multi-year trend in the percentage has been more-or-less sideways since 2011.

4. Ageing population • The high degree of sales by this group is being partly driven by South Africa’s changing demographics. • IHS age cohort estimates indicate that over the 5-year period 2008-2012, the noticeably faster growth in age cohort numbers took place 50+ cohorts, with most of these groups’ growth rates exceeding 20% over the period. • This source of selling is likely to boost supply in the larger-sized home segment of the market, while boosting demand for smaller homes and of course retirement property.

5. Financial Pressure-Related Downscaling vs Upgrading • Selling in order to upgrade remains at multi-year highs when expressed as a percentage of total selling. • The percentage of sellers selling in order to upgrade their home was estimated at 18% of total selling in the 1st quarter survey. This is, however, slightly down on the 20% of the previous quarter’s survey. • The other “financial strength (or weakness)”-related motive for selling residential property is selling “in order to downscale due to financial pressure”. This motive was estimated to account for 15% of total sellers , marginally up from the previous quarter’s 14%

6. Buying down vs Renting down • Increased confidence in residential property in recent times continues to be reflected in a further rise in the percentage of financially-stressed sellers, downscaling due to financial pressure, who are believed by agents to be intending to buy a cheaper property as opposed to renting. • From the previous quarter’s 63%, the percentage of this group of sellers intending to buy a cheaper property has risen to 66%, now well up on the 49% estimate back in the 2nd quarter of 2011 when the question was introduced.

7. Emigration-related selling • The other category of reasons for selling that we like to monitor due to its relevance to sentiment towards South Africa is the category “Selling in order to emigrate”. • At 3.4% of total sellers, emigration-driven selling remains relatively low, and we believe this to be a function of a global economy that has been mediocre for a number of years, thus constraining employment opportunities for emigrants.

8. Summary Table – Reasons for Selling

9. Outlook • The 1st quarter survey regarding the various reasons for selling appears to confirm that we are still currently at a relatively strong stage of the property cycle, The ageing portion of the population, that dominates the sellers selling in order to downscale due to life stage, remains the most important source of home selling. The second most important driver of selling is “selling in order to upgrade”, a key indicator of confidence of a portion of households in their future financial strength as well as in residential property as an asset. The third-most important driver is downscaling due to financial pressure, a percentage far down from 2009 but still significant at 15% of total selling. • Based on our expectation of further interest rate hiking, and recent economic weakness continuing, we expect some deterioration in some of the key cyclical reasons for selling. This should include a decline in the percentage of sellers selling in order to upgrade, along with a moderate rise in those selling in order to downscale due to financial pressure. • And one smaller category which may already be starting to reflect SA’s weakened employment growth situation is that of “selling in order to re-locate within South Africa” (i.e. to different region), or so-called “semi-gration”. This percentage has declined from 9% of total selling a year ago to 7% in the 1st quarter of 2014. • With regard to the “oldies” who sell in order to downscale due to life stage, we expect them to remain the largest percentage of total sellers for the foreseeable future, due to the strong growth in the number of people reaching “retirement-age”.

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