Why sectional title sales are booming in SA

Why sectional title sales are booming in SA

MAIN IMAGE: Sandra Gordon, senior research analyst for Pam Golding Properties.

In 2010 only 13.5% of all new residential buildings completed in South Africa were sectional title properties – according to Statistics SA, by the first quarter of 2019 that figure had risen to 57.7%. Convenience and affordability are key factors behind this trend says Sandra Gordon, senior research analyst for Pam Golding Properties.

Today’s fast-paced and busy lifestyle dictates that for many people, convenience is a key factor critical in decision-making when it comes to buying or renting a home.

Coupled with a trend towards smaller living spaces which enjoy reduced monthly utilities and maintenance costs, or which are better suited to a change in lifestyle, this has resulted in an exponentially increasing demand for sectional title units in apartment complexes in easily accessible locations, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

Says Dr Golding: “With South Africa’s young demographic profile, it is hardly surprising that there is a growing demand for sectional title living, not only from first-time and young buyers opting for apartment living, but from home owners across all ages who are seeking smaller homes in more convenient locations.

“This is borne out by the fact that in Cape Town’s city centre, the average size of apartments sold decreased from approximately 82sqm in 2013 to 77.6sqm in 2018 (Source: Cape Town Central Improvement District). While sacrificing space, and apart from the benefits of lower operating and maintenance costs and good security, a smaller apartment in a convenient location such as this enables a reduction in the daily commute to the workplace as well as on foot access to a range of facilities such as restaurants, coffee shops, gyms and shopping, among others. Indeed, some new developments in key, centrally positioned hubs in various regions around the country offer a host of such facilities on site, further enhancing the ‘live, work, play’ appeal of the location.”

As mentioned, there has been exponential growth in the popularity of sectional title buildings. In addition, Gordon says, new and repeat sectional title sales increased from 21.2 percent of total residential sales in the country in 2010 to close to 28 percent in late 2018.

“The trend is pronounced in Gauteng province, which dominates the sectional title market, accounting for just over half of all apartments sold each year.”

Sectional title units in Sunset Towers, Morningside, Sandton.

“The trend is pronounced in Gauteng province, which dominates the sectional title market, accounting for just over half of all apartments sold each year. We know that half of all young South Africans purchase their first home in Gauteng – hence the demand for sectional title units. Here, according to Lightstone, sectional title sales have risen from an average of 27.4 percent of total unit sales in 2010 to 33.9% in 2018. The shift developers are making towards building new sectional title homes is highlighted by the fact that 60.1 percent of all new homes sold in Johannesburg last year were sectional title properties, while 45.4 percent of all sales – both new and repeat – were sectional title units.

“Affordability is a further factor favouring sectional title. For example, of the 12 603 sectional title properties sold in Johannesburg last year, 45 percent were priced under R800 000 while a further 40.1 percent were priced between R800 000 and R1.5 million, and only 191 units (1.5 percent of the total), were sold for more than R3 million.”

In Tshwane Municipality, 33.3 percent of all new homes sold in 2018 were sectional title, with a similar proportion of 35.4 percent of all sales – both new and repeat – comprised sectional title. Of the 7 042 sectional title properties sold in Tshwane last year, 50.6 percent were priced under R800 000 while a further 39.7 percent were priced between R800 000 and R1.5 million, and just 21 or 0.3 percent of all sectional title units sold were sold for in excess of R3 million.

 Affordability is another factor that favours sectional title sales. Source: Lightstone.

Interestingly, adds Gordon, eThekwini Municipality in KwaZulu-Natal is also experiencing the shift towards sectional title – with these sales as a percentage of total unit sales rising from 27.8 percent in 2010 to 34.7 percent last year. In a similar metric to Johannesburg, 61.8 percent of all new homes sold were sectional title properties, and 41.7 percent of all sales – both new and repeat, were sectional title units. Of the 4 755 ST properties sold in eThekwini last year, 49.9 percent were priced under R800 000, with a further 30.8 percent priced between R800 000 and R1.5 million. A total of 169 units (3.6 percent) were sold for more than R3 million.

In the Western Cape, sectional title as a percentage of total sales rose from an average of 14.4 percent in 2010 to 19.4 percent in 2018. In Cape Town, sectional title comprised 28.4 percent of all new homes sold in 2018, and 25.3 percent of all sales, both new and repeat. Of the 6 520 sectional title properties sold in Cape Town last year, 34.5 percent were priced between R800 000 and R1.5 million, while a further 31.9 percent were priced under R800 000, and 543 units or 8.3 percent sold for more than R3 million.

Olive Wood, East London.

In the Eastern Cape, sectional title as a percentage of total sales increased from an average of 15.2 percent in 2010 to 19.7 percent in 2018. To date in 2019, 24 percent of all sales in East London have been sectional title and 47.9 percent of all sales in Port Elizabeth – up from 20.9 percent and 41.4 percent respectively in 2018.

Adds Gordon: “In line with the trend towards sectional title properties, mixed-use developments – such as Menlyn Maine in Pretoria, and others in Sandton, Cape Town central and uMhlanga – which facilitate an appealing and secure, lock-up-and-go lifestyle are increasing in popularity. Apart from having appeal for the younger generation, these include professionals who travel frequently and retirees who travel overseas to visit family.”

Showing 2 comments
  • Winston
    Reply

    Why the trend towards Sectional Title accommodation ?…the answer is simply because the initial escalation of PRICES of the household properties and the affordability ongoing, of living in a SUBURBAN HOUSE….especially now , in the WCape, is too HIGH… what with the huge increases in Rates affecting the WCape., as a result of the DA local government increasing the Municipal Valuations .by 30-50% !
    As a result , this action will have a rolling add on effect that will necessitate higher prices in the near future especially on Sectional Title units which come up for sale ! NOT SUCH GOOD NEWS !

  • Avril Mitchley
    Reply

    Absolutely correct re your last comment, Winston.
    Sectional title units may be selling faster but the main reason for so many sectional title units becoming available is the problem of high rates and levies being imposed. Many sectional title owners (especially investors) are finding that the rentals they are asking cannot keep pace with the levies and rates they are paying. Rental amounts are actually coming down because of the financial constraints of tenants. Owners are paying higher rates and levies(which often include special levies and CSOS levies)so holding sectional title units is no longer seen as an attractive investment and they are being shed by disillusioned investors. Eventually the glut of stock will also impact on investor sellers as they try to get good prices for their units and don’t succeed.

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