Advice and Opinion

Future demand lies in sectional title homes, says Homebid

“The demand for more affordable sectional title homes is going to increase as home buyers are pushed down the buying pyramid as the economy falters,” says Neville Berkowitz, property economist and adviser to Homebid.

The sectional title market place is driven by affordability and to a lesser degree, the perception of better security. The empty nester market place considers the perception of security as important as affordability while the first-time and second-time sectional title home buyer is more focussed on affordability, according to research undertaken by Homebid, the low commission estate agency.

“By now we all know that the South African economy is faltering badly and the prognosis for its possible future is for low growth, if any. All South Africans are facing falling employment numbers, interest rate increases, and no increases in real terms in wages and salaries coupled with electricity load shedding affecting productivity levels. Consumers are pulling in their horns and watching every cent they spend while business confidence is at a 16 year low”, says Berkowitz

Homebid’s analysis of sectional title transfers in the various deeds offices around the country shows that the “GASH” – Good Address Small Home – segment will dominate the R500 000 to R1 million marketplace. The emerging first time sectional title homebuyer will also be looking to buy in the R250 000 to R500 000 price segment. Here sectional title homes are usually found in areas on the outskirts of municipalities where land is cheapest, as well as in or near city centres, in older apartment living”, he adds.

Homebid has obtained property transfer information from all the deeds offices in South Africa and has extracted information on all the sectional title transfers around the country. The four major municipalities in South Africa show varying adoptions of the sectional title way of living.

The Pietermaritzburg deeds office, which is dominated by sales and transfers in the Durban metropolitan area, has the highest penetration of sectional title transfers at 38,4% of all homes transferred in the first six months of 2015.

The highest demand for sectional title homes in the Kwazulu Natal province was in the R500 000 to R1 million price bracket where 48,1% of homes sold and transferred were via sectional title ownership. The R250 000 to R500 000 price bracket was slightly behind at 46.9% sectional title ownership followed by the R1.5 million to R2 million price bracket at 41%. The R1 million to R1.5 million market place was a little lower at 38,7% and the over R2 million market place saw 31.1% of all homes transferred being sectional title.

The Pretoria deeds office which covers parts of Gauteng, Limpopo and North-West is the second most active sectional title marketplace with 37,1% of all residential transfers being for sectional title ownership.

The most dominant price bracket is the R500 000 to R1 million market where 59% of all transfers are for sectional title ownership. The R1 million to R1,5 million price bracket has 50,6% sectional title ownership. The R250 000 to R500 000 price bracket follows at 42,6% sectional title penetration. One third of homes from R1,5 million upwards are transferred via sectional title.

The Johannesburg deeds office covers parts of Gauteng, however the northern areas of Johannesburg are registered in the Pretoria Deeds Office. The dominant sectional title marketplace in the Johannesburg deeds office is in the R500 000 to R1 million price level where 48,7% of homes transferred are via sectional title.

The next most dominant price bracket is the R250 000 to R500 000 where 39,5% of transfers are via sectional title ownership. The R1 million to R2 million marketplace averages 27% sectional title ownership.

The Cape Town deeds office covers the Western Cape Province, parts of the Eastern Cape and Northern Cape and only has a 25.1% sectional title market penetration in terms of recent home ownership transfers.

The R250 000 to R500 000 price bracket has a 39,2% sectional title market penetration followed by the R500 000 to R1 million marketplace with 38,4%. The R1 million to R2 million price bracket has a 27% sectional title presence and the over R2 million price bracket has a 22% sectional title market share.

Figures published by ABSA in their recent Homeowners Insights confirm the dominating presence of the sectional title marketplace. Sixty-three per cent of all their home loans for residential development units during the past three years were for sectional title units. In addition, 64% of respondents to their survey said they would consider buying a townhouse or cluster home.

“For the foreseeable future we expect the sectional title market place to grow at the expense of free standing homes as affordability constraints and better perceived security drive buyers decision making”, says Berkowitz.