If you are looking to invest in property with strong future growth, then the sectional title sector should no doubt be a strong consideration, especially in the Cape metro, says Samuel Seeff, chairman of the Seeff property group.
“With growth of 70% to 80% in property prices in some of the high profile areas such as the Atlantic Seaboard and central city and with prices now reaching R150,000 for just one square metre in Clifton, you can hardly go wrong with this sector”, he adds.
This sector is not just where demand is likely to be strongest, but where values are likely to continue edging upwards.
An analysis of the latest Lightstone data for the Cape metro shows that this sector has seen the strongest growth in sales volumes and prices over the last few years since 2010. This is also the sector that has been responsible for much of the phenomenal price growth in the Cape.
Even against a slowing economy, sectional title sales volumes for the metro ended the 2015 year with 3715 units transacted, some 10% up on the 3384 units of the previous year, 45% more than the 2556 units registered in 2010 and about 70% higher than the 2181 transfers for 2009.
“From a value perspective, sectional title sales for the year ending August 2016, contributed just over R6.6bn, just over 30% of the total value of all transactions recorded for the Cape metro for the period. The data also shows that the median price for a sectional title property in the Cape metro for 2016 is now standing at R1.495m, some R200,000 more than the 2015 rate of R1.295m, thus representing year-on-year growth of 15%. The current median price is also some 66% higher than the R900,000 of the 2010-year”, says Seeff.
“According to the data, the median price for sectional title property at R1.495m is also notably higher than the median for freehold that currently stands at around R1.1m if you take the lower sub-R400,000 sector out of the equation”, says Seeff.
“Looking at the latest Propstats data, we can see that much of the growth has taken place in high demand areas such as the Atlantic Seaboard, Waterfront Marina, CBD and Century City”, says Seeff, adding that prices in some of the suburbs here are now some 70% -80% higher compared to just over five years ago.
In Clifton for example, a luxury seaside apartment in a complex such as Eventide can now sell for as much as R150,000 for just one square metre according to Lance Cohen, luxury market specialist for the agency. This is over 70% higher than the highest price of R85,837/sqm paid in 2010.
“Sectional title prices in the suburb have reached record levels this year at R146,465/sqm for a two-bedroomed apartment in Eventide (198sqm) and R138,136/sqm for a one-bedroomed (59sqm) apartment in Heronwater. If you now want to get your hands on an apartment in the suburb, you would need to pay upwards of around R8m for a small 60sqm unit to as much as R100m for a luxury unit”, says Cohen.
“At the V&A Waterfront Marina and in neighbouring Mouille Point too, we have seen sectional title prices rise significantly over the last few years”, say agents, Ross Levin, Finella Botes and Lynn Pinn.
In 2010, the highest price paid in Mouille Point was R41,818/sqm in Two Oceans Beach. This year, the price has already reached R74,324/sqm in Mouille Sands (222sqm unit) and R74,289/sqm in Aquarius (275sqm), thus some 78% higher.
The entry level price for a one-bedroomed apartment in Mouille Point is now around R3.2m (R50,000/sqm) while a two-bedroomed unit starts at R7m (R66,000/sqm) and a three bedroomed unit at R19.5m (R71,000/sqm).
At the Waterfront Marina, the average sales price has increased to R11,388,812 from R10,949,088 last year, but Levin says that the actual average sales rate on a square meter basis has risen by 15% year-on-year and can now reach R139,000/sqm.
A one-bedroomed apartment here now starts at R7.05m (R82,000/sqm) while a two-bedroomed unit will set you back upwards of R10m (R83,000/sqm) and a three-bedroomed unit upwards of R34.5m (R139,000/sqm).
Meanwhile, the average sectional title price for Sea Point has risen by almost 80% from R1.940m in 2010 to R3.470m. In the CBD, you could now pay up to R40,000/sqm to R50,000/sqm for a top end apartment or penthouse. The average sales price is now around R2.289m for a CBD flat, about R160,000 more than last year’s average of R2,125m and 76% higher than the 2010 average of R1.298m.
In the Century City area, the average sales price has risen by some 82%, from R1.206m in 2010 to R2.195m according to the latest Propstats data.
Dinis Martins, COO for Seeff Atlantic Seaboard, City Bowl and V&A Waterfront says that rental rates for the sectional title sector has also risen notably over the last few years.
You can still find a two-bedroomed flat higher up in Clifton for R35,000 per month, but closer to the beach, he says, you would pay as much as R80,000 to R100,000 for a long-term rental.
A two-bedroomed flat in Sea Point will now set you back upwards of R22,000 per month to around R33,000 along Beach Road. At the Waterfront, you would pay about R30,000 for two bedrooms and R55,000 to R65,000 for three bedrooms that can range to as much as R80,000-R85,000 at the top end.
Meanwhile, the luxury three-bedroomed penthouse in the new Amalfi development in Mouille Point will set you back R70,000 per month.
In the CBD, a two-bedroomed flat will now cost you R20,000-R25,000 per month and as much as R30,000 per month in Canal Quays that overlooks the Waterfront.
Seeff says that while security and convenience tends to be the overriding driver of the demand for sectional title property, location and lifestyle are two added factors when it comes to the Cape property market.
“While there will always be demand for large homes and spacious plots and estates, Seeff says that the sectional title sector is where the biggest growth will come from over the next few years. Rapid urbanisation and growth of Cape Town combined with the scarcity of land, the fabulous location and lifestyle and of course the yearning for security and convenience all converge for the perfect growth catalyst”, he adds.
Aside from apartment blocks, townhouses and lifestyle estates, you will see a notable rise in the sub-division of plots and the creation of trendy sectional title units to meet the housing demand.
Seeff says that the Cape property market is just about as solid as you could want for as a buyer or investor. The leading price indices such as the FNB Property Barometer and Lightstone have put the metro well ahead in terms of price growth. Lightstone for example says that the Cape metro clocked up 12% growth, three times as much as Johannesburg’s 4% and twice as much Pretoria’s 6%.
Meanwhile, the prestigious Knight Frank Global Cities index has put Cape Town in the top three globally with 16.1% growth for 2015 and the only African city in the top twenty.