Advice and Opinion

South Africa’s residential sector embraces ‘green’

Sandra Gordon, senior research and market analyst: Pam Golding Properties.
Sandra Gordon, senior research and market analyst: Pam Golding Properties.

South Africa’s residential sector is embracing green, with new builds and existing stock the focus of a domestic market with already the highest percentage of green building projects currently underway. Speaking at the Green Building Council South Africa’s (GBCSA) 10th annual Green Building Convention 2017 conference held at Century City in Cape Town, Sandra Gordon, senior research and market analyst at Pam Golding Properties, explained the current trends that will ensure the growth of green building from commercial to residential property sectors.

Gordon said that the transition to green building practices in the local residential market is further encouraged by young first-time buyers who, with limited spending power, appreciate the value offered by green homes. Gordon was presenting her findings in a session entitled The Value of Green Homes: Usage and Attitudes in the Residential Space.

Trends turning the residential market green

The service delivery and energy and water security offered by green precinct developments, along with the competitive pricing of sectional-title properties, are increasingly attractive to first-time buyers,” Gordon noted.

First-time buyers: young and cash-strapped

Two-thirds of South Africa’s population is younger than 34 years – the typical age of the first-time buyer – and, with almost half of all ooba new mortgages awarded to first-time buyers each year, the demand from young buyers in urban areas is expected to continue. Limited land in major metros will keep sectional title properties popular.

The jobs, services and opportunities of the city attract young people, forcing it to densify while becoming proportionally younger. Concurrently, as less convenient land remains underutilised and values appreciate, the expected trend is for price-sensitive buyers to move into sectional title property schemes, explained Gordon.

Older, more affluent buyers also favour apartments

The security of well-located apartments, and the appeal of downscaling draws older buyers. Travelling for work and family, and the increased rates and utilities costs associated with managing a home mean a growing trend towards smaller, if not necessarily less expensive, properties for older buyers. “More affluent residents are moving from freehold properties to luxury apartments, often in the same area. This is certainly the case along the Atlantic Seaboard,” Gordon said.

With both first-time and other buyers opting for apartments, metros are becoming increasingly congested – a trend aggravated by prevalent car ownership of the emerging middle class and the deterioration in some forms of public transport. Cape Town is currently SA’s most congested city and Johannesburg’s peak traffic period is extending by 15 minutes each year, and this long, crowded commute may become more expensive as the likelihood that petrol may soon be subject to VAT, Gordon noted.

In reaction, home buyers often vote with their pockets and relocate to a growth node, such as Cape Town’s Century City where they can live, work and play on one estate, or near a new transport corridor – new suburbs are opened when MyCiTi or Gautrain routes are extended, said Gordon.

Green precincts bridge commercial and residential markets

Currently, most available housing is freehold, but a growing demand for sectional title is outstripping available stock, and this demand is reflected in the proportion of building plan submissions for sectional-title units.

New developments in major growth nodes are increasingly mixed-use and include retail, office, residential and sometimes hospitality. This can be seen in Harbour Arch and Century City in Cape Town, Melrose Arch and Sandton Gate in Johannesburg, Menlyn Maine in Pretoria and along the North Coast of KwaZulu-Natal.

As mixed-use developments gain traction with buyers, green design is extending beyond buildings into the public realm, with the creation of  green precincts. “In this way, South Africa’s lead in green building in the commercial sector is impacting positively on the new residential housing market,” said Gordon.

Green estates hold sporting appeal

At least one in 10 South Africans choose gated communities when making residential property purchases, said Gordon, citing Lightstone research. There are currently nearly 7 000 estates with 355 000 active residential properties valued at R800-billion in SA. Here too the effects of the green transition are being felt.

Encouragingly, green estates are not limited to top-end eco estates. In the affordable housing market, green estates are also available with an emphasis on the potential savings on utility costs. Fourleaf Estate in Port Elizabeth, first fully EDGE certified residential development in Africa by the GBCSA, offers annual savings on utility bills of around R1 280. In addition to water and energy savings, the estate also encourages recycling and provides community food gardens.

Research indicates that there is a move away from traditional golf estates and a rise in demand for retirement and eco estates. According to Pam Golding Properties agents, the most popular estates are those with amenities like golf courses, but also cycling routes, jogging paths and sports fields, thereby accommodating a range of interests, Gordon said.

Is existing housing stock turning green?

During the past year most sales were of existing homes rather than new housing units, Gordon notes, who cited Gumtree Head of Property Barrie Swart’s comments that the inclusion of green features  means that homes  are sold or rented more quickly.

Keyword searches for “borehole water” and ”eco estate” and  steadily rose on Gumtree during 2016, and by last November more than a thousand properties were promoted as eco-friendly, sustainable or eco-sensitive – double the number in previous years.

While Gumtree does not believe that green features affect the price of the property, most Pam Golding Properties agents surveyed agree that green features do in fact result in a price premium being achieved for a home.

Costly utilities fuel green residential trend

The underlying trends in SA’s housing market suggest that the transition to green will continue to snowball. The anticipated growing cost of utilities coupled with electricity and water shedding increases the appeal of alternative, greener sources of energy and water, and greater efficiency for both, in homes.

More sustainable homes that are well-located and easier to maintain will continue to attract South African buyers, summarised Gordon.