Homeowners forced to downsize in South Africa
Just Property CEO Paul Stevens described the current residential property market as “the great downsizing,” in which homeowners are choosing smaller, more efficient homes amid cost pressures.
In addition, lifestyle requirements and a desire for greater control are driving many homeowners to choose smaller homes.
“It’s a two-speed market. On one side, people are choosing compact, energy-resilient living,” said Stevens.
“On the other hand, well-capitalised buyers – including returning expatriates and younger high-earning families – are upgrading to premium freehold properties and estates where prices have stabilised.”
Stevens said both of these movements are reshaping the market in real time.
According to Stevens, sectional title properties now represent over 50% of new residential transactions in many of the country’s major metropolitan areas.
Sectional title properties refer to individually owned units, such as apartments or townhouses, within a larger development or complex.
The owner of the sectional title holds a deed for the section they own, whilst sharing joint ownership of common property such as elevators, grounds, etc., managed by the body corporate.
The increase in demand for sectional titles is also driven by rising rates, utilities, security costs, and municipal tariffs.
Additionally, Just Property revealed that buyers under the age of 44 account for nearly half of all purchases nationwide.
The drivers of the demand surge have led households to choose smaller homes, as larger homes have become more difficult to maintain.
“These buyers want homes that support the way they live now. They want efficiency, security and financial manageability, which they’re finding in smaller, well-located units,” said Stevens.
Younger families are moving back to long-established communities, helping to revitalise schools, sports clubs, and local businesses.
Retail areas are shifting towards convenience-oriented formats that cater to compact living.
Security estates are attracting upgraders, while smaller, well-located freehold homes are being quickly purchased by buyers seeking more space without the burden of excessive maintenance.
Traditional suburban layouts are evolving into a mix of compact freehold homes, sectional title units, and estate living.
Cost of living hitting the property market
South Africa is currently experiencing a prolonged cost-of-living crisis, which has been steadily worsening, according to Raksha Darji, a senior economist at the Competition Commission.
In an interview with Kaya Biz, she explained that this crisis began following Russia’s invasion of Ukraine nearly four years ago, and it appears to be exacerbating as global shocks combine with local structural challenges.
The impact on household finances is particularly severe for lower-income groups and younger earners who are trying to enter the property market.
“Low-income households spend about 66.81% of their income on food and housing utilities, leaving almost no room to absorb any shocks that may come their way,” Darji said.
Over the last six years, cumulative electricity prices rose by around 85% and water prices by nearly 70%.
These increases far exceed the overall inflation of just over 30%. This leaves many households forced into difficult trade-offs.
She explained that, because their budget is squeezed and prices are increasing, people have to choose between things they shouldn’t have to choose between.
In its recent Cost of Living Report, the Competition Commission expressed concern about rising electricity costs.
They noted that electricity prices are projected to increase by about 18% over the next two years.
This increase follows an error by the National Energy Regulator of South Africa (NERSA) that led to an underestimation of Eskom’s costs by approximately R54 billion.
The Cost of Living Report also revealed that rental inflation for both flats and houses has increased by only 15% since 2020, which is still significantly lower than the overall inflation rate.
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