Young South Africans are struggling in the current property market, with many being drawn to sectional title properties.
Those in the property market are struggling, with the South African Reserve Bank pushing the repo rate to 8.25%.
Richard Gray, the CEO of Harcourts South Africa, said that younger people are struggling to service their bonds, which is forcing many to downsize.
“The same is true with rentals, where they are moving to smaller properties or moving areas to “cheaper” areas. In some cases, they are negotiating with landlords to get rent reduced (if they are in areas where rental property supply exceeds demand) or at least not have the rent increased on the renewal of the lease,” Gray said.
He also noted that many homeowners are also selling their properties and moving into rentals.
“However, this is not always much of a help, as the lease is not always much less than the bond repayment. Banks are known to work with home loan clients who are struggling with mortgage payments, rather than the homeowner having the home repossessed,” Gray added.
Where are young South Africans going
Dr Andrew Golding, CEO of the Pam Golding Property group, said that younger buyers are currently moving to smaller properties as they are becoming more affordable, with many also desiring the simple lock-up-and-go nature of sectional title properties.
“This is reinforced by the new trend towards shared spaces, with micro private units developing with co-working and co-living shared spaces. Not only does this make property ownership more affordable, it also creates a sense of community which has been lost to a large degree in traditional suburban areas amidst security concerns,” Golding said.
“While the pandemic and ensuing lockdowns temporarily reversed the shift to sectional title homes – as the freedom to work-from-home prompted many to purchase freehold homes in peripheral suburbs and holiday or retirement towns, the longer-term trend to sectional title residences has since reasserted itself.
“A contributory factor towards the shift to sectional title homes is the availability of surplus office space in business nodes in the post-Covid era, thereby providing new opportunities for conveniently located residential developments.”
The trend is also seen in the increase in sectional title homes in new unit sales. In 2010, 20.5% of new homes sold in South Africa were sectional title homes, which increased to 36.1% in Q1 2022.
“While all four of the major regions have experienced a shift towards sectional title properties over the past 12 years, the change has been the most pronounced in KwaZulu-Natal, which has a historical bias towards sectional title living, particularly as much of the development is along the coast where land is scarce and more expensive,” Golding added.