Good news for complexes and sectional titles in South Africa

 ·5 Feb 2024

Sectional title residential property prices have risen at a faster pace than freehold prices – for the first time in 20 years.

According to Andrew Golding, CEO of the Pam Golding Property Group, sectional titles saw 1.8% growth in Q4 2023 compared to growth of 1.5% in freehold homes.

“This is the first time that sectional title house price inflation has exceeded that of freehold since 2004. The gap further widened during the fourth quarter, ending the year at price growth of +1.9% for sectional title and just 1.1% in freehold in December 2023, Golding said.

“While growth in freehold prices for the year 2023 averaged 3.2% compared with 1.7% growth in sectional title for the same period, it will be interesting to see if the trend favouring greater sectional title price growth prevails in the coming year.”

FreeholdSectional Title
Dec’231.1 %1.9%
Q4’231.5 %1.8%
2023 average3.2%1.7%
Source: Lightstone

He said that the demand for sectional title units has grown substantially in the last decade, rising from 44.6% of all residential property sales across the five major metro housing markets in 2013 to 53.1% in 2023.

Source: Lightstone

“At a metro level, the largest percentage of sectional homes sold last year was in Tshwane. Cape Town, meanwhile, registered a marked increase in the percentage of sectional title sales last year, making Johannesburg the metro market with the lowest percentage of sectional title sales among the five major metros,” he said.

“This could, in part, be attributable to the marked increase in investment purchases and new developments in the Western Cape – the majority of which are sectional title homes.”

Reasons for the increase

“Several factors are most likely contributing to the increasing demand for sectional title properties – affordability, for example, as younger buyers look to enter the market for the first time – now more than ever as interest rates are expected to enter a downward cycle later this year.”

In addition, sectional title complexes tend to offer good security and amenities, such as swimming pools, entertainment areas, laundromats, meeting rooms, shared workspaces, concierges and more.

There has also been increasing demand due to changed lifestyle requirements, particularly lock-up-and-go and hassle-free flexibility.

“Furthermore, many of these developments are well positioned, in part because they are often redeveloped office buildings, and so offer the opportunity to live in a convenient location where one could not necessarily afford a freehold home. Some municipalities, like Cape Town, are encouraging densification, which is seeing some freehold homes being replaced by small sectional title developments,” Golding said.

“Cost is another important consideration, and with the rising costs of building, amenities, maintenance and security, the ability to afford but also maintain and run a larger freehold home is less accessible or desirable to many home buyers.

“Although South Africa has a predominantly young population, there is a growing number of older people, as elsewhere in the world, whose children have left home, who may prefer a more manageable sectional title in the higher price bands.”

Data from ooba Home Loans also showed a clear preference for sectional title properties as investments, accounting for 67.4% of all investment properties sold in 2023.

Most expensive cities

Lightstone’s data showed that the median price of a sectional title property in most major metros averaged less than R1 million in 2023.

However, Cape Town is an outlier, with a median sales price of R1.7 million – strengthening to R1.75 million at the start of 2024.

Although Cape Town is traditionally the most expensive housing market, the gap in freehold prices in the Western Cape capital and mother major metros is not as big, with median sales for freehold properties in Cape Town and Tshwane moving at the same speed in 2022 and 2023.

Source: Lightstone

Read: This is how much it costs to buy a shopping mall in South Africa

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