Home buyers set their sights on sectional titles

Over half residential properties sold in Cape Town Metropole comprise sectional titles

With time being a commodity in short supply in today’s fast-paced world, global trends logically reflect an increasing desire among home buyers for convenient and affordable living in close proximity to amenities, the workplace, schools and entertainment, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

Renovated to perfection and priced at R15 million (excluding VAT) through Pam Golding Properties, this three bedroom, all en suite, sectional title apartment in Clifton on the Cape’s Atlantic Seaboard includes an open plan lounge/dining/kitchen leading to a spacious undercover balcony with spectacular views of the beach. The building includes a communal pool with large level lawn and direct beach access.

“Driving demand for residential accommodation both to buy and rent in economic nodes and key hubs around the country, densification and urbanisation is seeing cities becoming more crowded. In line with this the demand for land for residential accommodation increases exponentially and wherever possible, new suburbs open up and urban sprawl increases.

“The requirement for security is another consideration which is an important driver of home buying decisions, and so, as a general trend, sectional title as a property type is increasingly in the sights of home seekers – including first time buyers, with its advantages of security and in many instances, convenient apartment living.”

According to Absa, in the last 20 years flats and townhouses have made up 26.6 percent of newly completed buildings, while over the past three years, 63 percent of all residential development units which they financed were sectional title units – a trend they anticipate will continue.

In the Western Cape, the increasing popularity of sectional title living is clearly evident not only in Cape Town’s highly successful regeneration of the central city, but also in areas such as the sought after Atlantic Seaboard and prime pockets in the Southern Suburbs and burgeoning areas of the Western Seaboard, says Laurie Wener, MD of Pam Golding Properties in the Cape Town Metro region. “Coastal areas have proved the most popular for apartment dwellers for permanent, part-time or holiday usage, with beach and ocean views increasing desirability and value.

This ultra luxurious, three bedroom sectional title apartment on the ‘Platinum Mile’ in Mouille Point, Cape Town is priced at R26 million (excluding VAT) through Pam Golding Properties. With approximately 215sqm of patio with a private pool and elevated deck with spectacular sea, golf course and Urban Park views, this apartment has a large double volume kitchen, scullery, lounge and dining areas. The new and contemporary apartment building has advanced security, glamorous foyer and two restaurants.

“Across the board, the sale of sectional title property in the Cape Town Metropole is steadily increasing, with this region experiencing an increase in total units sold of 77 percent from 2008 to 2014 and an increase in total sales value of 141.6 percent over the same period, according to Lightstone statistics.

“During 2014 a total of 4 216 sectional title properties were sold in these areas, with an average sales value of R1.46 million.  This is considerably up from 2 383 sectional title properties sold in 2008, with an average sales value of R1.1 million, 3 222 units sold in 2012 with an average price of R1.16 million and 3 892 in 2013 priced at R1.27 million on average.”

This compares with 2 685 freehold properties sold in the region in 2008 and 3 841 freehold in 2014. Of interest is that during this period the number of freehold sales increased by just 43 percent, while sales value rose by 115.3 percent.

“Notably there’s been a surge in the sale of sectional title property from 2012 to 2014. Naturally, the activity is relative to supply, as demand is positively impacted by all the desirable characteristics of convenient sectional title living, but limited by fewer sellers and limited development opportunities,” says Wener.

“Investors too find sectional title extremely attractive, given the high demand for apartments to rent and the growth in value of such accommodation. According to the Pam Golding Residential Property Index, since 2011 growth in sectional title prices in South Africa has accelerated slightly more rapidly when compared to freehold house prices, and then began to completely outperform freehold in March this year (2015,) with growth of 6.1 percent year on year in July, compared to 5.4 percent in freehold.

“For the buy-to-let investor, the rule of thumb is the lower the capital value the higher the rental return. So at the lower end of the scale - say under R1 million, one can achieve rental returns of 10 percent, then up to R5 million this would be in the region of five or four percent and over R5 million from about four percent or slightly below.

“In the Cape Town Metro we see all the price bands of sectional title property in demand from various types of buyers, including young professionals, singles, young couples starting out as well as older buyers, but as with all property the highest demand is in the lower price bands.”

With its high demand and limited supply, the prestigious Atlantic Seaboard has by far the most expensive apartments to offer, with luxurious prime properties currently on the market ranging from R20 million to R50 million, R85 million, R110 million and upwards.

Wener says smaller sectional title units are very much in demand by those scaling down or retiring, particularly in terms of reducing utility and other costs associated with owning a large, freehold property, with secure lock-up-and-go properties affording peace of mind when travelling or commuting to and from the workplace. Sectional title apartments close to tertiary education facilities also cater for the demand both to buy and rent for student children or staff.

“From the point of view of costs, with a sectional title unit these are more or less fixed on a monthly basis, with building insurance, general maintenance and water all included in the levies, while there is less potential for major costly maintenance as experienced with a private garden with associated high water costs or exterior house painting, for example. However, one needs to be sure of buying into a well-maintained block with a healthy bank balance and a good body corporate or one runs the risk of high special levies when any major repairs are required.”

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