Get bigger gains from smaller homes

Smaller homes are increasingly popular among SA buyers – and not just because that’s all that’s available or all they can afford. Another major consideration is that such properties are increasingly proving to be savvy investments.
That’s the message, says Berry Everitt, CEO of the Chas Everitt International property group, to emerge from the latest FNB statistics detailing the rate of price appreciation among properties of different sizes – small homes of between 20 and 80sqm, medium-size homes of 80 to 230sqm and large homes of 230 to 800sqm.

These figures show that in the second quarter of the year:
* Small home prices were increasing at a rate of 12,5% a year (up from 12,4% a year in the first quarter);
* Medium home prices were rising at a rate of 6,6% (down from 7,5% in the first quarter); and
* Large home prices were growing by 4,6% a year (up from 1,4% in the first quarter).
Similarly, he says, the latest Absa Housing review shows that among homes costing less than R4,4m, small homes showed a 9,9% year-on-year increase in the second quarter, medium-size homes a 6,1% increase and large homes a 5,6% increase.
“One of the main reasons for these relatively high gains on smaller homes is the additional demand that has been coming from the increasing number of repeat buyers who are ‘downscaling’ to smaller homes in pursuit of lower operating and maintenance costs.
“Add this to the traditional first-time buyer demand for such properties, as well as the slowdown in new housing delivery over the past few years, and you get supply shortfalls - and rising prices.”
Writing in the latest Property Signposts newsletter, Everitt notes that an increasing number of high-end buyers are also choosing smaller properties now for reasons of security, convenience and lifestyle – with the result that “small” is by no means always synonymous with “inexpensive” any more.
“For example, even tiny studios and apartments can now easily sell for more than R50 000/square meter if they are in the most fashionable and sought-after locations, and prices like that will quickly push up the averages.”
What is more, he says, further statistics suggest this is not just a flash in the pan. The small homes category has clearly outperformed the other two over the past 15 years – including the “boom” period from 2003 to the end of 2007, when falling interest rates actually prompted many homebuyers to upgrade, and spurred high demand for bigger homes.
Indeed, FNB says that between the first quarter of 2001 and the second quarter of this year, smaller homes showed a cumulative 375,3% increase in value; medium-size homes an increase of 349,8% and large homes an increase of 286,1%.
“In short, those who buy smaller homes can currently and for the foreseeable future expect much better returns on their investments than those buying medium or large properties – and that means that the traditional steps “up the property ladder” may soon have less to do with buying bigger and bigger homes than with buying more and more valuable small homes.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us