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The cost of sectional and full title properties are converging

House prices between different segments of the market had seen a general narrowing in the gaps in the third quarter of 2012, according to FNB housing data released on Wednesday.

"The average price growth rate of full title homes, at 6.7 percent year-on-year, no longer far exceeds the 4 percent growth for sectional title homes, as was the case a few quarters ago," John Loos, property strategist at FNB said.

Sectional title refers to separate ownership of units or sections within a complex or development.
Full title segment is where the consumer buys the ownership rights of the property and the land on which it is built.

It was expected that the various segments' price growth rates will move increasingly closer to each other in the near term, with relative affordability advantages having been reduced over the past few years.

At stages during the pre-2008 house price boom, the average price of a three-bedroom sectional title home was in excess of 20 percent higher than the average for a three-bedroom full title home.

The gap was still very significant as at 2009, just after the recession.

"However, thereafter this gap has steadily narrowed to a virtually insignificant 0.6 percent, as full title house price growth has exceeded sectional title price growth in recent years."

Loos said the full title market's affordability advantage that was built up in the boom period had probably come to an end.

From a price affordability point of view there was no longer much of an advantage in buying a three-bedroom full title home compared to a three-bedroom sectional title home.

"The average price gap in this segment has virtually disappeared as a result of superior full title house price growth over the past few years."

The percentage by which the average sectional title-two bedroom price exceeded that of two-bedroom full title had also significantly reduced.

The four-bedroom sectional title average values were back below average four-bedroom full title values since late-2009.

(Sapa)


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