Property Buying: Changing Trends - Part Two

Private Property South Africa
Dieter Deppisch

Insights from the South African Property Transfer Guide (SAPTG) research team reveals changing trends in property buying that property professionals and investors should consider when formulating their respective marketing and buying strategies.

Knowledge Factory’s, Dieter Deppisch, Property Data Research National Manager is discussing these trends in a three part series, due to the length of the report.

TREND 2: Sectional titles prices rising

The second trend is the convergence of sectional title and full title property prices, confounding the common logic that apartments and townhouses are simply entry-level buys. According to SAPTG data, which tracks the median price trend, the two price medians have been getting steadily closer since 2004/2005. In that year the median prices of full title and sectional title were separated by R61,435, in subsequent periods by R50,000 then R32,000 R16,000 and finally, at the end of 2008 they crossed over, with the median sectional titles value actually R20 000more than their full title counterparts.

This does not mean that sectional title is now the most popular property type. Overall the volume of sectional title units sold has declined at a rate more rapid than that of full title properties. While SAPTG research indicates a 34% decline year-on-year in full title it shows a 36% decline in sectional title. (footnote: properties within the R200 000 and R5 million range between April 2007 and March 2008 and the corresponding period in 2008/2009)

The converging effect then has been in rand value. What has stimulated the positive growth in sectional title prices and the negative growth in full title prices? Recessionary economic drivers are contributing factors, as Deppisch elaborates. “We have seen a rise in the debt-to-disposable-income ratio over the past 2 years. Many buyers have responded to pressure on their household budgets by purchasing smaller, living spaces that are perceived to be cheaper, offer value for money and are less costly to maintain,” he explains. “These changes are also part of larger shifts in lifestyle as buyers opt to move closer to their places of work to save fuel costs or even to move to different suburbs in order to save face with their friends if they can no longer maintain their previous lifestyles.”

Deppisch cites security as another factor. “Sectional title properties are perceived to be more secure because many complexes implement centralised security measures, such as 24-hour guards and secure access,” he asserts, “and buyers are comforted by the notion that there is safety in numbers.”

Property developers have also played a role in the rising price of sectional title properties. “They have responded to the changing demographics of buyers by upgrading finishes within sectional title units,” confirms Deppisch, “which, in turn, made them an attractive option, especially for those who were downscaling and wanted to keep as many of the comforts they previously had in their full title home.”

Click here to read Part One on Property Buying: Changing Trends

Click here to read Part Three on Property Buying: Changing Trends

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