Smaller is better for South African homebuyers

Published Aug 3, 2023


Sectional title properties, particularly in South Africa’s major metro hubs and key commercial hubs, are in demand as buyers prioritise convenience and affordability.

And, encouragingly, developers are responding to this demand.

For young and other first-time home purchasers, smaller properties are appealing because they are more affordable, while lifestyle choices mean they also want secure, lock-up-and-go properties.

Read our latest Property360 digital magazine

It is, therefore, no surprise that the percentage of passed building plans for flats and townhouses has risen from just under 26% in 2010 to 47% last year, says Dr Andrew Golding, chief executive of the Pam Golding Property group.

The demand for smaller and more affordable homes is also being reinforced by the trend towards shared spaces and micro units that offer co-working and co-living areas.

“Not only does this make property ownership more affordable, but it also creates a sense of community which has been lost to a large degree in traditional suburban areas amidst security concerns.”

Furthermore, while the pandemic and ensuing lockdowns temporarily reversed the shift to sectional title homes – as the freedom to work-from-home prompted many to purchase freehold homes in peripheral suburbs and holiday or retirement towns, he says the longer-term movement towards sectional title residences has since reasserted itself.

“A contributory factor towards the shift to sectional title homes is the availability of surplus office space in business nodes in the post-Covid era, thereby providing new opportunities for conveniently located residential developments.”

These are both high-end and more affordable developments.

While the choice between freehold and sectional title is often dictated by life stage – such as a preference for a suburban freehold home while raising a family, or ‘empty-nesters’ downscaling or planning for retirement – there appears to be an underlying shift across generations towards low-maintenance, sectional title living. This is a result of security and cost considerations.

“This trend is most evident in the growing proportion of sectional title homes in new unit sales. In 2010, 20,5% of all new homes sold in South Africa were sectional title. By the first quarter of 2022, this had risen to 36,1% of all new homes sold.”

However, South African housing stock still remains predominantly freehold.

While all four of the major regions have experienced a shift towards sectional title properties over the past 12 years, Golding says the change has been the most pronounced in KwaZulu-Natal, which has a historical bias towards sectional title living, particularly as much of the development is along the coast where land is scarce and more expensive.

The difference between freehold and sectional title homes

To decide which property type is better suited to your needs, Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says you should aim to fully understand what each of them entails.

Sectional title homes, he explains, are usually semi-detached houses, townhouses, flats or apartments, and duet houses. Unlike a sectional title, a freehold property entitles a buyer to the full ownership rights to the property, which includes all the structures, as well as the land that it is built on.

“When you buy into a sectional title complex, you purchase a section or possibly sections of the common property. This is basically where you own everything within the four walls of your property, but external hallways, gardens, elevators, and so on, are co-owned by the rest of the community and are cared for by everyone.”

When you own a freehold property though, you have the right to change anything on your property, pending municipal planning approval, without needing the additional approval of a body corporate or HOA, as you would need within a sectional title scheme.

However, with a freehold property, homeowners are responsible for all the exterior upkeep, maintenance, and security costs on the property. On a sectional title, these costs are shared by everyone in the complex in the form of a levy.

When it comes to value, annual property price inflation tends to be higher for freehold properties than for sectional titles, which means that a freehold home is more likely to show greater appreciation in value over time than a sectional title one.

“This makes freeholds generally a better choice for those looking to invest in property as a long-term investment strategy. On the other hand, sectional titles generally are a better choice for those who want to generate a steady stream of income through a rental portfolio. Every situation is different though,” Goslett says.

IOL Business