SA's first-time buyers are choosing sectional title- here's why.
Category Residential Property
Despite the predominance of freehold stock on the South Africa property market, sectional title properties have become the leading choice for first-time buyers.
According to David Jacobs, Gauteng Regional Sales Manager for the Rawson Property Group, this is due to a combination of age demographics, urbanisation, affordability, availability and lifestyle trends.
Demographics and urbanisation
"The first thing to understand is that South Africa's population is a young one, with a median age of just 28," he says. "For these young people, there is a strong trend towards urbanisation where sectional title properties are more common."
Affordability
Sectional title properties are also typically more affordable than freestanding homes, which often have higher municipal rates and maintenance expenses to match their higher purchase prices.
"This is an increasingly relevant factor as South Africa's cost of living continues to soar," says Jacobs. "Younger buyers in the early stages of their careers have the benefit of a lifetime of income growth ahead of them, but that doesn't increase the amount of disposable income they have in the meantime."
Lifestyle trends
It's not just finance driving first-time buyers to more compact sectional title purchases, however. Despite - or possibly because of - the COVID-driven shift to remote and hybrid work models, Jacobs says today's first-time buyers are sacrificing personal space in favour of community. "We're definitely seeing an increase in trends like micro-apartments with shared co-working and co-living spaces," he says. "This gives buyers access to community and social interaction with the added benefit of certain shared expenses that would otherwise cost a relative premium."
Availability
According to Jacobs, population growth and ongoing urbanisation is also contributing to property shortages in popular urban and suburban hubs. "It's easier for developers to meet demand for new properties in these land-scarce areas by building sectional title developments to maximise use of space," he says. Sectional title availability is also seeing a boost from repurposed office space in CBDs. "COVID left a lot of office buildings sitting empty and idle," he explains. "Many of these are now being converted into inner-city sectional title residences and mixed-use developments."
Choosing the right sectional title agent
Despite being an increasingly popular market segment, he says many real estate agents fail to take the complexities of sectional title purchases seriously. "Buying into a sectional title development isn't the same as buying a freehold property," he says. "You're buying more than just a home - you're buying into a community that has rules and responsibilities."
As such, Jacobs says it's essential that real estate agents assist prospective sectional title buyers in accessing all available information to make a fully informed purchase decision. Some of this is legally required, like a copy of the scheme financials showing the latest balance sheet, levy payment schedule, levy calculations and probability of special/extra levies. Other details - like the scheme rules - are often treated as optional, with unethical agents waiting to be asked for this information rather than volunteering it at the risk of souring the deal.
"A principled agent, on the other hand, will actively assist buyers to ensure they understand all the pros and cons of their potential purchase," says Jacobs. "That includes everything from the exact breakdown of communal and private spaces, to the scheme's financial health and quality of management, to the rules they will need to live by.
"At the end of the day, all these elements could prove pivotal to the buyer's decision, not to mention influence the cost, growth potential and long-term viability of their investment."
With so many different types of secure developments now all falling under the Community Housing Schemes Ombud Service Act, it's important for homebuyers - and especially those buying for the first time - to be aware of the differences between Sectional Title and freehold properties in these schemes, and how these differences are likely to affect them in future.
So says Andrew Schaefer, MD of leading property management company Trafalgar, last month shared the differences between sectional title and freehold and what it mean to buyers.
Schaefer noted that there is even a mixture of freehold and Sectional Title properties in certain gated estates now, while Sectional Title ownership is certainly not restricted to high rise apartment buildings or townhouse complexes.
"However, no matter what they look like, the most important difference between Sectional Title and freehold property developments is the fact that in a Sectional Title scheme, you are buying a share in the common property in addition to your own apartment, townhouse or house.
"This common property includes the land on which the whole scheme is built, as well as gardens, parking, any other shared amenities and security equipment such as electric gates and fencing, CCTV and biometric scanners. And you will be liable to pay a monthly levy to cover the maintenance and repair of this common property, as well as certain other items."
On the other hand, he says, when you buy a freehold or full title home, you acquire exclusive ownership of an entire property, including the land and any structures on it - although if it is in an estate, you will also have to pay a monthly levy to the homeowners' association (HOA) to cover the maintenance and upkeep of common areas, roadways and the security provisions. Your personal homeowners' insurance cover (HoC) will, however, not be included in this levy.
Author: Property24
