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Future of Property in Sectional Title Sector

The future of property lies largely in the sectional title sector, says Paul French, commercial director for the Coastal Property Group. This is driven by the rise in demand for housing in urban areas combined with limited land space and a need for greater convenience and security.

In a recent FNB Property Barometer, property economist, John Loos also said as much. While the sector may well come under pressure in volume and price terms in view of the wider economic climate, it is likely to continue to perform well. Especially, says French, if we segment the market and break it into the various pricing sectors.

The lower to mid-market sector is likely to remain the busiest throughout the year with the highest demand for well-priced units under R1.5m likely to drive most of the activity, but this sector can also be a bit challenging, he adds. “We often find that obtaining home loans for buyers, especially at the lower end of the market is a challenge, so while you may have high demand, sales can be hampered.”

Smaller units more affordable

According to FNB, smaller units also showed the best price growth gains last year as these units are often more affordable, he says. In most urban areas, the rise in sectional title property is quite evident so it stands to reason that it will now become a busy sector of the market.

Jason Paans, property consultant with the group says that areas such as Cape Town’s CBD, City Bowl and Atlantic Seaboard continue to see high demand for sectional title property below the R3m price band. He says that if you look at the performance of this sector over the last year, sellers still achieved almost full price with a less than 3% on average below the asking price recorded for the market as a whole.

Stock shortages a challenge

In the CBD and City Bowl especially, sales are still concluded in a relatively short period, averaging at just over a month. Paans says that stock shortages remain a challenge and this will be the case at least for some time. “As we have seen over the last two years, new developments sell out very quickly, especially below the R3m-R6m price range.”

A challenge for this year though, adds French, will be the higher levies that will be necessary to meet the new maintenance fund requirements that came into effect late last year when the Sectional Title Schemes Management Act (STSMA) was introduced. That said, the demand for this property type is such that buyers and tenants are happy to pay higher rates for the convenience and security. Of course this new maintenance provision should add further peace of mind for property owners and investors.

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