HOME OWNERSHIP

HOME OWNERSHIP

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In this blog, we cover an issue upon which I am biased. I admit that upfront so that no illusions are created.

The issue is full title standalone housing versus sectional title homes.

The recent FNB Property Barometer gives some insight into this phenomenon and we quote as follows:

“The Sectional Title Housing Market Segment continues to outperform the Full Title Segment, although the latter segment has seen its average house price growth accelerate somewhat.

The FNB Sectional Title House Price Index has remained at a faster growth rate than Full Title of late. The Sectional Title House Price Index rose by 5.18% year-on-year in the 4th quarter of 2017, having accelerated from 4.96% in the 1st quarter of the year. 

The Full Title House Price Index, by comparison, showed a slower 3.95% year-on-year growth rate in the 4th quarter of 2017. However, its growth had accelerated a little more over the year than the Sectional Title Index, from a lowly 3.18% year-on-year in the 1st quarter of 2017.

Our panel of FNB valuers also perceived the Sectional Title market to be stronger than the Full Title market in the 4th quarter of 2017.”

Let’s just analyse this trend. What does sectional title represent generally? Secure estates with smaller homes on smaller stands and community living.

On the negative side, if you don’t like people, you’re too close to the neighbours. In addition, you become liable for the community rather than your own costs. So, as per our units in a Cape provincial town, you become liable to paint the whole complex when that is needed or the sewer repair even though your own toilet is working. Of course, you don’t really feel this as a good Body Corporate will make provision for such an eventuality. In my Mom’s case, the roof is still asbestos sheeting and this needs to be replaced at great cost and with sensitivity of those living below. The financial provision is building for this to happen and even the downstairs units are contributing to the replacement. Painting is another generic cost and gardens are contained in the operational budget. In essence, everyone contributes to the common good of the complex.

So why stay there and endure all these common costs? I would put to you that the major reason is the simple human phenomenon that there is safety in numbers. Older folk feel comfortable that having a friendly neighbour provides then with a point of first call should there ever be an emergency. But for the younger folk, having neighbours, especially good ones, just creates a sense of community that you can get nowhere else. The kids grow up together, the lifts to school are easier, and the sense of security and camaraderie is expanded as people live closer together.

So, it is not unusual that sectional title properties are more sought after than standalone houses. To be honest, I’m not sure this is a purely South African phenomenon. It may well occur elsewhere. Here are some of the reasons why:

  1. Community is a modern trend. We give away some privacy in order to live in community. I have a friend with a 3000m2 stand, who has planted fully grown trees so as to avoid neighbours. But he would be the first to admit that he is unusual. Firstly, affording such a property is the realm of the wealthy and secondly, not everybody needs such reclusivity. For many, the proximity of neighbours is sacrificed for the benefits of communal living.
  2. Expenses are shared in a sectional title complex. Painting, municipal costs, security, building insurance, and Body Corporate costs eg a burst geyser, are all co-borne. In other words, when we paint, I pay just that portion of my cost that pertains to my square meterage. So I don’t need to pay for my whole property but just for that portion that I “use”. That’s neat! The same goes for security. When you drive in Inanda in Joburg and you see those guard quarters at the entrance to the property, you’re looking at R20-30000pm for 24 hours guarding. In your complex, you get that but for a fraction of the cost.
  3. The case for security goes without saying. Firstly, you have it with everyone else but you also pay less and feel safer in a complex where there is movement around you. Nothing is fool proof as my friend’s daughter who was followed right into her complex will tell you, but there is a semblance of more security in a townhouse complex than on the open road.
  4. Sectional titles can be cheaper to buy and give a better return long-term than stand-alone houses. The reason upon entry is standardization. A 50 home complex has 500 common windows, 1000 similar doors etc so prices can be negotiated by the developer that pale into insignificance compared with your non-standard, fancy windows and doors in your architecturally designed home. This what you buy – similar design, cost-effective material and building costs and often, benefits like transfer duty included in plot-and -plan sales. Really, a great value proposition.
  5. Finally, a benefit worth mentioning in an ageing population [that’s you, by the way :-)], is that old age facilities accompany communal living. Where we live, Alzheimer’s centres, Frail Care and proximity [if not on-complex] to such facilities, is crucial to the buying decision and the value proposition of community living. High demand exists in these areas as global populations age beyond their time.

There are a few property types in the communal category that bear unbelievable common-sense. My uncle taught me that properties along a ridge, with a view, and properties along a shoreline, close to the sea, are scarce. Another is the golf course and eco-estates that have sprung up. The golf course estates of course now bear the water issue. Golf courses drink water so practically no more will ever be built except at the great expense of grey water reticulation which makes the stands expensive to service. Eco-estates will continue to spring up in many different forms as urbanites attempt to escape the pressures of city living. It is therefore fair to say that these estates carry a scarcity value that bodes well for good investment returns.

Compare these benefits with a stand-alone house. In this case, your security is your responsibility, your neighbours are “next door” rather than close by and every cost of the property is your own exclusively. You may be paying excessively for privacy.

Thus, sectional title complexes have carried value over the years and have proliferated as a form of property ownership.

Property ownership remains a definite source of wealth in South Africa. The fact that you own property, never mind the advanced financial engineering of gearing properties, remains a major source of wealth creation for most young people.

In this regard, Homeloan Junction is positioned to help you acquire property. Our advice, access to the free services of the banks, and our ability to negotiate credit terms that suit your pocket, mean that we remain a leading originator in the country. We have offices countrywide and can refer you to them with any need you may have. Contact us on www.homeloanjunction.co.za for a free consultation and pain-free mortgage finance.

 

Yours in Property.

Jack Trevena
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