09 November 2023
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,” says Jacobs. “For these young people, there is a strong trend towards urbanisation where sectional title properties are more common.”
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.”
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.”
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,” Jacobs 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, Jacobs 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.”