The rising popularity of sectional title ownership
Category Advice
Sectional titles have become a staple in the real estate industry over the past decades. And with all the benefits that come with it, it makes sense. Heightened security, lower insurance costs on buildings and outdoor areas, shared maintenance costs with other owners, becoming part of a community, no cleaning the pool on Saturday mornings - it sounds like any homeowner's dream. And it's not just hearsay, the numbers speak volumes. In 2005, sectional title sales only took up about 13% of overall property sales. But by 2010, sectional titles sales started picking up, soon accounting for 22% of all sales and reaching a whopping 28% of overall sales by 2016. Even with the slight dip sales took due to the pandemic, sales were still able to reach a high of 29% of the market at the end of 2020.
When looking at sectional title sales in each province, Gauteng has always been the frontrunner, accounting for more than half of all sales nationally, while the Western Cape and KwaZulu-Natal take 2nd and 3rd place (with 18% and 14% of sales, respectively).
The market is drastically shifting, though, with the Eastern Cape's sales increasing by 28,3% over the past four years. Growth in the other provinces has been substantially lower, with the Western Cape even showing a decline of 4.9%.
When it comes to revenue, however, the Western Cape is still in the lead, dominating the R3 million+ property market. The Western Cape market saw an exceptional rise in sectional title sales between 2016 and 2018 with an influx of sales born out of the semigration trend. In the following years the sales have metered out and plateaued again (however, still leading in the upper market spectrum).
Beyond the benefit of having a cost-effective home that allows you to lock-up-and-go knowing that your property will be safe, one of the primary factors that contribute to the growing popularity of sectional title sales has been the lower price inflation rate. Lightstone statistics show that sectional title properties have had a lower inflation rate compared to freehold properties since 2010. The margin between the inflation rates had slowly been closing over the years, with the rates aligning at the end of 2019. Though, in 2020, the gap widened once more.
That gap may be narrowing once again, though, as the inflation rate of a 3-bedroom property in either category reached the 4%+ mark in the first quarter of 2021. This is largely due to the momentum that sectional title sales have gained while freehold properties have been losing traction.
It doesn't look as if sectional title ownership is going to drop in popularity any time soon. Rather, all signs indicate that it has become a mainstay in the property market going forward.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)
Author: Extracts from NGL Attorneys
