Future growth looks good for sectional title property

There can be little doubt that the sectional title sector of the property market is in for a busy year. We have seen this sector rise in prominence and it certainly is where the future of property lies.

Paul French, the commercial director for the Coastal Property group says the rise in demand for housing in the urban areas combined with limited land space and a need for greater convenience and security are just some of the contributing factors.

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 like 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.

According to FNB, smaller units also showed the best price growth gains last year as these units are often more affordable. 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.

Sales manager, Jason Paans, says that in high demand areas such as Cape Town’s CBD, City Bowl and Atlantic Seaboard, it is likely to be the price band below R3m that will see the bulk of the demand. For the last year, it still showed excellent offers with most sales concluded at less than 3% below the asking price. Sales were also still taking place in a relatively quick time of just seven weeks.

The picture is very similar for the CBD and City Bowl except that the demand is such that sales are concluded in just over a month. Paans says that stock shortages remain a key theme, especially in the more affordable price ranges.

It is certainly a good time to either buy or sell sectional title property right now and Paans expect the demand to remain good in key locations and at the lower price ranges.

French adds that this sector is also likely to see some higher levies coming through this year as a result of the new maintenance fund requirements that came into effect late last year when the Sectional Title Schemes Management Act (STSMA) was introduced.

That said, good management and maintenance can only serve to add value to this property class, he concludes.