Recent trends indicate a significant rise in sectional title residential property prices compared to freehold prices in South Africa, marking a notable shift in the market dynamics after two decades. Andrew Golding, CEO of the Pam Golding Property Group, highlighted that sectional titles experienced a 1.8% growth in the fourth quarter of 2023, surpassing the 1.5% growth observed in freehold homes.
"This is the first time that sectional title house price inflation has exceeded that of freehold since 2004. The gap further widened during the fourth quarter, ending the year at price growth of +1.9% for sectional title and just 1.1% in freehold in December 2023," Golding remarked.
He emphasized the growing demand for sectional title units, which has notably increased over the past decade. In major metro areas, particularly Tshwane, there has been a substantial rise in the percentage of sectional homes sold. Additionally, Cape Town witnessed a surge in sectional title sales due to increased investment purchases and new developments, resulting in Johannesburg having the lowest percentage of sectional title sales among the five major metros.
Several factors contribute to the heightened demand for sectional title properties. Affordability remains a key driver, especially for younger buyers entering the market. Sectional title complexes offer attractive amenities such as enhanced security, recreational facilities, and shared spaces, appealing to buyers seeking convenience and lifestyle flexibility.
Moreover, redevelopment projects, particularly in urban areas, have transformed office buildings into residential complexes, providing convenient living spaces in desirable locations. Municipalities like Cape Town are encouraging densification, leading to the conversion of freehold homes into smaller sectional title developments.
Cost considerations also play a crucial role, as the expenses associated with maintaining larger freehold properties are becoming less feasible for many buyers. The shift towards sectional titles is evident in investment preferences, with ooba Home Loans reporting that 67.4% of all investment properties sold in 2023 were sectional title properties.
While sectional title properties in most major metros have a median price averaging below R1 million, Cape Town stands out with a median sales price of R1.7 million, reflecting its status as a premium housing market. Despite being traditionally expensive, the gap in freehold prices between Cape Town and other major metros has narrowed, indicating a more balanced market landscape.
These developments underscore the evolving preferences and dynamics within the South African property market, emphasizing the growing appeal and viability of sectional title properties for a diverse range of buyers and investors.
