With nearly 60 percent of all value added to the South African economy occurring in the metropolitan areas and rapid urbanisation as a result, the need for densely built residential properties is increasing, explains Paul-Roux de Kock, analytics director at Lightstone.
In Cape Town, a relatively small proportion of properties are in sectional title schemes, but those that are, are more likely to be positioned close to the City Bowl and beaches, which drives up the average price of sectional schemes to even more than that of a freehold property.
City dwellers don’t simply move into complexes, flats and apartment blocks in a bid to conform to the norm, but the increased prominence of sectional scheme properties in metros are mainly due to their affordability relative to the other properties, he says.
One could argue that the additional security sectional schemes generally offer is also a major factor but similar, if not better, security can also be found in freehold lifestyle estates.
Of the nearly 850 000 sectional scheme properties in South Africa, 82 percent are located in the major metropolitan areas.
Within these areas the average sectional title property is currently valued at about R850 000 while the average freehold property is valued at R1.2 million, and this equates to a 41 percent difference.
“There is, however, a substantial variation in the price proportion of these two property types in the different towns making up the metropolitan areas.”
According to De Kock, the relative price difference between sectional title and freehold properties is very low if the property is located in coastal areas like Durban, Cape Town and Port Elizabeth.
“High sectional title property values in coastal areas are mainly due to the investment potential of those properties as holiday destinations, as these are generally over weighted to beachfront holiday flats within close proximity to the major business centres,” he says.
What is very interesting to note, albeit not unexpected, is the strong correlation between the relative price of sectional title to freehold properties and the relative amount of sectional title properties to freehold properties in different metro towns.
In Sandton, for example, the average sectional title property is valued at about 37 percent of the value of freehold properties – and since freehold properties are more expensive the demand for cheaper sectional title properties has increased over time, notes De Kock.
He points out that there are currently roughly the same amount of sectional title properties as freehold properties in Sandton.
In Cape Town, a relatively small proportion of properties are in sectional schemes, but those that are, are more likely to be positioned close to the City Bowl and beaches, which drives up the average price of sectional schemes to even more than that of a freehold property.
“Considering the pros and cons of buying a freehold or sectional title property can be a big decision for any buyer.
“Having your own stand might provide more privacy and a backyard for the children to play in, but in conjunction with good security can come at a steep price when you’re close to a dense metropolitan area,” says De Kock.
A freehold property in Sandton, for example, will cost you about R3.2 million whereas a sectional title property will cost a substantial R2 million less.
“To the average city dweller, buying a freehold property may only be a viable option if they’re willing to hunt a bit further away from the city centre where properties are generally more reasonably priced.
He adds that additional travel inconvenience and costs should be considered and if found to be too high, the discerning buyer will need to consider buying a sectional title property closer to work.
