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How much will you pay for your yard?

07 Apr 2014

Property and real estate moguls currently make up the third largest group of self-made billionaires on the Forbes 400 list.

Moving from a two bedroom apartment to a two bedroom house with a larger yard will in general cost no less than twice as much, while a three bedroom house will cost about 45 percent more than its sectional title counterpart.

It’s not surprising that the majority of them made their fortune in countries with densely populated cities such as those found in South-East Asia, the United Stated and Europe, according to Hayley Ivins-Downes from Lightstone.

Since a higher concentration of people living in an area increases the demand and value of land, these entrepreneurs realised that the future of property expansion was skywards, she says.

In South Africa luxury is still associated with large yards and proportionally large property sizes, but with the increase in population densities in metro areas residential apartments might become a more feasible living option.

In Sandton, for example, the average freehold property is valued at approximately 150 percent more than a sectional title property.

“Even though the amount of bed and bathrooms in these two types of properties generally differ, we expect a large portion of the price difference to remain when comparing like-for-like properties due to sought-after luxuries like a big lawn, a swimming pool and solitude that is generally associated with luxury freehold properties.”

But how much can you expect to pay for your own yard?

The proportion of the price of freehold relative to sectional title properties gives an indication of how much buyers are willing to pay for a yard and the benefits it unlocks.

She notes that in a previous study Lightstone showed the extent to which the values of sectional title and freehold properties differ and found that in almost all cases freehold properties are more expensive than apartments and flats, except in some coastal areas where more sectional title properties are located near the beach.

Freehold properties with three bedrooms and a yard smaller than 900 square metres will cost almost the same as a sectional title but with the added benefit the yard brings.

The amount of bedrooms, bathrooms and the size of freehold and sectional title properties might, however, differ vastly within a town, therefore requiring us to compare houses that are similar to avoid a potentially biased comparison.

The easiest way to do such a comparison is to compare houses that have the same amount of bedrooms, bathrooms, garages and living areas.

Ivins-Downes says they decided only to compare the prices of two bedroom freehold and sectional title properties, as well as three bedroom sectional title and freehold properties.

A two bedroom house with a small yard of less than 900 square metres will only cost about 10 percent more than a two bedroom flat or apartment if you are looking to live in a relatively sparsely populated area. 

Moving to a more densely populated area increases this premium to about 20 percent but can be as high as 40 percent in towns like Sandton and Randburg.

A larger yard of between 900 and 1 600 square metres is going to cost a lot more regardless of how many bedrooms are needed.

Moving from a two bedroom apartment to a two bedroom house with a larger yard will in general cost no less than twice as much while a three bedroom house will cost about 45 percent more than its sectional title counterpart.

A good potential buy if you’re not house-hunting in one of South Africa’s luxury suburbs is a freehold property with a smaller yard.

Freehold properties with three bedrooms and a yard smaller than 900 square metres will cost almost the same as a sectional title but with the added benefit the yard brings.

The trade-off might mean that buyers will not get the additional security benefit sectional titles may offer, so remember to budget for some security upgrades as well, she says.

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