As property buyers weigh their options in South Africa’s recovering real estate market, Sectional Title schemes continue to stand out for their affordability, convenience, security, shared amenities and strong investment potential, says Andrew Schaefer, MD of leading property management company Trafalgar.
READ: SA’s first-time buyers are choosing sectional title – here’s why
This is reflected in the fact that Sectional Title (ST) properties now account for more than a third of home sales nationally - and more than 50% of sales in some areas - compared to just 10% of the market in 2010.
“In addition, the rising demand for ST homes has seen values in this sector of the residential market grow more than in the freehold sector in recent years and led to an increasing focus on ST project among developers.”
He says the key benefit of ST schemes for home buyers and investors is of course their relative affordability, aided by the fact that in new apartment and townhouse developments, VAT is usually built into the purchase price so there is no additional tax for purchasers to pay.
“Meanwhile the recent increase in the Transfer Duty threshold from R1,1m to R1,21m has also put more pre-owned ST homes within the ‘tax-free’ category. The average ST home price in SA is currently around R1,2m, compared to an overall average home price of R1,5m.
“Purchasing an ST home is thus an ideal entry point to the market for young professionals aiming to build equity in property without overextending themselves financially.”
READ: Sectional Title or freehold? What the differences mean to buyers
But ST is also a good option for investors, especially in a well-managed scheme where property values are protected and enhanced by regular maintenance and upkeep, jointly funded by all owners through the payment of their monthly levies, says Schaefer.
“The Sectional Titles Schemes Management Act (STSMA) provides a clear set of rules and governance requirements that ensure transparency, accountability and a good level of financial certainty and security for ST investors. And on top of that, ST schemes often provide stronger-than-average rental returns due to the ever-rising demand for apartments and townhouses in SA’s big metros and other growth nodes.”
Meanwhile, he notes, ST schemes are becoming an increasingly popular retirement property option for seniors, who are finding that they offer a cost-effective way to own property compared to individual freehold ownership, where owners bear the full cost and effort of maintenance, or HOA-run estates where the entry costs are usually much higher.
“ST schemes typically also offer controlled access, boundary walling or fencing and on-site security, which are top priorities for older buyers seeking a safe and secure lifestyle. And levies are also generally lower and more predictable in ST schemes than in estates, which helps retirees manage fixed incomes more confidently.
“These days, many schemes are also working to foster a sense of belonging by promoting social interactions among neighbours, enabling owners to make the most of communal living while retaining their autonomy and privacy.”
Ultimately, Schaefer notes, ST ownership is about smart, sustainable living, “and whether you’re an investor or a home buyer, it’s a property solution that combines great value with long-term peace of mind”.
READ: Responsibilities of trustees for sectional title schemes
Cobus Odendaal, CEO of Lew Geffen Sotheby’s International Realty in Johannesburg and Randburg.
“Neglecting to assess the body corporate’s overall management, financial health, and effectiveness can lead to unforeseen challenges down the line.
“If it is inefficient or mismanaged, you could face various issues, including deteriorating facilities, unexpected special levies or poor security, which can directly affect your property’s value and your quality of life.”
Odendaal explains the body corporate’s crucial role and how it affects property owners:
Shared Responsibilities: In a sectional title property, individual owners own their units, but the common areas, such as gardens, walkways, parking areas, and pools, are managed by the body corporate. The entity is also responsible for the upkeep of the exterior of buildings, including painting and structural repairs. Poor maintenance can not only affect your quality of life but also the resale value of your property.
Financial Health of the Scheme: One of the most critical aspects is the financial stability of the body corporate. If it is poorly managed and has insufficient reserves, you may be faced with special levies—additional charges to cover emergency repairs or upgrades to communal areas.
For instance, if the roof of the complex needs repair and there’s not enough money in the reserve fund, every unit owner will be expected to contribute. A well-managed body corporate with solid financial reserves prevents these unpleasant surprises.
Impact on Property Value: A mismanaged body corporate can significantly impact the overall value of the entire complex and, thereby, the individual units as well. Buyers are likely to steer clear of complexes with high levies, poor maintenance, or management issues. Over time, the condition of the common property will further deteriorate, which can drag down the resale value of your property and make it harder to sell.
Enforcing Conduct Rules: A body corporate is also responsible for enforcing the rules of the complex which may include guidelines about pets, noise levels, use of communal areas, and parking. A well-run body corporate ensures these rules are fairly enforced, which helps maintain peace and order in the complex. On the other hand, a poorly managed body corporate may fail to resolve disputes or apply rules consistently, which can lead to frustration and conflict with neighbours.
READ: Why rules are essential in a sectional title complex
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