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RESIDENTIAL PROPERTY TRENDS: Inflation influences decisions

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The country’s property buyers and sellers are making different choices to cope with ever-increasing living costs

When to buy, where to buy and what to buy: these are all choices facing today’s home seekers who need to consider more than just where their hearts lie. Rising petrol and electricity costs, weak economic conditions and changing lifestyles are creating a melting pot of trends playing out in the country’s property market.

These trends are impacting the types of properties buyers are looking for, the steps sellers need to take to get offers on their homes and the resilience of the market in general. Nersa’s recent granting of a 9.4% increase, in combination with all the tariff hikes and CPI inflation over more than a decade, has “significantly” altered property operating costs and affordability, says FNB property economist John Loos.
“The cumulative inflation rate in the electricity CPI since the first quarter of 2008 to the final quarter of 2018 was a massive 274.45%. The CPI for water and municipal rates and other non-electricity utility tariffs inflated by 147.16%.”
This, he says, provides a strong incentive for households to lower electricity consumption or cut broader operating costs on homes. One way to do this is to buy smaller homes with fewer “frills”, such as pools.
“The other way is to cut power costs, either through more energy efficient homes or alternative energy sources.” The spiralling cost of fuel also directly impacts where people buy homes and therefore the type of homes available to buy, says Andrew Golding, chief executive of the Pam Golding Property group.
“The high cost of fuel, coupled with increased traffic congestion in major centres and the ever-rising cost of utilities and property rates, has already seen the emergence of a trend towards sectional title living in easily accessible locations as people sacrifice space for location.
“Now, with this triple whammy, we anticipate the growing demand in this property segment will increase exponentially as consumers try to avoid the cost of fuel and transport eating their disposable income.”
Lifestyle changes are also impacting where and how people want to live, with many looking for more eco-friendly properties or smaller homes that have a less negative impact on the environment.
Smaller homes also require less financial outlay for maintenance and running costs, says Jill Lloyd, area specialist in Rondebosch and Claremont for Lew Geffen Sotheby’s International Realty.
In this rapidly changing real estate environment, Berry Everitt, chief executive of the Chas Everitt International property group, says it is beneficial for sellers to take note of the new products, styles and habits that are likely to catch on and cause a shift in lifestyles. This includes the home design preferences of prospective buyers.
Of course, it is not just trends that buyers and sellers need to consider. Market conditions, economic performance and interest rates all impact when people should be putting in offers for homes or putting their homes on the market.
“There is every reason for buyers to feel positive about getting into the market before the next upward growth cycle kicks in,” says Samuel Seeff, chairperson of the Seeff Property Group. “That said, purchasing a property is a significant financial transaction and a mistake can be costly because you can’t quickly sell and move on.” 

Tight budgets see sectional title growth
SMALLER IS CHEAPER Rising living costs will see continued demand for sectional title properties. Picture: Aleeroy Agency

Rising living costs are leading to increased demand for sectional title living, and this is seen in StatsSA’s building plan statistics which show an increasing portion to be flats and townhouses. This is opposed to free-standing houses, says FNB’s John Loos.
Sectional title properties are also more land efficient and “often more economical to maintain and run”.
“From 27.9% of residential units’ plans passed in 2010, the ‘flats and townhouses’ category of StatsSA’s building stats rose to 40.9% of total unit plans passed in 2018. Not all of this increase in this category’s share is due to municipal rates and utilities’ tariff increases, but we believe this is a key contributor.”
Conveniently situated sectional title properties in key economic hubs – close to the workplace, schools and all amenities – are particularly in demand, says Pam Golding Properties’ Andrew Golding.
Lightstone statistics indicate sectional title properties account for a growing percentage of total residential sales in South Africa – rising from around 21% in 2010 to an average of 26.5% during the third quarter of 2018. In Gauteng, sectional title sales as a percentage of total sales have risen by 6.8% from an average of 27.4% during the first half of 2010 to 34.2% during the first half of 2018.
In the Western Cape, sectional title sales have risen by 5.7% from an average of 14% during the first half of 2010 to 19.7% during the first six months of 2018. Pam Golding senior research analyst Sandra Gordon says although house price inflation for sectional title properties is not outperforming freehold overall, smaller sectional title properties are marginally outperforming large, three-bedroom freehold properties.
“In January (2019), two-bedroom sectional title properties were experiencing house price growth of 3.99% while three-bedroom freehold properties saw prices increase by 3.12% from year-earlier levels.
“Consumers’ appetite for more compact, lock-up-and-go, hassle-free living is further driving the demand for sectional title homes across all sectors of the market. This includes first-time buyers, further encouraged by the banks’ increased willingness to compete for mortgage business, and those downscaling earlier than they would otherwise have done.”
Lew Geffen Sotheby’s International Realty’s Jill Lloyd also believes modern compact homes will be the best investment properties for the foreseeable future. She says millennial buyers prefer low maintenance, hi-tech homes.
Landscaping, walkability are desirable
GREEN DREAM Neighbourhoods with many mature trees are perceived to be more affluent. Picture: Kirk Fisher

Kitchens, bathrooms and school catchment areas are the most obvious factors influencing buyers, but there are other less obvious aspects that increase a property’s desirability.
Tony Clarke, managing director of the Rawson Property Group, says his four favourites which catch many sellers by surprise are landscaping, mature trees, walkability, and street and house names.
“Established gardens with thoughtful landscaping elements are a huge value-add to homes, as are neat and attractive walkways, pretty off-street parking areas and convenient garden storage spots.
“As a rule of thumb, it’s suggested homeowners invest around 10% of their property value in landscaping, if possible, but this depends on the specifics of your home.” Clarke cautions landscaping improvements that appear to be high-maintenance can have a negative effect on a property’s sales price.
Mature trees are a green touch which can add surprising value to homes and neighbourhoods. “Mature, well-kept trees are typically associated with affluent neighbourhoods,” Clarke says.
Walkability is a growing trend and homes within an easy stroll of shops, restaurants, parks and public gardens are valued. Furthermore, he says even the name of a street can influence a property’s value.
“Streets and roads sound ordinary, but avenues, drives and hills sound more high-brow. Properties with a name rather than just a number tend to be viewed as special and achieve better prices when marketed as such.”
Sellers should also be aware of current lifestyle trends that impact buyers’ choices and those more likely to “stick” going forward, says Chas Everitt International’s Berry Everitt.
“Minimalist decorating is increasingly popular, especially among millennials, so we expect to see a growing preference for homes with elegant and unobtrusive built-in storage units, cupboards and dressing rooms.”
Properties with food-producing urban “farm” areas, rain tanks and irrigation systems will also grow in appeal as plant-based diets and concern for the environment encourage increases.
“Among those without access to a garden or balcony, there is also greater demand for interior ‘living walls’ and vertical gardens which ensure access to healthy produce.” Smart home devices and hubs like Amazon Echo and Google Home will become more popular as will homes able to accommodate an office or home-based business. 
How to maximise space
COMPACT Small homes call for creativity. Picture: Lew Geffen Sotheby’s International Realty

As demand for smaller homes grows, the effective utilisation of space is becoming a primary factor in decision-making. While South Africans are used traditionally to larger homes with gardens, small homes need not be dark and cramped, says Lew Geffen Sotheby’s International Realty’s Jill Lloyd.
Identify your spatial needs and maximise every inch of the plan, she advises, offering further guidelines:
◆Paint walls in light colours and make your windows bigger.
◆Get creative with storage space, such as fitting a drawer, installing floating wall shelves and investing in beds and couches with pull-out drawers.
◆Design a small well-planned garden with shrubs that attract birds and create indoor/outdoor living.
◆A stoep and braai can be covered and form part of the house.
Increasing home-ownership diversity
CHANGE Free-standing is making way for small sectional title developments. Picture: Hans Braxmeier

Pam Golding Properties research analyst Sandra Gordon says interesting property trends in Cape Town, and “probably other major centres”, include: 
◆Freehold homes demolished to make way for small sectional title developments in conveniently located areas, such as the southern suburbs, resulting in increased densification.
◆An increase in the number of mixed-use developments in prime business nodes, such as Claremont Upper, Tyger Valley, Waterfront, Century City and Simon’s Town.
◆A growing number of sectional title apartments in security estates as developers realise apartment living is a lifestyle choice, a question of affordability and a way to achieve greater diversity of homeowners. “In the economic hub of Claremont, we see more boutique developments offering the security of estates.”
Mixed-use makes better use of time
MIXING IT UP Construction will soon begin on Harbour Arch. Picture: Amdec Property Group

Cape Town’s inner-city living is being redefined by “new urbanism” trends feeding into the idea of maximising one’s time. This movement continues to gain traction in major cities around the world and has contributed to the popularity of mixed-use developments both overseas and here, says Nicholas Stopforth, managing director at Amdec Property Development.
New York, London and Sydney have embraced the concept and demand is spiking for liveable areas that provide a safe and secure environment. Construction of the Amdec Group’s latest major mixed-use development in Cape Town, the R10 billion Harbour Arch, is scheduled to begin this year and will provide people with a safe, walkable precinct to meet all their daily needs within easy reach.
“The new urbanism trend, which requires all your daily needs to be within walking distance, is well-established and gaining significant traction in South Africa, with developments such as Menlyn Maine, Melrose Arch and Harbour Arch as prime examples,” Stopforth says. 

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