Sectional title properties with fewer than two bedrooms boasted the strongest price growth in Q3 2017, inflating at 9.3%.
Two-bedroom sectional title properties realised 5.3% price growth, while the largest three-and-more-bedroom category came in at 4.6% average price growth.
This is according to FNB’s household and property sector strategist, John Loos, who explained that the bank’s Sectional Title House Price Index shows a faster growth rate than full-title homes.
“The Sectional Title House Price Index rose by 5.27% year-on-year in Q3 2017 – faster than the 5.1% rate of the previous quarter although still below the multi-year high of 7.6% that was reached in Q3 2015,” he said. “The Full Title House Price Index, by comparison, showed a slower 2.95% year-on-year growth rate in Q3 2017, down from a 7.2% multi-year high rate at the beginning of 2014.”
A reason for the strong performance of small sectional title properties is due to it being a key target of the “highly-cyclical first-time buyer” trend.
“Apart from low first-time buyer levels in Cape Town, the major regions of SA still have reasonably strong first-time buyer levels, according to the FNB Estate Agent Survey,” said Loos.
In the full-title segment bigger has proven strongest, with homes boasting three bedrooms showing the highest average price growth of 3.7% year-on-year in Q3 2017.
“The relatively expensive four-bedroom and more full-title segment saw a more stagnant average price growth of 2.0% – very similar to the full-title two-bedroom-and-less segment’s 2.1%,” he said, noting that even over the long term, smaller-sized sectional title homes have shown the strongest price inflation. “Since the beginning of 2001…the top performer has been the sectional title less-than-two-bedroom segment, with cumulative average price inflation of 494.57% from Q1 2001 to Q3 2017. This far outstrips the second placed sectional title two-bedroom segment’s 366.5% and the sectional title three-bedroom-and-more segment’s 353.45%.
“The more popular three-bedroom segment’s 326.6% is neck and neck with the four-bedroom-and-more segment’s 329.36%, but outstrips the far more affordable two-bedrooms-and-less segment’s 277.71%.”