South African property market faces shift as price hikes hit
The annual increase in what consumers pay for municipal services is likely to reinforce a long-term trend toward smaller, greener and smarter homes, said Berry Everitt, general manager of the Chas Everitt International real estate group.
The main component of the overall rise in municipal charges is the huge increase in electricity tariffs this year, in accordance with an agreement between Eskom and the National Energy Regulator, Everitt said.
“This is up to 15% in many areas and will undoubtedly lead to an instant increase in demand among existing homeowners for solar geysers, heat pumps, solar (photovoltaic) panels and other energy efficient equipment. energy.
“The installation of such equipment is already one of the most popular types of home improvement, and the trend is fueled by the fact that some banks and finance companies are already offering specific ‘green’ loans to finance these upgrades – or to buy a new “certified green” home.
However, continued increases in municipal rates are by no means the only factor that has driven increasing demand for smaller homes for several years, Everitt said.
“We have heard a lot in recent months from home buyers who have moved from small apartments or townhouses to larger properties with more space, home offices and proper gardens in response to Covid lockdowns -19, but the point is, most of these buyers are still only buying the home they need, along with their families.
“They don’t want extra bedrooms and dining areas that are unused most of the time, for example, or cavernous living spaces that are difficult to heat in the winter, and that fits the trend of smaller homes for more than 50 years. at least the last 10 years.
Buyers are increasingly realizing that choosing the size of the home they really need means cutting costs across the board – and that buying a smaller home isn’t just the ‘green’ thing. to do, but can also make a sought after area more affordable, Everitt said.
“A smaller house will of course mean lower energy and water costs, but it will also attract lower property taxes, even in an upscale neighborhood.
“It will also cost less to maintain and insure. And these savings will come on top of a lower purchase price and therefore lower monthly bond repayments. “
And despite current low interest rates, affordability remains a serious concern for most buyers, as they are still under relatively heavy debt – and worry about constantly rising taxes and food costs, fuel and utilities, Everitt said.
The house is shrinking
South African consumers are generally more spendthrift than before and are very careful not to gain the upper hand. So as more and more people buy now, the average size of homes bought is definitely going down.
This is also reflected in the huge growth of properties as a section in recent years compared to freehold purchases, Everitt said.
The latest figures available show that sectional title units only accounted for 13% of total home purchases in 2005, but just under 30% at the end of 2020.
Changing lifestyles have also played an important role in moving towards smaller homes, he said.
“The number of people in an average household has gone down, for example, so buyers generally need fewer rooms. In fact, four- and five-bedroom dwellings now represent less than 10% of new dwellings under construction and three-bedroom dwellings less than 40%.
Nowadays, many homeowners are also short on time and therefore do not want to maintain a huge garden or a house.
“So while many buyers are leaving town now and returning to the suburbs, they generally favor new developments that offer more compact and modern homes over the sprawling suburban homes of the past. “
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