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Monday May 07, 2018

Sectional titles lead in price growth

Buyers looking at sectional title homes could pay almost 6% more for these properties this year, new data from Lightstone has disclosed.

The difference in house price inflation between sectional title and freehold is usually less pronounced and conventionally about 1%. PaulRoux de Kock, analytics director at Lightstone, says recent months have seen a reversal of this trend.

"Sectional scheme properties have experienced some growth and this is probably due to this segment's affordability and added benefits like security and maintenance."

He says this trend will persist into 2018.

Lightstone also predicts variations in the inflation forecasts of prices for mid-, high- and luxury value properties.

"Looking back at the past 18 months we have observed price inflation of mid-value properties has tended to be about 2% above national inflation. High value properties are 0.5% below national inflation and luxury properties sit at about 2% below national inflation."

De Kock says higher growth in lower market segments have "not been the norm", with the luxury segment experiencing disproportionately higher growth from 2009 to 2016. He attributes this to the possible combination of the decline in luxury segment inflation due to owners scaling down and more buyers from the informal housing market entering the lower-end market. "This would drive the increase in the lower- and mid-value segments."

Overall, house price inflation is expected to remain similar to the around 4% achieved by the end of last year.

With consumer price inflation expected to remain stable at between 4% and 5.5%, GDP expected to grow by between 0.7% and 1.5%, and interest rates to change by 0.5% and 1%, these ranges are also indicative of deviations for house prices this year. In other words, "if the economy does not fluctuate, neither will house prices".

De Kock says: "In 2017 the market was very much towards a buyers' market. This will start stabilising in 2018 with investors feeling more positive about South Africa. However, we might not see the full effect of a potential economic turnaround play positively into property price growth until the noise around land expropriation without compensation dissipates. Luxury property inflation will continue to decrease, but the deviation will be more subtle. Sectional title property will enjoy more growth as its popularity will endure into 2019."

Bonny Fourie
Weekend Argus (Saturday Edition)


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