Property Newsletter | April 2022

Freehold leads sales volumes, but value is in Estates

Lightstone property watch:

• Freehold remains the volume leader in sales – although on a slow downward trajectory
• Value in Estates is higher than the other property types – and rising more rapidly
• Sales are declining as homeowners stay put for longer

Property inflation falls after 2019-2021 spike

Property inflation in all three property types increased exponentially from 2019 to mid-2021 after four years of decline, and then Freehold and Sectional Title inflation began drifting downwards while Estate properties held steady.

Freehold property inflation has dropped to 6.89% at the end of 2021 after touching 7.49% in mid-2021. Sectional Title has dropped to 3.17% from 3.47% in mid-2021, while Estates ended 2021 at 3.87%, its highest level since early 2017.

National property inflation dropped to 5.05% by the end of 2021 from 5.79% in mid-2021, significantly less than the 6.21% recorded in January 2015.

Property inflation - Estate, Freehold, Sectional Title and National

Higher value in Estate properties

The value of Estate properties purchased has risen from R1.2m in 2015 to just less than R1.7m in 2021, while the value of Freehold properties purchased has risen from R830k to R1.2m. Sectional Title properties have risen from R717k to R882k over the six years.

Average value of purchases

More Freehold properties sold than Estate or Sectional Title

Freehold properties account for the highest volume of transfers across the country, followed by Sectional Title and then Estate, although Freehold transactions have also led the decline in volumes since 2015.

Volume of transactions

Nearly 136 000 Freehold transactions were recorded in 2015, although transactions declined year-on-year until 2020 with approximately 106 000 transactions recorded before jumping in 2021 to 133 000 transactions.

The jump in 2021 is evident in all three categories and in part is probably the market adjusting after 2020, when Covid restrictions were at their most severe and there were delays at the Deeds Office.

Both Estate and Sectional Title sales declined marginally over the period under review, and both bounced back strongly in 2021 to record their highest numbers in the seven years since 2015 – 45 000 in the case of Estates and more than 91 000 in Sectional Title.

Tenure increases across all property types

Property owners in all three types are holding onto their properties for longer.

The majority (54%) of Freehold property owners will sell after 10 years compared to 47% in 2015, while 33% of Sectional Title owners sell after ten years (24% in 2015) and this drops even further for Estate homeowners to 29% - although this number is almost double the 15% in 2015.

Freehold seller tenure

Sectional Title seller tenure

Estate seller tenure

First time buyers moving to Sectional Title

Freehold is losing its attraction for first time buyers, with 53% going this route in 2021, down from 58% in 2018. Conversely, Sectional Title buyers have risen from 30% in 2018 to 34% in 2021, while Estate buyers have remained static at 12%.

Repeat buyers in 2021, however, tend to favour either Sectional Title (33%) or Estate (22%), while Freehold drops to less than half of all purchases to 45%. Freehold is down marginally from 47% in 2018, while Estate has benefitted as buyers have increased 20% to 22%.

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