Property Newsletter | September 2022

Less is more

Transfer volumes better, value of deals jump in post-Covid-19 property bounce

…while new residential property development also shows signs of recovery

Residential property transfers in 2021 (330 105) edged ahead of 2018 (326 549) as the market recovered from the fall to 262 761 transfers in 2020, when Covid-19 lockdowns took their toll.

However, the average number of transfers over the last four years is lower than the totals recorded in 2018, 2019 and 2021, suggesting the market continues a gentle decline in volume terms. The decline is driven by falling transfers in Freehold property, which in 2021 was nearly 10% down on its 2018 numbers. Both Estate and Sectional Title are trending marginally up since 2018.

Volume of transfers

	Estate	Freehold	Sectional Title	TOTAL
2018	42 845	202 513	81 191	326 549
2019	41 311	185 295	84 835	311 441
2020	35 949	152 477	74 335	262 761
2021	50 166	184 241	95 698	330 105

Transfer volumes: 2018-2021

While the volume of properties transferred has fallen, the value of the transactions has risen, confirming previous data which showed that the mid to upper price bands have outperformed the entry level and lower bands. The value of transfers in 2021 was R334b, well up on the R245b recorded in 2018 and a significant recovery from the R225b in 2020.

The R334b recorded in 2021 was also well ahead of the average of R261.5b for the four years, 2018-2021, driven by a spike in the value of Freehold sales.

Transfer value: 2018-2021

Value of transfers

	Estate	Freehold	Sectional Title	TOTAL
2018	60 138 437 862	117 753 834 506	66 639 032 206	244 531 304 574
2019	59 171 784 157	116 849 760 304	66 413 743 053	242 435 287 514
2020	55 006 391 339	110 642 564 520	59 528 278 127	225 177 233 986
2021	85 787 828 562	165 884 221 498	82 069 556 225	333 741 606 285
2022	56 073 042 684	107 461 463 451	52 036 916 875	215 571 423 010

New developments start to recover

New residential property development has recovered slightly from the crash of 2020, with 55 695 new properties in 2021 compared to 51 106 in 2020. But the 2021 number is still significantly lower than the 73 012 recorded in 2019, which was itself already a drop from the 77 509 new properties recorded in 2018.

As the two graphs below show, new Freehold residential development fell by almost 40% from the 50 271 units which came onto the market in 2018 to 29 872 in 2021 – although sales in 2022 could edge past last year’s total.

New stock volumes by property type: 2018-2021

While Freehold continues to lose appeal, Sectional Title remained relatively buoyant during 2021, with new properties falling to 14 907 from 19 705 in 2019, but then recovering strongly to 17 003 in 2021. As a percentage of the total number of new properties on the market, Sectional Title has risen from 21% in 2018 to 31% in 2021.

Estate volumes have fallen from 10 574 in 2018 to 8 820 in 2021. However, because of the drop in Freehold numbers, Estate accounted for 16% of all new properties in 2021, up from 14% in 2018.

The value of new developments has also dropped from R73b in 2018 to R55b in 2021, which was up on the low of R50b in 2020. All three property types suffered reversals – Estate from nearly R25b in 2018 to R19.6b in 2021; Sectional Title from almost R27b to R21.4b in 2021 and Freehold fell the most, from R21.3b in 2018 to R14b in 2021.

Value of new developments by property type

	Estate	Freehold	Sectional Title	TOTAL
2018	24 818 230 000	21 365 162 000	26 915 555 000	73 098 947 000
2019	22 076 420 000	19 724 583 000	28 347 290 000	70 148 293 000
2020	14 622 230 000	13 312 971 000	22 306 100 000	50 241 301 000
2021	19 614 335 000	14 024 837 000	21 386 289 000	55 025 461 000

New development by property type - value: 2018-2021

Volume, value proportions point to where to find value – and what’s selling at a premium

The proportion of volume or value to property type graphs tell an interesting story – and confirm buyers place a premium on Estate living, followed by Sectional Title with Freehold offering good value.

Using 2021 as an example, Freehold accounted for 25% of the value of new stock but double that – 54% - in terms of volume. Sectional Title accounted for 39% of the value against 31% of the stock, but it is in Estates that a premium is being charged for properties, as they accounted for 36% of the value for just 16% of the volume.

The data holds over the four years being reviewed. Sectional Title has accounted for between 37% and 44% of stock value, and between 21% and 31% of value, while Estates have moved between 29% and 36% of value, and 14-16% of volume. While Freehold has been drifting downwards in terms of value, from 29% in 2018 to 25% in 2021, its share of the market in terms of volumes has gone from 65% to 54%.

Proportion of new stock value by property type: 2018 - 2021

Proportion of new stock volumes by property type: 2018-2021

Where do sellers go?

Sellers of Freehold have mostly stayed with Freehold, but the numbers are dropping, from 68% in 2018 to 65% in 2021. Purchases of Sectional Title have risen by 1% from 19% to 20% in 2021, while Estates have climbed a little more in percentage terms, from 13% to 15% in the same period.

The consistency of purchase choices is evident in both sellers of Estate and Sectional title properties. Most sellers in an Estate buy back into an Estate (42% in 2021) or Sectional Title (36% in 2021), while most sellers of Sectional Title opt for Freehold (50% in 2021), Estates (26% in 2021) while just 24% bought Sectional Title again – suggesting more space was a primary consideration in the repurchase.

We simplify the complex