The Sectional Title Housing Market Segment still outperforms the Full Title Segment, widening the price inflation gap between the 2

Posted On Wednesday, 25 October 2017 13:11 Published by
Rate this item
(0 votes)

The Sectional Title Home Market appears to be opening up a wider gap in terms of the house price inflation differential between itself and that of the Full Title Home Market.

John_loosFNB

And since around 2011, the Sectional Title Market has resumed its upward march towards a greater share of total market in terms of transactions volumes, a longer term trend which we believe may ultimately see this sector become the larger of the 2 Residential Market segments some years from now.

RECENT HOUSE PRICE PERFORMANCES OF SECTIONAL VS FULL TITLE

The FNB Sectional Title House Price Index has remained at a faster growth rate than Full Title of late. The Sectional Title House Price Index rose by 5.27% year-on-year in the 3rd quarter of 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 the 3rd quarter of 2015. The Full Title House Price Index, by comparison, showed a slower 2.95% year-on-year growth rate in the 3rd quarter of 2017, down from a 7.2% multi-year high rate at the beginning of 2014.

Our panel of FNB valuers also perceived the Sectional Title market to be stronger than the Full Title market in the 3rd quarter of 2017.

SECTIONAL TITLE SUB-SEGMENT PERFORMANCES

Within the Sectional Title segment, “smaller was still better” in the 3rd quarter of 2017 when one compares the relative strength of the various sub-segments.

The smallest sized Sectional Title sub-segment, namely the “Less than 2 Bedroom” segment, showed the strongest price inflation to the tune of 9.3% in the 3rd quarter of 2017. Then came the 2 Bedroom sub-segment with 5,3% price growth, while the largest “3 Bedroom and More” category was the slowest sub-segment with 4.6% average price growth.

This “Less than 2 Bedroom” sub-segment is believed to be a key target of the highly-cyclical 1st time buyers, and apart from low 1st time buyer levels in Cape Town, the major regions of SA still have reasonably strong 1st time buyer levels according to the FNB Estate Agent Survey.

FULL TITLE SUB-SEGMENT PERFORMANCES

In the Full Title segment, the popular 3 Bedroom segment has shown the highest average price growth of the 3 sub-segments, to the tune of 3.7% year-on-year in the 3rd quarter of 2017.

The relatively expensive 4 Bedroom and More Full Title Segment saw a more stagnant average price growth of 2.0%, very similar to the Full Title 2 Bedroom-and-Less segment’s 2.1%.

AVERAGE PRICE GAP BETWEEN FULL TITLE AND SECTIONAL TITLE MARKETS CONTINUES TO NARROW

Taking a simple percentage differential between the average Full Title house price and that of Sectional Title, the outperformance of Sectional Title in recent years has reduced the gap by which the average Full Title house price exceeds that of the smaller-sized Sectional Title category, from a revised 26.7% as at the end of 2013 to 21.6% by the 3rd quarter of 2017.

LONG TERM PERFORMANCES OF MAJOR HOUSING MARKET SEGMENTS

In a view of the long term performance of our major FNB Segment House Price Indices, the smaller sized Sectional Title homes with their more efficient use of land have clearly been the cumulative outperformers since the beginning of 2001 around the time when the data series’ started. The period since then has spanned through South Africa’s biggest housing boom on record, the Global Financial Crisis around 2008, and the period of “normality” that followed.

Top performer has been the Sectional Title Less than 2 Bedroom Segment, with cumulative average price inflation of 494.57% from the 1st quarter of 2001 to the 3rd quarter of 2017.

This far outstrips the 2nd placed Sectional Title 2 Bedroom Segment’s 366.5% and the Sectional Title 3 Bedroom and More Segment’s 353.45%. The 3 Full Title Segments have “underperformed”, the more popular 3 Bedroom Segment’s 326.6% neck and neck with the 4 Bedroom and More Segment’s 329.36%, but outstripping the far more affordable 2 Bedrooms and Less Segment’s 277.71%.

Last modified on Thursday, 26 October 2017 13:36

Most Popular

Tshwane Regional Mall Is Inevitable

Jul 26, 2018
TSHWANE REGIONAL MALL
The company hosted a site walkabout to showcase this majestic development meant to…

2018 South African Institute Of Black Property Practitioners(SAIBPP) annual convetion to address'The new normal' In SA property

Jul 24, 2018
Nkuli Bogopa-SAIBPP
The South African Institute of Black Property Practitioners (SAIBPP) will be hosting its…

Investec Property Fund announces leadership changes

Jul 30, 2018
Nick Riley
Nick Riley to assume broader leadership role within Investec Bank Limited (“IBL”), with…

Liberty Two Degrees unlocks value in line with strategic objectives

Jul 25, 2018
Amelia Beattie
Liberty Two Degrees (“L2D”), a premier retail and South African focused REIT, today…

Intu Properties-Interim results for the six months ended 30 june 2018

Jul 26, 2018
DAVID FISCHEL
Intu Properties-Interim results for the six months ended 30 June 2018 winning…

Please publish modules in offcanvas position.