Here’s why the majority of homes being built in SA now are flats or townhouses

Six in ten residential properties constructed in South Africa in the first quarter of 2019 were apartments and townhouses, a new report by FNB showed.

The FNB Property Barometer, released on Wednesday, showed that flats and townhouse completed between January and March were 90.6% higher than for the same period in 2018.

The segment now makes up 59.2% of all new residential properties completed in the country, up from 29% in 2015 and just 13% back in 2000. 

“This could be explained by the increasingly urbanising population, rising densification in the metros, as well as the changing consumer preferences,” FNB’s Siphamandla Mkhwanazi said.

“[This can include that] buyers are now more security conscious in their buying decisions”.

Several cities have roll out out densification strategies as part of their spacial transformation, while flat and townhouse living is often marketed as more secure than living in free-standing homes. 

The proportion flats and townhouses built (supplied, FNB)

The proportion flats and townhouses built (supplied, FNB)

The increase in new apartments and townhouses should create an increase in vacancies, which will keep rental inflation low, Mkhwanazi said.

The FNB Barometer found that the segment for houses smaller than 80 square meters grew by 5.2% in the first three months of the year, and houses larger than 80 square meters grew by 17.9%. 

Growth of property segment construction (supplied, FNB)

Growth of property segment construction (supplied, FNB)

It revealed that property prices increased by only 3.3% year-on-year in May, while South Africa’s latest consumer price index (CPI) inflation stood at 4.5%.

This means property prices declined by 1.2% in real terms. 

Low-income properties with an average purchase price of R395,000, however, saw a 16.3% price growth, well above inflation.

The lower-middle income segment, with an average purchase price of R638,200, saw a 6.8% growth, a growth of 2.3% above inflation.

Meanwhile, the middle segment (4.2% growth) with an average purchase price of R935,000; the upper-income segment (3% growth) with an average purchase price of R1.3 million; and luxury value segment (0.8% growth) with average purchase price R2.3 million, all showed below-inflation growth.

Source: Business Insider South Africa

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