Mar­ket anal­y­sis shows that buy­ers can get big­ger gains from smaller homes

Weekend Argus (Saturday Edition) - - PROPERTY -

SMALLER homes are in­creas­ingly pop­u­lar among SA buy­ers – and not just be­cause that’s all that’s avail­able or all they can af­ford.

An­other ma­jor con­sid­er­a­tion is that such prop­er­ties are in­creas­ingly prov­ing to be good in­vest­ments.

That’s the mes­sage, says Berry Everitt, chief ex­ec­u­tive of the Chas Everitt In­ter­na­tional prop­erty group, to emerge from the lat­est FNB sta­tis­tics de­tail­ing the rate of price ap­pre­ci­a­tion among prop­er­ties of dif­fer­ent sizes – small homes of be­tween 20 and 80m medium homes of 80 to 230m2 and large homes of 230 to 800m

These fig­ures show that in the sec­ond quar­ter of the year small home prices were in­creas­ing at a rate of 12.5 per­cent a year – up from 12.4 per- cent a year in the first quar­ter. Medium home prices were ris­ing at a rate of 6.6 per­cent com­pared to 7.5 per­cent in the first quar­ter, and large home prices were grow­ing by 4,6 per­cent a year com­pared to 1.4 per­cent in the first quar­ter.

Sim­i­larly, he says, the lat­est Absa Hous­ing re­view shows that among homes cost­ing less than R4.4m, small homes showed a 9.9 per­cent year-on- year in­crease in the sec­ond quar­ter, medium homes a 6.1 per­cent in­crease and large homes a 5.6 per­cent in­crease.

“One of the main rea­sons for these rel­a­tively high gains on smaller homes is the ad­di­tional de­mand that has been com­ing from the in­creas­ing num­ber of re­peat buy­ers who are down­scal­ing to smaller homes.

“Add this to the tra­di­tional first-time buyer de­mand for such prop­er­ties, as well as the slow­down in new hous­ing de­liv­ery, and you get sup­ply short­falls – and ris­ing prices.”

Everitt says that an in­creas­ing num­ber of lux­ury home buy­ers are also choos­ing smaller prop­er­ties now for rea­sons of se­cu­rity, con­ve­nience and life­style. The re­sult is that small is by no means al­ways syn­ony­mous with in­ex­pen­sive.

“For ex­am­ple, even tiny stu­dios and apart­ments can now eas­ily sell for more than R50 000/m if they are in the most fash­ion­able and soughtafter lo­ca­tions, and prices like that will quickly push up the av­er­ages.”

What is more, he says, fur­ther sta­tis­tics sug­gest this is not just a flash in the pan. The small homes cat­e­gory has clearly out­per­formed the other two over the past 15 years – in­clud­ing the boom pe­riod from 2003 to the end of 2007, when fall­ing in­ter­est rates ac­tu­ally prompted many home­buy­ers to up­grade.

In­deed, FNB says that be­tween the first quar­ter of 2001 and the sec­ond quar­ter of this year, smaller homes showed a cu­mu­la­tive 375.3 per­cent in­crease in value; medium homes an in­crease of 349.8 per- cent and large homes an in­crease of 286.1 per­cent.

“In short, those who buy smaller homes can now ex­pect much bet­ter re­turns on their in­vest­ments than those buy­ing larger prop­er­ties. And that means the tra­di­tional steps up the prop­erty lad­der may soon have less to do with buy­ing big­ger and big­ger homes than with buy­ing more and more valu­able small homes.”

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