SA homes still getting smaller
The latest available building statistics from StatsSA show that the rate at which new homes are being delivered to the market continues to trend upwards – but that the average size of these new units is declining.
On a year-on-year basis, the total value of new residential buildings completed rose 25% in January and February, while the value of building plans passed for new homes rose 20,5%.
In the same period, the square metreage of new small homes (less than 80sqm) completed rose 20,2% compared with the first two months of last year, and that of flats and townhouses completed rose 38,7%, while that of homes bigger than 80sqm rose only 1,1%.
Meanwhile the square metreage of plans passed for new houses of 80sqm or more rose 2,4, and that for flats and townhouses a whopping 50,2%, clearly indicating that this is where developers believe future demand will be.
The major factor stimulating new housing development at the moment is the decrease in what First National Bank has termed the Replacement Cost Gap – the percentage difference between what it would cost to replace an existing home and the current value of that home.
This differential is variously estimated at between 21% and 33% now, but has definitely been on a declining trend since the start of 2012, making it easier for developers to bring new homes to market at prices that can compete with those of pre-owned homes.
However, the size of new homes is also steadily declining. The average has gone from 141sqm in 2006 to 111sqm now and is not expected to rise again in the foreseeable future, due to rising consumer preference for smaller, more secure and easier to maintain homes in the face of rising property rates and utility costs.
This is underscored by the fact that flats and townhouses now account for more than 27% of all residential building completions, up from 24% in 2011, and suggests that estate agents will increasingly have to hone their expertise in sectional title sales, and in working with bodies corporate and home owners’ associations.
Meanwhile, this is all good news for first-time buyers especially, because there is usually no transfer duty payable on newly-built homes (VAT being included in the sale price instead). This can significantly reduce the amount of cash they need to complete a purchase, at a time when the average deposit required by the banks is 17%.