RESIDENTIAL PROPERTY TREND: The need for smaller houses continues to grow
Category Property
More South Africans are giving up spacious homes as increasing financial pressure forces them to cut down on bond or rent payments. Many in the rental market are moving into smaller homes, while homeowners sell their properties to downscale or rent.
Although "downscaling due to life age" remains the most prominent reason for people selling, according to the Q2 FNB Property Barometer, "downscaling due to financial pressures" has increased over the past year. In Q1 of 2019, this reason accounted for 15.9% of all sales, but in Q2, the FNB report states it jumped to 19%.
This reason for selling is the second most prominent with "downscaling due to life age" behind 23% of all sales. "This is consistent with our view that household finances are under pressure," says FNB economist Siphamandla Mkhwanazi. "Of those who sell due to financial pressure, around 60% now opt for the rental market as opposed to a cheaper property."
On the western seaboard, 30% of people looking for new properties, both tenants and buyers, are downscaling, with financial reasons a "big factor", says Marlene Snowdon, Century21 principal in the area. On the Atlantic seaboard, Graham Cowburn of Dogon Group Properties estimates about 20% of buyers are downscaling.
"Overvalued rate estimations have hit the retired pretty hard. The upkeep and maintenance of larger properties has added expenses for those with restricted incomes."
Cape Town homeowners are also looking to downscale due to changes in their family structure, says Knight Frank chief executive Richard Hardie, explaining they opt for homes that are "half the size" and have secure lock-up-and-go benefits. These properties also give them more freedom in their retirement.
"When their children have left home and/or they have lost (a spouse), they do not need all the space and maintenance, so they want something more secure." The downscaling trend in the residential market will "continue for some time" throughout the country, says Herschel Jawitz, chief executive of Jawitz Properties, attributing it to the cost of living and security.
"Many empty-nesters are downsizing far earlier than they anticipated as the cost of living has increased, especially with regards to electricity and the cost of maintaining large homes on large grounds." Although the downscaling trend is a sign of the economic times, Glenda Luitingh, branch manager of Jawitz Properties in the Cape Town CBD and Atlantic seaboard, says financial pressure is not the only reason.
Instead, it is in line with the "unabated" international movement towards smaller homes. "Many well-heeled homeowners are choosing to downsize or downscale to smaller properties that are easier to manage."
Summing up the trend in South Africa, she says the choice to downscale is mainly due to the following five factors:
Location: With the price of fuel and traffic congestion on the increase, people are choosing to downscale the size of their homes to upsize their lifestyles.
Financial: With pressures on disposable income, buyers are more interested in smaller, easier to maintain properties.
Retirement: As the country's population continues to age, many homeowners are looking to downscale from larger family homes to easy-to-manage, more compact properties.
Security: Larger properties need fencing, beams, alarms and cameras, which are costly to install and maintain.
Family dynamics: Many family occurrences, such as divorce, death, debt or becoming empty-nesters, make the decision to downscale common sense.
Luitingh says: "The trend towards downscaling is also echoing a philosophical need for us to simplify our lives."
Security is preferred to swimming
Swimming pools and large gardens are being sacrificed willingly by buyers and tenants looking for easier and more affordable homes and lifestyles.
Entertainment areas and formal dining rooms are also near the bottom of their lists. "People who are downsizing will give up large gardens, pools and excess bedrooms and entertainment rooms for a lower cost of living and better security," says Jawitz Properties' Herschel Jawitz.
Formal dining rooms and lounges are often replaced with open-plan entertainment areas that can include the kitchen, dining area and a TV room. Newer units with en suite bedrooms and a study that can be used as an additional bedroom are attractive options for downscaling buyers and tenants.
The recent drought in Cape Town encouraged the move towards less garden and away from pools, says Knight Frank's Richard Hardie. Furthermore, those with teens or older children do not need as much garden space.
Older people prefer to move into or buy properties that are smaller but in better condition as they do not want to take on development and/or maintenance.
Low-maintenance and managed properties are more suited to those under financial pressure or unable to take on heavy maintenance and upkeep, says Dogon Group Property's Graham Cowburn. Twenty-four-hour security has also become a pre-requisite for many people.
Other factors in favour with today's home hunters include a central location where all amenities are within walking distance. Communal pools and gardens are covered under the levies of sectional title complexes, making these properties sought-after, says Cowburn. "Another factor is peace of mind in case of a medical emergency and having a neighbour or security concierge close at hand is an advantage."
Tenants and buyers are still looking for small gardens, confirms Marlene Snowdon of Century21. They are also happy to forego the dining room area. "We have had clients who don't want a pool and all the associated costs. Most clients are looking for something compact and more affordable and manageable."
Features they will not compromise on are good security systems, such as an alarm and electric fence for a freehold property. A functioning kitchen is also non-negotiable.
"There is still a big attraction to estates, but only a few can afford the large levies." Security is definitely a requirement of most house hunters, agrees Hardie.
"We also find they want to be near amenities like shops and restaurants. They want life to be more convenient in general. They want a view like the mountain, ocean or something pretty. In Cape Town, if they're going to downscale, they make sure they find good features."
Safe parking is also essential these days, due to the high number of car break-ins, says Cowburn.
Switching suburbs to reduce expenses
For many people, the decision to downscale could mean a move into a completely different suburb, if they can no longer afford to rent or buy where they are living.
Making such a move could also give them more value for money, says Graham Ross general manager of Just Property in Cape Town, confirming that downscaling to alternative suburbs is happening more frequently.
"However, they would still want to live in areas that are somewhat close to what they had in the past. As an example, people on the Atlantic seaboard would move to the western seaboard." Some people also move out of upmarket estate homes into smaller, affordable estates or homes in relatively secure suburbs, says Century21's Marlene Snowdon.
These homes must have added security. Dogon Group Property's Graham Cowburn says those who downscale into more affordable areas tend to move from large property suburbs like Constantia, Bishopscourt and the Atlantic seaboard. Their places in these suburbs are usually taken by baby boomers and young families requiring easy access to work and top schools in the area.
"Young families always require larger accommodation to suit growing family needs." In many cases, downscaling does not require a move out of the suburb of the homeowner's choice, says Jawitz Properties Herschel Jawitz. This is due to the proliferation of apartments, town houses and clusters built on land that once had a single home on it.
He says downscaling in size of property and monthly running costs is not always a downscaling in value as smaller, more modern and more secure properties often sell at a premium to the larger, old er homes that people are vacating. Some people also downscale from one area to another due to lifestyle situations that afford them an opportunity to move, says Knight Frank's Richard Hardie.
For example, someone in the southern suburbs might have lived there because they needed to be near schools, but when they no longer have this need, they might prefer to live in an apartment on the Atlantic seaboard, or even Greyton, Hermanus or Franschhoek.
Hardie says: "The gated estates are popular, although not necessarily cheaper. This move is more a lifestyle choice as they have the cash and want to travel. Lock-up-and-go properties are therefore popular.
Security views: Property priorities
People looking to downsize homes or move to more affordable suburbs do not always want to downscale their lifestyles.
Dogon Group Property's Graham Cowburn says some of the must-have features these buyers and tenants insist on, or would like, include:
◆Good views
◆24-hour security
◆Potential for Airbnb
◆Pet-friendly
◆Off street, secure parking
◆Balconies.
Two-bedroom properties must generally have two bathrooms or at least a separate toilet and full bathroom for those sharing. Most people want open-plan kitchens. "Properties that are within walking distance of the beachfront, lifestyle amenities and places of worship are often most sought-after," Cowburn says.
Benefits and blues: What change means
Downsizing due to financial pressure is a tough decision to make. Adrian Goslett, regional director and chief executive of Re/Max of Southern Africa, offers his insight into the pros and cons:
Con: Hidden Costs Subtract commission fees; bond registration and cancellation fees and advance payments of municipal accounts from your selling price for a realistic view of what you will get out of selling.
Pro: Lower Monthly Instalments The true saving in downsizing is not necessarily the profit from the sale but what homeowners stand to save on home loan repayments.
Pro and Con: Less Space Apart from adjusting to a smaller space, you might need to factor in buying new furniture for the tighter living quarters. Smaller means electricity and water bills are likely to be lower. If you had a large garden, you will save on maintenance.
When more is less: Upscale savings
People move home roughly every five to eight years, often into properties that are cheaper, but offer more space for their money, says Dogon's Graham Cowburn.
These properties are generally also closer to places of employment to cut out excessive traffic congestion and the rising cost of petrol. "Paying a bit more often results in saving time, transport costs and maintenance."
Cowburn says buyers upscale and downscale for different reasons. He says sometimes a young couple might have two smaller properties and decide to amalgamate their assets to purchase one larger family home; older people often downscale for the opposite reasons.
"Older people also need to be centrally located or closer to their children and grandchildren," Cowburn says.
Author: By BONNY FOURIE - https://www.property360.co.za
