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Sectional Title: The Pros and Cons part 2
By arlene | March 10, 2008
Group housing
Group housing is similar to sectional title in one way: it is high-density housing.
The laws covering group housing allow all units to be detached, whereas there have to be common walls in sectional title and share block schemes. With group housing:
- full title is given over the unit and the land on which it stands;
- there is no body corporate or levy, although the owners have to pay the rates and taxes themselves and see to the upkeep;and
- there is no commonly owned property.
Basically, buying a group housing unit is like buying a standard house on freehold title; transfer is given in the conventional manner.
The building and the land is usually much smaller than conventional housing.
Examples of group housing can be found in the rows of old, attached houses found in the city or in modern developments such as Garden Cities’ Edgemead Housing Scheme, near Cape Town.
Cluster housing
Group housing should not be confused with cluster housing developments in which dwellings, each on their own small piece of land, are placed close together, leaving free a larger section to be used for special amenities such as park areas, playgrounds or a swimming pool. This “free land” is common property and is jointly owned in individual shares by all the owners. The administration is undertaken by a homeowners’ association.
The disadvantages of cluster schemes are:
- A zoning change is required in most cases and, as the application is often treated as a minor sub-division, it can be complicated and time-consuming.
- The payment of endowments may be necessary.
- Local authorities prefer to deal with a body corporate with its stronger control over a sectional title scheme than a homeowners’ association. The advantages of cluster schemes or group housing include:
- conventional title;
- usually easier-to-obtain mortgage bonds; and
- a more flexible provincial group and cluster housing code.
Sectional title
If the building was erected before February 1981, it is important that a prospective sectional title unit buyer does not sign any documentation until proof is given that the register has been opened. Failure to heed this could lead to a contravention of section 26 of the Alienation of Land Act which, in essence, states that no money can be paid until a scheme exists.
Basically there are two types of buyers of sectional title units:
1. The home-seeker.
2. The investor.
In the case of an investor, the major reason for the purchase is return on capital. In the longer term, there can be little doubt that fixed property—and this includes sectional title—is one of the finest investments around. The size of the investor’s return on capital, or profit, depends on a single factor: timing. Naturally, there are other important considerations such as the quality of the building, the location of the scheme, its price, convenience, attainable rentals, mortgage bond interest rate, management and restrictions.
The property market is a market in the true sense of the word, but is not as volatile as the stock or commodities markets. If we cast our mind back several years and plot an imaginary graph of price rises, we will note that prices were relatively constant and steady, with only small hiccups up to 1979. Prices showed major increases late in 1980 when they soared from their lows to the heights of early 1993.
Now, if we superimpose a graph of what one could call a longterm trend which takes into account a steady growth rate of about 7%, we will find that the two graphs intersect in late 1981 and then soar to about 24% above the long-term trend. This situation could not continue and prices started to decline in the latter half of 1983. After stabilizing, they caused the gap between the selling prices and the long-term up trend to narrow. The adjustment lasted a matter of 5-6 months with prices remaining static for owners for a year and a half until the end of 1985 when a real upswing came into force pushing prices upwards until the end of 1988. From 1988 until the introduction of the new government the property market has been in a constant state of downswing and prices have not shown the growth that should have been expected from them. Once the economy improves and the property cycle achieves an upswing the gap between the present day housing prices and the true values will once again narrow.
Unlike the investor who has purchased for capital gain and then looks for a tenant to offset part of his expenses, the home-seeker buys for the purpose of having a roof over his head. Whether it be a detached home or a sectional title unit, he is investing money in an asset which he hopes will appreciate in value.
Great care must, therefore, be taken over the selection of the property and, in the words of all good estate agents, the three prime requisites of a purchase are: “location, location and location“.
The sectional title market is still relatively new and much of its success over the last few years has mainly been due to:
- security of tenure;
- physical security; and
- economies of scale thereby reducing all running costs.
However, as each year passes, land becomes scarcer and, hence, more expensive. A good location could, consequently, cushion the effects of any slackening in the popularity of high-density housing.
If, on the other hand, the sectional title market remains strong, a good location will yield a welcome bonus. But, again, the amount of profit made will depend on the timing of the purchase. In some circumstances it may be a better proposition to rent first and buy later.
Possibly related posts: (automatically generated)
Sectional Title: The Pros and Cons part 2
- Sectional Title: The Pros and Cons part 1
- Sectional Title: The Pros and Cons Part 4
- Sectional Title Re-sales
- Sectional Title: The Pros and Cons part 3
- Group Housing Schemes
- Sectional Title: The Pros and Cons Part 5
- Property Sale Guide: The Role of the Conveyancer
- Buying a Flat / Apartment: sectional title or block share schemes?
- Housing Development Schemes for Retired Persons Part 3
- The Completion of Mortgage Loan Application Forms
Topics: Agent, Investment, Land, Market, Property, Rental | 5 Comments »
July 5th, 2008 at 10:25 pm
Law's share of the value of the property when he purchased it plus any improvements made on the property. … Property Commission
July 5th, 2008 at 10:29 pm
This is definitely one way to alienate and upset a landlord instantly and experts are predicting Pete will face a tricky time finding a rental property in the future. … Rental Income
July 17th, 2008 at 10:15 pm
Title Insurance Policy Protection against financial loss arising from defects in the title occurring before purchase. … South Africa
July 17th, 2008 at 10:20 pm
Our customers are extremely loyal to this resort and we are delighted to be continuing to operate the property under the Le Meridien brand over the next ten years". … Spanish Market
July 18th, 2008 at 1:55 am
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