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5 reasons to choose sectional title

Private Property South Africa
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5 reasons to choose sectional title

Many first-time buyers are going ahead with their plans to become homeowners. Here's why sectional titles could be your best option.

The reaction of many first-time buyers to the Covid-19 virus pandemic has – surprisingly - not been to withdraw from the market but to go ahead with their plans to become home-owners, in anticipation of at least one more interest rate cut this year.

“This would of course make it easier for them to qualify for a home loan, and to afford the monthly repayments,” says Gerhard Kotzé, MD of the RealNet estate agency group. “At the same time, prices are under pressure and most sellers are willing to negotiate, so lots of millennials are telling us they see this as an opportunity to buy a home much sooner than they thought.

01. “In some instances, it may even be cheaper now to buy than to rent, especially if they focus on sectional title (ST) apartments and townhouses, and we are now seeing a definite increase in enquiries about such units.

Other good reasons for first-time buyers to choose ST homes, he says, include the fact that ST developments usually contain the highest number of units per hectare of land. “This brings down the land cost as a proportion of the purchase price per unit, so buyers get more actual living space for their money.

02. “Secondly, those who are buying into a new ST development don’t have to worry about paying transfer duty. They will pay VAT instead, but this will usually be built into the purchase price, so they will only need cash to cover their bond registration fee and the legal costs of transfer – and some developers will even cover these amounts.”

03. Thirdly, says Kotzé, buyers in new ST schemes don’t have to worry about managing the construction of their homes. “The construction company building a ST complex is usually directly contracted to the developer, rather than the individual buyer, and for real estate newbies this is the way to go, because they will not be responsible for the builders’ performance or payments – or for getting them to return if necessary to rectify any defective work.”

04. The fourth good reason for first-time buyers to choose ST, he says, is that there is less likelihood of any “nasty surprises” when it comes to the ongoing costs of home-ownership, which is always a risk for those new to the market.

“The monthly levies payable in all ST schemes won’t cover their municipal rates and utility charges, so they will still need to budget for those, but they should look out for schemes where each unit has separate water and electricity meters – and preferably prepaid meters for electricity.

“Then before they make an offer to purchase, buyers must ask for a breakdown of exactly what the levy does cover, which should include security, maintenance, building insurance and any contribution payable to the reserve fund. At the same time, they need to check if there are any additional fees payable – for parking, for example – and if there is any special levy in force.

“This last item is very important because the recent introduction of a large special levy, which they would ‘inherit’, may be exactly what has prompted the current owner to sell.”

05. And finally, he says, a big advantage of ST schemes is that there are very specific rules about how they must be managed and run, as set down in the Sectional Title Schemes Management Act (STSMA). “This legislation really helps to protect and increase the value of owners’ investments in ST schemes.”

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