‘Sleep small, live large’ properties on the rise

There’s been a noticeable rebound in residential development activity in recent months, with plenty of new stock — sectional title apartments in particular — coming to the market.

Latest figures from Stats SA show plans passed and completed for houses larger than 80m² were up 18.1% year on year in the first quarter; for flats and townhouses they were up 37.2%. That follows a dismal few quarters when building activity came to a virtual standstill, no doubt on the back of pandemic-induced lockdowns and trading restrictions (see graph).

The latest FNB/Bureau of Economic Research building confidence index rose to its highest level in three years in the second quarter, underscoring the improved sentiment in the residential development sector.

FNB property strategist John Loos says the rise in building activity, albeit off a low base, is a clear response to last year’s interest-rate cuts to near 50-year lows and the resultant uptick in housing demand.

Loos notes an interesting shift from previous years, when most new-build activity was in the lower-income end of the market, below R500,000. It seems current demand is being driven primarily by middle-income buyers, those who can typically afford to spend at least R800,000 on an apartment and R1.6m-R2.6m on a house.

While an uptick in home-building activity and sentiment is good news for SA’s residential construction sector, Loos says developers need to be cautious about potentially flooding the market with too many high-end apartments. The upper end of the sectional title market, especially in and around popular business nodes such as Joburg’s Sandton, the city bowl in Cape Town and Umhlanga, north of Durban, is already labouring under an oversupply of rental apartments.

"We need more affordable stock, not high-end apartments," he says.

Latest figures from TPN Credit Bureau confirm the oversupply of rental stock in most cities. Residential vacancies spiked to 13.15% across SA in the second quarter, nearly double the five-year average of 6%-8%. Vacancies in Cape Town’s city bowl rose to 28.8%, while Sandton and KwaZulu-Natal’s north coast reached an equally worrying 26.7% and 17.2%.

TPN CEO Michelle Dickens says: "The Cape Town story is a double-whammy of increased supply caused by converting short-term holiday rentals into long-term lets and work-from-home opportunities, which allow tenants to relocate to the more affordable northern suburbs."

She believes Sandton’s sky-high vacancies are partially a result of office-to-residential conversion, which has created a glut of new apartments in the area.

However, it seems astute developers are already starting to bring apartments to the market at lower price-points. To achieve this, buildings are becoming higher, with greater density.

For instance, JSE-listed Attacq, together with developer D2E Properties, has just launched The Mix, a 14-storey development adjacent to the Mall of Africa at Waterfall City, near Midrand. The building will bring 400 apartments to the market, priced from just less than R1m for studios of about 25m², to R2.4m for two-bedroom units of about 65m².

D2E Properties director Robin Magid says the development appeals to a new breed of aspirational, entry-level buyer who has a "sleep small, live large" mindset.

[Millennial and Generation Z buyers] are increasingly seeking simplicity and are prepared to sacrifice space to be closer to urban hubs and city centre
— Steve Herring

The company, he adds, believes its product "taps into strong demand among a younger audience that embraces the live, work, play and shop lifestyle."

Giles Pendleton, Attacq’s chief development officer, says The Mix will complement rather than compete with Waterfall City’s Ellipse product. The latter was launched nearly two years ago on the eastern side of the Mall of Africa and will feature more than 600 apartments on completion.

Ellipse prices range from about R2m to more than R50m. The development targets a more affluent buyer.

Pendleton says the key attraction of The Mix, besides its lower price point, is the array of communal lifestyle facilities, including a ground-floor deli, co-working spaces, rooftop pool deck with infinity pool, onsite laundromat, wellness and fitness areas, "hangout" zones and even a dog-walking park.

Thibault Investments, another developer bringing taller, smaller and cheaper apartments to the market, is repurposing one of Cape Town’s oldest buildings. On completion, the 32-storey former BP Centre, on the corner of Long and Strydom streets, will be the Mother City’s tallest residential tower.

The multi-use development will be known as One Thibault. It will offer 180 studio, one-and two-bedroom apartments priced from R895,000 and sized between 20m² and 60m². The building also has co-working office, retail and leisure components.

Thibault Investments director Steve Herring says the project will introduce the global "micro-living" concept to Cape Town’s city centre.

"Millennials and Generation Z have been at the forefront of the micro-apartment trend," he says. "These buyers still want luxury but are increasingly seeking simplicity and are prepared to sacrifice space to be closer to urban hubs and city centres."