Sectional title units show 30% growth in value

Posted On Monday, 30 August 2004 02:00 Published by
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Schaefer said sectional title was making a comeback as the financial and security benefits of communal living were being recognised
By Eddie Botha

Local sectional title complexes have seen values increase in excess of 30% over the last year, says Neville Schaefer, CEO of Trafalgar, the national residential property company.

Schaefer, who recently visited the city, said sectional title was making a comeback as the financial and security benefits of communal living were once again being recognised by investors and tenants.

"The list of potential buyers wanting to invest is growing steadily and we find that tenants prefer to live in sectional title complexes," said Schaefer, who described East London's sectional title complexes as well run.

Schaefer said agents reported that sectional title complexes in Quigney and Southernwood, in particular, were being targeted.

"Investors in these areas will see a return on investment in the short term from rental income based on current sale prices in these areas," he said.

"If trends in the rest of the country are anything to go on, lower-priced units in these areas will see their values increase substantially provided that the complexes are properly managed and upgraded.

"But this is the key," he warned.

"It is critical to do your homework before investing or renting in a complex. Buyers or tenants must ascertain that the developer of a new complex has a good track record and reputation.

"In addition, questions about the management and running of the complex should be asked to establish if it will be properly run and maintained."

Schaefer said provided a buyer or tenant was made aware of how the Act worked, and was made aware of issues such as levy payments, there were many benefits to sectional title living.

He said building insurance, maintenance costs and items like cleaning and security services all cost a sectional title owner a fraction of what they would cost the owner of a separate title dwelling.

Furthermore, any judicious improvements to the common area of a sectional title complex had the effect of increasing the market value of the individual units far in excess of the actual expenditure incurred, he said.

"For instance, the provision of a remote security gate may cost a complex R10,000 but the effect on the resale value of each of the say 10 units could be R5,000 per unit namely, R50,000, which is a remarkable return."

He said in certain complexes in East London, owners and trustees were beginning to realise this potential and these complexes were showing remarkable growth in value.

He cautioned, however, that investing in sectional title differed from that of separate title.

He said investors should investigate the audited financial statements of the body corporate and ensure that the finances were being managed effectively.

It was also important to ensure that municipal rates were not in arrears, and that levy payments were not significantly in arrears.

"Look for obvious defects to the common property which could result in significant costs to yourself as a member of the body corporate.

"Inquire from the chairman whether any special levies are envisaged in the near future."

Daily Dispatch

Publisher: Daily Dispatch
Source: Daily Dispatch

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