Forget house prices, it is the increasing running costs of our homes that will drive buyers to smaller properties.
FNB property economist John Loos argues that South Africa will now join the trend, as we see in many other countries, where people buy small properties close to work as the costs of running a home, transport costs and traffic congestion put pressure on our monthly expenses.
Already the figures are worrying and explain why home owners are still feeling the pinch despite rate cuts. Just last year electricity prices increased by 23% last year — and that is before the stratospheric increases mooted for the next three years.
Last year water and utility bills increased by over 9% — well above inflation and all these increases will continue as government raises money to upgrade infrastructure and improve services. Bottom line, it is going to get more expensive to run a home and demand will increase for smaller properties, even in the luxury sector.
Rentals are already showing signs of this trend with a higher demand for flats. This has allowed flat owners to pass on above inflation rental increases whist town house investors and free standing homes have seen rental increases below inflation.
Small manageable properties, close to business centres, good schools and opposite a well maintained park will be the hot properties of the future. If the property has a solar geyser and borehole, even better.