Time to downsize?

Time to downsize?

The latest FNB statistics measuring the rate of price appreciation among properties of different sizes, reveal that smaller sized homes are outperforming medium to larger sized homes.

The FNB report measured homes that were the following sizes:

·         Small homes of between 20 and 80sqm

·         Medium-size homes of 80 to 230sqm

·         Large homes of 230 to 800sqm.

The results for the second quarter of the year show:

·         Small home prices were increasing at a rate of 12.5% a year (up from 12.4% a year in the first quarter).

·         Medium home prices were rising at a rate of 6.6% (down from 7.5% in the first quarter); and

·         Large home prices were growing by 4.6% a year (up from 1.4% in the first quarter).

Similarly, the latest Absa Housing review revealed that houses which cost less than R4.4 million had the following year-on-year increase in the second quarter:

·         Small homes showed a 9.9% year-on-year increase

·         Medium-size homes saw a 6.1% year-on-year increase

·         Large homes showed a 5.6% year-on-year increase

Lower operating and maintenance costs are a key factor that is leading to the increased demand in small homes. Since there is a lack of supply of small homes, prices increase.

High end buyers are choosing to invest in smaller properties which often have increased security, convenience and lifestyle. These buyers have realized that small does not mean cheap.

For the past 15 years, the small homes category has outperformed the medium and large sized homes category even in periods when the interest rate fell and homebuyers demanded bigger homes.

According to FNB, from the first quarter of 2001 up until the second quarter of this year each category has had the following cumulative increase in value:

·         Smaller homes showed a cumulative increase in value of 375.3%

·         Medium-size homes saw an increase in value of 349.8% and

·         Large homes showed an increase in value of 286.1%.

Small home buyers can expect better returns on their investments than buyers of medium to large properties. Buyers will be looking for small homes that are valuable and will give a higher return on investment than bigger homes.