Will rising municipality rates boost demand for more compact, energy-efficient homes? | General

The annual increase in what consumers pay for municipal services – which is being implemented in most municipalities this month – is bigger than usual, and is likely to reinforce a long-term trend towards smaller, greener and smarter homes.

“The main element in the overall hike in municipal charges is of course be the huge jump in electricity tariffs this year, in line with an agreement between Eskom and the National Energy Regulator. This is as much as 15% in many areas and will no doubt prompt an instant increase in demand among existing homeowners for solar geysers, heat pumps, solar (photo-voltaic) panels, and other energy-saving equipment.

“In fact, the installation of such equipment is already one of the most popular types of home improvement, and the trend is being fuelled by the fact that certain banks and finance companies are already offering specific “green” loans to finance these upgrades – or to purchase a “green certified” new home.”

However, the continuous increases in municipal tariffs are by no means the only factor that has been driving a growing demand for smaller homes for several years now.

“We have heard a lot in recent months about home buyers moving from small apartments or townhouses to bigger properties with more space, proper home offices, and gardens in response to the Covid-19 lockdowns, but the fact is that most of these buyers are still only buying as much home as they and their family need.

“They don’t want to have spare bedrooms and dining rooms that are unused most of the time, for example, or cavernous living areas that are hard to heat in winter, and this is in line with the trend towards smaller homes for at least the past 10 years. Buyers are increasingly aware that choosing the size of home they actually need means reduced costs across the board – and that buying a smaller home is not only the ‘green’ thing to do but can make a sought-after area much more affordable.

“A smaller home will of course mean lower energy and water costs, but will also attract lower property taxes, even in an upmarket area. It will also cost less to maintain and insure. And these savings will come on top of a lower purchase price and thus lower monthly bond repayments.”

And in spite of the current low-interest rates, Everitt says, affordability does remain a serious concern for most buyers in SA because they are still labouring under relatively heavy debt loads - and worried about ever-rising taxes and food, fuel and utility costs.

 

 

 

“SA consumers are generally much more conservative spenders now than they used to be and really careful about getting in over their heads, so while more people are buying now, the average size of home bought is definitely shrinking, and this is also reflected in the huge growth in sectional title over the past few years relative to freehold purchases. The latest available figures show that sectional title units accounted for only 13% of total home purchases in 2005, but just under 30% by the end of 2020.”

Changing lifestyles have also played a big role in the swing towards smaller home sizes, he notes. “The number of people in the average household has declined, for example, so buyers generally need fewer bedrooms. Indeed, homes with four and five bedrooms now make up less than 10% of new homes being built, and homes with three bedrooms less than 40%.

“Many homeowners are also short of time these days so don’t want a huge garden or home to maintain. So, while many buyers are heading out of town now and back to the suburbs, they are generally favouring new developments offering more compact, modern homes rather than the expansive suburban homes of the past.

“Then finally it must be said that smaller properties are usually also easier and less expensive to secure, and this is definitely a big concern for SA home buyers, who are already big spenders on ‘smart’ technologies that enable them to remotely monitor alarm systems and security cameras via their smart phones, photograph intruders, open or close garage doors and gates, and turn lights on and off to make it seem as though there is someone at home.”

Courtesy of Berry Everitt, CEO of the Chas Everitt International property group

 

 

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