Average Full Title Stand Size diminishes as urban densification continues

 

As urban land scarcity has mounted since the 1970s, urban densification has been the order of the day, average Full Title stand sizes almost halving, building sizes decreasing and Sectional Title homes becoming far more common. Various luxuries attached to homes are also becoming less common in newly built homes. We expect this longer term trend towards “smaller and simpler” to continue.

In the modern day urbanising South Africa with its General Government fiscal constraints, low rates of economic infrastructure investment, much of this around cities, have led to a growing effective land constraint.

The result is that the supply-side response to rising demand for residential property is in part seen in higher average real home values, in part in the building of more residential units, but also in part in urban “densification” and a major change in home building characteristics over the long term in an attempt to address a mounting affordability challenge in an increasingly land-scarce urban environment.

We believe that South Africa’s urban land scarcity began to increase noticeably from a stage of the 1970s onward. A key change at that stage was the steady stagnation in general government fixed investment. This was due to a general deterioration in the state of government finances as a worsening political situation caused major economic and government revenue stagnation.

One of the expenditure items to suffer was general government economic infrastructure investment. Rapid urbanisation further increase the pressures.

So, while theoretically SA has no great land scarcity, and we could expand the likes of Joburg and other major cites significantly, in reality this has become less practical in recent decades due to limited expansion in urban infrastructure, very importantly, (but not only) in the area of transport infrastructure. This has implied increasing urban congestion to, from, in and around key business nodes.

From our FNB valuations data, where valuers note the estimated building date of a property each time they value one, we can glean important information regarding the size and characteristics of homes built in certain periods.

Average Full Title Stand Size diminishes

A long term acceleration in government infrastructure investment through the 1950s and 1960s to early-70s (much of the urban infrastructure investment admittedly being in and around the highly-traded former “white” suburban areas) corresponded with an increase in the average size of full title residential stands to an average peak size of 1063.4 square metres for homes built from 1970-1974. With the onset of steadily declining focus on infrastructure by general government, we went into a long term declining trend in the average stand size of a house. 2.5 years into the current 5-year period, i.e. 2015 to 2019, that average size of a full title stand to date has measured 551.94 square metres, almost half the average stand size of full title homes built in the early-70s.

We have long since said that the major region with the most acute land scarcity has been the City of Cape Town, with its sea on a few sides and a large mountainous nature reserve in the middle. Not surprisingly, therefore, we see the Western Cape Province having the lowest average Full Title stand size of 487.2 square metres. Landlocked Gauteng has typically had less land scarcity, but has been narrowing the gap as it grows and becomes more congested, and its average Full Title stand size is not far larger at 551.9 square metres. Less developed and less congested KZN, however, has an average Full Title stand size of 802 square metres, significantly larger.

Long term building size diminishes too, though not as rapidly as average stand size

But the adjustment to land scarcity in more recent times has gone further than merely a reduction in average size of full title stands. Average building size has also declined significantly, from a 203.35 square metre peak for homes built from 1970-1974, to 161.89 square metres for buildings built from 2015 to 2017.

It seems, however, that households are far happier to dispense with outdoor space than indoor space in the quest for affordability. This is reflected in the decline in full title building size not having kept pace with the decline in average stand size. The result has been an increase in the full title land utilisation rate (building size/stand size) from a low of 20.4% for homes built from 1975-79, to 33.2% for the period 2015-17.

Sectional Title grows in significance

And the adaptation to growing effective land scarcity does not stop at smaller Full Title stands. Since the 1985-89 period, where only 6.09% of homes built were Sectional Title homes, there has been a shift to increased sectional title living, where land is far more highly utilised, with Sectional Title homes built from 2015 to 2017 amounting to 27.06% of all homes built in the period.

Households are also reducing the luxuries in order to address the long term deterioration in home affordability.

A further noticeable way in which South African households are addressing the long term rising trend in real urban property values (if one could measure them on a per square metre basis instead on the basis of average home value), is via the dramatic reduction of certain “luxuries”. Domestic workers’ quarters, an Apartheid Era institution, peaked in buildings built from 1955 to 1959, with 63.82% of homes built in those years possessing this characteristic. For homes built from 2015 to 2017, the percentage is a far lower 13.02%.

The late-70s/early-80s appears to have been the Golden Era of the swimming pool, with 38.28% of homes built from 1975-79 having pools (although admittedly some of the pools may have been built at a later stage). Thereafter, the long term declining trend set in, and a mere 8.84% of homes built from 2015 to 2017 have such luxuries, according to the significant sample of homes valued by FNB.

Of homes built in 1980-84, a high of 68.55% of these homes had garages. In the 2015-17 period this was a slightly lower 59.06%.

While there has not been that much “economising” on garages, carports have diminished in popularity more significantly. Whereas 38% of the homes built in the 1975-79 period had carports, this declined to a far lesser 13% by the 2015 to 2017 period.

The demise of the Study in the newly built home has partly to do with the need to economise on space, and partly to do with technological development and the fact that much information has moved from the bookshelf, the filing cabinet and desk, and onto the computer or laptop. This has greatly reduced the need for such study space in the modern home.

It is thus not surprising that the percentage of homes with studies that were built in the 2015 to 2017 period, valued by FNB, was a mere 14.1%, well down from the 27% high reached in the 1980 to 84 period.

The dining room, too, is becoming gradually more “outdated”. 78.8% of the homes valued by FNB that were built in 1980-84 had dining rooms. This was significantly lower at 55% for homes built in the 2015 to 2017 period.

As land scarcity mounts, and average stand size gets smaller, so the incidence of multi-storey homes increases. Whereas the average number of storeys on homes valued by FNB was 1.13 for homes built in the 1985-89 period, this increased to 1.39 storeys by the 2015 to 2017 period.

Declining fertility rates and a smaller average size of household has also contributed to the demand for a smaller sized home with less bedrooms on average. Therefore, we have seen a noticeable long term decline in the percentage of homes built with 3 and 4 bedrooms. For homes built in the 1970-74 period, 10.9% had 5 bedrooms. By the 2015 to 2017 period only 1.39% of the homes built had 5 bedrooms. Of those homes built in the 1975 to 79 period, 23.32% had 4 bedrooms. This percentage had declined to 5.64% by 2015-17. Even the previously-most popular 3 bedroom homes category has seen some decline in significance. Of homes built in the 1985 to 89 period, 55.04% had 3 bedrooms. This had declined to 39.25% by the 2015 to 2017 period. And in the 2005 to 2009 period, the 2 bedroom home overtook the 3 bedroom home as the most prevalent, with 41.46% of homes built in that period being with 2 bedrooms, compared to 41.07% being 3 bedroom. The 2 bedroom percentage was 41.51% in 2015 to 2017. We have also seen a noticeable increase in the prominence of 1 bedroom homes, from 1.84% of total homes built in 1985 to 89, to 12.05% by 2015 to 2017.

Interestingly, though, despite smaller homes with less rooms on average, implying less people, there has not been a similar decline in the number of bathrooms per house. For homes valued by FNB, those built in the 2015 to 2017 period had 1.57 bathrooms per home on average. This is only marginally lower than the 1.64 high reached in homes built from 1980 to 1984.

Big Urban Challenges

The long term home densification process is expected to continue as the long term effective scarcity of urban land mounts.

The key challenges coming out of this rising urban land scarcity and densification include:

 

  • Creating safe open public spaces to largely replace the private space and amenities that many used to have on their own properties.
  • Improving the health of the Household Sector in the face of declining physical activity partly as a result of less open space
  • Creating mass public transport systems to reduce the myriad of costs associated with transport congestion
  • Designing lifestyle cities which can be attractive to highly skilled labour which can be attracted or repelled by lifestyle aspects, implying that urban design is a key driver of a country’s competitive advantage (Cape Town winning this “war” amongst the Big 4 cities at present).
  • Zoning for densification in certain areas, notably along transport corridors, and preventing densification in other areas.
  • Improving key infrastructure and facilities such as water/sewage, schools and hospitals in existing areas to keep up with growing demand per area as densification takes place.