Small homes deliver bigger returns for savvy buyers.

Smaller homes are increasingly popular among SA buyers – and not just because that’s all that’s available or all they can afford. Another major consideration is that such properties are increasingly proving to be “savvy investments”.

Berry Everitt, CEO of the Chas Everitt International property group, says that’s the message to emerge from the latest FNB statistics detailing the rate of price appreciation among properties of different sizes – small homes of between 20sqm and 80sqm, medium-sized homes of 80sqm to 230sqm and large homes of 230sqm to 800sqm.

These figures show that in the second quarter of the year:

- 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).

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

Similarly, Everitt says, the latest Absa Housing review shows that among homes costing less than R4.4 million, small homes showed a 9.9% year-on-year increase in the second quarter, medium-sized homes a 6.1% increase and large homes a 5.6% increase.

 “One of the main reasons for these relatively high gains on smaller homes is the additional demand that has been coming from the increasing number of repeat buyers who are ‘downscaling’ to smaller home in pursuit of lower operating and maintenance costs.

“Add this to the traditional first-time buyer demand for such properties, as well as the slowdown in new housing delivery over the past few years, and you get supply shortfalls - and rising prices,” says Everitt.

Everitt says an increasing number of high-end buyers are also choosing smaller properties now for reasons of security, convenience and lifestyle – with the result that ‘small’ is by no means always synonymous with ‘inexpensive’ any more.

For example, even tiny studios and apartments can now easily sell for more than R50 000 per square metre if they are in the most fashionable and sought-after locations, and prices like that will quickly push up the averages.

Further statistics suggest this is not just a flash in the pan, says Everitt. “The small homes category has clearly outperformed the other two over the past 15 years – including the ‘boom’ period from 2003 to the end of 2007, when falling interest rates actually prompted many home buyers to upgrade, and spurred high demand for bigger homes.”

Indeed, FNB says between the first quarter of 2001 and the second quarter of this year, smaller homes showed a cumulative 375.3% increase in value, medium-sized homes, an increase of 349.8% and large homes an increase of 286.1%.

“In short, those who buy smaller homes can currently and for the foreseeable future expect much better returns on their investments than those buying medium or large properties – and that means that the traditional steps ‘up the property ladder’ may soon have less to do with buying bigger and bigger homes than with buying more and more valuable small homes,” says Everitt. www.property24.com