The role of micro-development in delivering affordable housing

Population numbers in the world’s largest cities have been steadily increasing and this has put pressure on governments and developers alike to find housing solutions. South Africa is no exception, with population increasing in Cape Town, Johannesburg and Durban by 1.93%%, 2.33% and 0.72% in from 2021 to 2022, according to macrotrends.net.

One of these solutions include the development of micro apartments, also referred to as compact living and small space homes.

According to tech business Linak, the trend of small homes is particularly prevalent among generation Y (people born between 1980 and 2000) because they are more prepared to sacrifice space in exchange for a home in the right location close to work that’s affordable.

Here we unpack what some of the bigger cities abroad are doing in terms of affordable living and how some of the major South African developments and ideas compare.

New York office conversion

Renting and buying accommodation in New York is pricy. According to CNBC, the average monthly rent in Manhattan reached a record $5,000 (R87,423) earlier this year. However, converting commercial real estate into micro-apartments could be a solution.

According to a report, average office rent is almost 5% lower than it was before the pandemic. With trends like the Great Resignation and people working from home it’s no surprise that New York’s office occupancy rate only hit 40% since the March 2020 pandemic related shut downs.

The increase in occupancy rates comes as large companies start imposing stricter in-person policies. However, the trend among many companies is still to cut back on office space. Companies that have ditched or cut their office space in New York include KPMG and State Street Corp, which is moving out of its Midtown office.

London’s smallest micro flat

Earlier this year The Guardian reported how London’s smallest microflat went up for sale for for a minimum of £50,000 by auctioneers in spite of just having seven square metres! In the end it sold for £90,000 – 80% above it’s asking price.

It’s another example of tiny homes and the fact that micro flats are becoming more sought after as property in big cities becomes more expensive and harder to find.

German micro-living

According to tranio.com micro-living has taken off in Germany with cumulative investment into micro-apartments or compact living rising by 70% in 2018. The pandemic didn’t slow interest in microunits and a total of €563m was invested.

Here, interest has mainly come from students, singles that demand one-person living space (einpersonenhaushalte) and commuters working in big cities, like Berlin and Frankfurt. Demand from singles has risen from 20.6% to 42.3% over the last 60 years according to Tranio.

South African micro-living

In South Africa we’re used to space, big gardens, pools and plenty of room inside our homes. But this is changing. One just needs to see the interest generated by the likes of the 25 square metre micro apartments, The Ivory, in Cape Town’s Atlantic Seaboard earlier this year.

It was marketed by Dogon Group Properties and apartments ranged in price from R1.45m for 25sqm to R2.575m for 32sqm. These properties have since increased in price. At the time of writing the properties had gone up in price and are on sale from R1,895,000.

In Johannesburg micro-apartments have caused a stir too. Back in April this year Business Insider reported how a total of 48 apartments in Sandton’s newest development sold for almost R50m in just three days. The tiny apartments in HQ Sandton are just over 20sqm in size and referred to as ‘hospitality studios’ with just a shower, small kitchenette and balcony.

Stefan Botha, director of Rainmaker Marketing which specialises in South Africa’s property sector told Business Insider: ‘Sales of this rate are unheard of, particularly in this economic climate and it’s safe to say that HQ Sandton is outperforming other developments in the area.’

Momentum for micro-living is perhaps more laid back in Durban. However, Citizen Hyde Park were reportedly the first micro apartments buildings in South Africa.

It looks like wherever you are in the world, the demand for micro apartment living is here to stay with demand increasing as we fight for space, look for affordable accommodation to get on the property ladder and try to find homes close to the big city hubs. If more developers don’t cater to this trend, they’re likely to be left behind.