Small apartments - big business
Mark Twain once offered this piece of investment advice, “Buy land, they don’t make it anymore”, but owning land is not only an economic goal, it remains a dream for most who see it as part of becoming an adult.
But it is not that simple, not that it ever was, but there are factors now that make owning a home more difficult despite most other parts of our lives getting easier.
The principal issue is not that we are going to run out of land as Twain might suggest, but rather that the demand to occupy the same piece of it is increasing.
Living in the heart of a city for those who also work there makes sense, but for young workers that would make the most of living in the city, they are the least likely to be able to afford it.
The solution until now has been to rent a flat as close as possible and possibly share the rent. Those types of blocks come with their own issues of overdue maintenance and not much in the way of facilities.
Being on the outskirts of popular areas you would need to rely on public transport or get a car, parking is typically as scarce as affordable units and unless addressed the neighbourhoods begin to fail.
Refitting older office blocks or building new ones that make the units smaller while adding more communal spaces is one way to overcome it. In urban settings these are micro-apartments.
For those further out the preference for a more manageable home has resulted in the tiny home movement.
Tiny homes can be free standing houses or units in a complex or buildings that are under a certain size typically under 40 sqm. It should have fully functional kitchen and bathroom facilities and a private room area. They are often built with a split level and use height to create the space to offset the limited floor space.
Using large windows or glass doors with small balconies maximises the light.
A micro-apartment can be smaller still and typically will compromise on the bathroom and kitchen or make the bed foldable when not in use.
An additional reason that smaller homes are becoming more acceptable is that appliances are getting smaller and smarter and home furniture is both compact and versatile further making the most of a small space.
The final tech advance is the increase in high speed internet combined with impressive TV’s and audio equipment. A large TV will convert your small home into a perfect cinema.
The shared living frees up options to create co-working spaces, gyms, areas for entertaining and restaurants. Some even have activity managers handling concierge services and planning social events for residents.
This also takes care of food and other deliveries.
Here are the pros and cons of much smaller homes.
Lower purchase costs
Minimal maintenance and cleaning
Easier to furnish and refurnish
Closer to popular urban areas
Shared spaces allow for access to big ticket items like pools and gyms
Co-living for single residents offers friendships and even romantic partners
If renting, it means lower rents and easier moves
There is greater demand from new homeowners so resale value should be maintained
It may merge with hotel living allowing for larger hotels with some floors with owners/renters to cover the base cost allowing the hotel to be more profitable with the remaining units
Not intended for families
Restrictive for entertaining
Limited cooking options
Limited additional space for bikes or cars
It could be a fad which may wane as decentralised work becomes more typical
Close living could cause psychological harm if there are issues with neighbours or noise
Some options available now
Some points on how to live in a smaller space even though we all seem to want bigger spaces. Andrew Morrison Tiny House Movement
Looking beyond the ownership
Buying a smaller and more affordable first home makes paying for it and so saving for the next one a little easier.
It would leave a bit more disposable income to use for entertainment. One block purposely does not sell parking in favour of walking or short Uber trips (Uber themselves has stated they want to make using an Uber cost less than owning a car).
But it would not only be local travel that becomes easier, it would make long distance and overseas travel more likely too and your home would only have a few plants that need a watering which could either be automated or taken care of by the concierge.
While there is a growing list of buildings that are available or will soon be available for this type of living, banks may still be unsure about bonds for the new segment.
Could it also solve social housing
South Africa has a major issue with social housing and while building more smaller units might sound like a good option, the social housing needed is typically for families and includes grandparents and relatives as part of the family unit. It may be possible to give a family multiple units but the costs probably don’t work as well.
It would be good if not a requirement that some units in a block are set aside for subsidised rentals for those that qualify to not further sustain the economic gap in our cities.
#BusinessUnusual considers how practical it is to build homes that are less than 50 sqm. Tiny Homes and micro-apartments are not new but are they ready to go big. Join @brucebusiness and @colincullis just after 7pm. How small could you go?— 702 (@Radio702) March 17, 2021
While some are willing to try smaller, the <25 sqm are off the table for Money Show listeners
A word of caution
If speculators pile in only to find that the high rentals they demand may not be forthcoming as was the case with a boom in buying units to use for Airbnb. The supply in Cape Town began exceeding demand and with lockdown effectively ended that trend.
One segment that should get a boost if enough units become available will be the small space furnishing companies. Smaller home units are already common in Europe and companies like Ikea have furnished many of them with their focus on simplicity, functionality and cost. Might it be the conditions to see the first store come to SA (there are already companies that import the most popular items)
Like most new options, they have some significant benefits and may disrupt some segments of the market. But it is not likely to end the desire for more sizable units or for wanting to have a spacious family home.
What it will do is offer a starting point for many who at the moment simply could not afford to get onto the bottom of the housing ladder.
This article first appeared on 702 : Small apartments - big business
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