23 Oct 2012
Although holiday home prices are stabilising, markets strongly driven by holiday home buying will remain subdued in the coming years, says a report.
This is according to the FNB Holiday Town House Price Performance report which reveals that due to the non-essential nature of a holiday home, holiday home buying has taken more of a back seat to primary residential buying during the tough financial times of recent years.
Writing in the report, FNB household and property sector strategist John Loos explains that following the 2008/9 economic recession, the South African household sector has been under significant financial pressure.
“Sharp increases in municipal rates and utilities tariffs related to housing have caused a good number of aspirant holiday home buyers to rethink the merits of owning a second home for leisure purposes.”
According to the FNB Estate Agent Survey in early-2007 prior to the recession, an estimated 5 percent of home buying was for holiday home purposes, while in recent years the percentage has ranged between 1 and 3 percent of total buying.
In Q3 2012, the percentage of buyers buying for holiday home purposes was estimated at 2 percent, unchanged from the previous quarter.
“Estate agents do not point to a strong holiday buying market, but one that is slightly better than the low of winter of 2011 where only 1 percent of buying was believed to be for holiday purposes,” says Loos.
Loos points out that it is possible that after a major downward correction in real holiday town home values, the combination of holiday home buying being slightly up off the low point, combined with improved price realism, may have led to a move towards real price stability in holiday town markets.
The FNB Holiday Town Index shows that in Q3 2012, year-on-year (y/y) price growth reached 3 percent – the third consecutive quarter of positive nominal growth.
He says with inflation currently near 5 percent y/y, this mild house price growth still translates into house price deflation in real terms.
As at Q2 2012, holiday town house price change in real terms was still negative to the tune of -3.1 percent representing a diminishing of the rate of real decline from -5.6 percent y/y in Q1 2012.
Since the Q3 2007 in the FNB Holiday Town House Price Index, the total decline in real house prices in this market has been -23.9 percent up until Q2 2012.
Loos says with slowing local and global economic growth, and increases in municipal costs, they expect regions dominated by primary residential home buying to broadly outperform the more “non-essential” holiday markets.
This is according to Knight Frank Anne Porter’s Atlantic Seaboard holiday rentals division, which reports having let out all but four of the 400 holiday properties on their books for the coming holiday season.
Janine Sullivan, who runs the holiday rental division says one of the highest rentals for the season has just been signed, at R30 000 per night for a luxurious four bedroom, four bathroom villa in Bantry Bay.
This villa has 180° views of the Atlantic Ocean from all three levels including luxury features such as sound proof walls, a surround sound system in the garden, electronically operated umbrellas, Portuguese marble floors, curved glass panel glazing in the dining room among others.
Sullivan says most of the bookings so far have been from foreigners from the USA, UK and Germany with an increase in enquiries from Johannesburg and other areas in Africa too.
Other areas sought-after for holiday homes include villas in Clifton and Fresnaye, homes in Bantry Bay and all these properties can fetch anything between R30 000 to R50 000 per day.
Since this is a buyer’s market, property buyers with cash are in position to negotiate good deals especially where the seller is in a rush to sell.
The recent FNB report reveals that 20 percent of home sellers are downscaling due to financial pressure while 3 percent of sellers were selling in order to relocate within South Africa (4 percent at Q2 2012).
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Two properties present an opportunity for buyers who can either use the properties as primary residences or holiday homes in KwaZulu-Natal and Limpopo.
Heather Pepermans is one such seller who has relocated to the seaside is in a hurry to offload these properties.
Speaking to Property24.com, she says in KZN, a property measuring 3 008 square metres located on George Pontuti Drive at San Lameer/Marina Beach is up for grabs.
This property can be easily subdivided into two separate properties enabling the buyer to earn money on one if they choose to make the other a primary residence.
“It has been valued at R1.3 million but because we are in a rush to sell and need the money, the property is selling for far less than that,” says Pepermans.
In Limpopo, a game farm property located in Vaalwater in the Waterberg with private two storey house fully furnished with a Landrover vehicle included is selling for a bargain.
She describes this property as offering privacy as there are no other houses in view, what’s more, electricity costs are very low and it is a secure place.
The property measures 2 000ha and is located on one of the best sites on the entire farm as it sits on the plains where animals pass by frequently.
Pepermans says a number of estate agents have valued the property at R1.35 million.
She points to relocation as the reason for selling and offers from R700 000 will be accepted. – Denise Mhlanga
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