24 Jul 2012
The South African Holiday Towns Average House Price Index grew by 3.8 percent year-on-year (y/y) in Q2 2012, according to an FNB report.
FNB reveals that this figure is up from the previous quarter’s 0.5 percent and is only the second consecutive quarter of increase after almost two years (seven quarters) of consistent y/y decline.
The report reveals that while still appearing to lag the national market, holiday town property market prices may be showing signs of stabilising after significant decline.
Writing in the report, John Loos, FNB Home Loans property strategist, says in nominal terms, the Holiday Towns Price Index is -5 percent down since the first quarter of 2010, the quarter after which the lengthy period of nominal house price decline set in.
In real terms, in the second quarter of 2012, average real price was -13.1 percent down on Q1 2010 and -22.9 percent down on Q1 2008, which represented the national real house price peak at the very end of the property boom, he says.
The Holiday Town Index is estimated from Deeds Office data, using transactions by individuals in holiday areas deemed to be strongly residential.
Loos points out that the holiday market has had a very significant real price “correction” in recent years and at 3.8 percent growth in the second quarter was still declining in real terms.
“The 2012 return to low nominal price growth (although still declining in real terms), could probably at best be called stabilising prices after the significant real and nominal price decline and probably reflects a mildly improved rate of holiday property buying following a 2010 low.”
He explains that in mid-2010, the panel of agents surveyed in the FNB Estate Agent Survey suggested that holiday home buying had reached a low of around 1 percent of total buying, after a declining trend from up around 5 percent in early-2007.
This percentage improved to between 2 and 3 percent in 2011 and it appears to have declined in 2012 to between 1 and 2 percent.
“The improvement in holiday town price growth is believed to be reflecting last year’s mild improvement in holiday property buying off the 2010 low.”
Loos says with ongoing household sector financial pressure and significant increases in municipal rates and utilities tariffs related to housing, they expect the holiday property market to continue to lag the more primary residential demand-driven markets of the major metropolitan regions, due to the non essential nature of holiday home buying.
Meanwhile, Pam Golding Properties (PGP) Intellectual Property Magazine notes that the second or holiday home market remains subdued, although they are experiencing some interest, particularly for prime seafront properties.
The holiday home market per se has donned an entirely new persona and the appetite for families to have one in the current economic climate has lessened.
It remains to be seen whether this is a factor of the current market conditions or a more permanent trend, says the agency.
Dr Andrew Golding, chief executive officer of PGP, explains that although most home buyers are seeking to acquire homes for primary residence, there are pockets of growing interest in the leisure homes market, with many well-located properties along South Africa’s traditional holiday coastline as well as inland offering excellent value at their current prices.
Following the collapse of the holiday home frenzy in the boom days, we are now seeing renewed interest in land, and Jeffreys Bay and St Francis have seen significant increase in land sales for building leisure homes, he says.
Golding notes that the North Coast of KwaZulu-Natal, around Ballito has seen an upturn with the greatest demand for homes on, or close to, the beachfront.
On the KwaZulu-Natal south coast, the areas south of Amanzimtoti, such as Pennington and Scottburgh, are showing a shift in buying pattern with about 50 percent of the interest in primary homes within a commuting distance of Durban, and the balance in second homes.
Inland recreational centres such as Underberg in the Drakensberg, Clarens in the Maluti mountains and Dullstroom in the Highlands of Mpumalanga, have all shown a recovery of the leisure market in the past year.
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