26 Apr 2012
Holiday home buying trends in South Africa have switched from once-a-year coastal holiday houses to accessible second homes that can be used more regularly.
With this evolution has come greater demand for second homes within a radius of 300km of South Africa’s major metropolitan areas or of individuals’ primary residence.
According to Century Property Developments, the country’s largest residential developer with R1 billion sales in 2011, the result has been “exponential” growth in demand for such holiday homes.
This runs contrary to recent media articles suggesting the economic climate had resulted in stagnant demand, but chief executive officer Mark Corbett says those analyses have ignored the changing trends of holiday home ownership.
“There has been a strong trend away from second homes that can only be used once a year, during the Christmas holidays, towards homes that can be used by the family on a weekly or monthly basis, or even shared between families.”
Corbett explains that the real change is that people want usage out of any investment and this is only possible with a holiday home that is in close proximity from a city.
A further big change is the time that people can afford to take off has diminished, which also comes into the equation.
People need holiday homes that they can escape to for a weekend without costly flights, leaving on a Thursday or Friday and returning early Monday morning, arriving in time for a full day’s work.
Ease of use is also a huge factor, he says.
He notes that in recent weeks, property commentators have discounted the market for holiday homes, stating that it has remained sluggish since 2008/09 with scant sign of a turnaround.”
Corbett agrees with the view - but only as far as the comment relates to coastal holiday homes, where they too have seen a demand drop.
“However, our experience is that the total market for holiday homes has seen a resurgence.”
What is actually occurring in the market is that many owners are placing their coastal homes on the market – resulting in a glut of property at the coast and a drop in the resale price - while looking for alternatives closer to home that they can get more usage from and possibly share, he points out.
With a coastal property, it is not really possible to share with other families as there is realistically only one prime time, which is December.
While holiday homes closer to Johannesburg, the usage is throughout the year and families can easily share these types of homes, he says.
Corbett says this view is supported by the FNB Property Barometer for the holiday home market released earlier this year.
The report revealed that holiday home buying had grown as a percentage of total buying from 1.5 percent in 2010 to 2.5 percent in 2011.
While the total percentage points are small, that reflects a massive two-thirds increase in the market and hardly the doldrums being spoken of, he says.
Corbett says market commentators and even those in the industry tend to be fixated on coastal properties ignoring the broader market.
A second trend discernible in the holiday home market is a greater sophistication being applied to the investment model of holiday homes.
Historically, this model – especially as they relate to coastal homes was always suspect.
This has been worsened of late by South Africa’s huge consumer indebtedness, meaning the recovery of costs by second homeowners relying on peak season has not fared as well as expected, he says.
A turnaround in this regard will be slow as the National Credit Regulator last year stated that 46.4 percent of South Africa’s 18.6 million credit-active consumers had an impaired credit record, an increase from 2007’s 16.9 million credit-active consumers of whom 6.38-million (37.7 percent) had impaired credit records.
“Coastal homes could only be rented in peak season, which would place pressure on the unit’s ability to cover its costs.”
Increasingly, investors in second homes are more street-wise.
They are looking for homes that are easily accessible (and from which they can therefore draw maximum value) while remaining cognisant of the future value of the second home in respect of potential resale, says Corbett.
“Where we are seeing the strongest demand from buyers of second homes is in established estates that offer all the amenities they have become used to while vacationing.
“These include facilities such as mountain biking, hiking, trout fishing and golfing,” says Corbett.
Century Property Developments recently acquired an estate under liquidation in Dullstroom, Mpumalanga.
It had been 50 percent sold out at the time of purchase and Century plans to relaunch the country estate in June.
Corbett says demand for units has been strong - typically from syndicates that they have already pre-sold a good percentage of the estate.
Century expects the estate to be 100 percent sold out within three months of re-launching.
He attributes the rising demand for holiday homes to people essentially “buying down”.
“Holiday homes offer excellent value compared to overseas holidays.”
A shaky economy, volatile rand and consumer indebtedness may have hit the property market, but have hit the overseas holiday market even more.
He adds that holiday research points to more locals staying either at home or in their own holiday homes this year rather than touring abroad.
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