It has been a slow recovery for the holiday home market after five years of zero demand for coastal properties.
It seems that buyer demand is [slowly] picking up. Industry players say holiday homes are starting to be attractive from a price point of view, although this is not yet translating to sales which remain subdued.
It’s now a buyers’ market and not a seller’s market says Ronald Ennik, principal of luxury real estate group Ennik Estates.
“Deals are slow and buyers are now in a good position when sellers are a bit desperate to sell their properties. And therefore buyers can call the shots,” says Ennik.
While the primary market has been in recovery mode following the onslaught of the 2008 global financial crisis, holiday homes have been muddling along. Ennik says: “If people go through hard times they tend to sell their holiday properties and hold on to their primary properties.”
The selling of holiday properties – which are still viewed as nice-to-haves – over the years has created a glut in the market.
Another pressure point for the market is the tepid capital appreciation of properties. Latest figures from FNB’s holiday towns house price index indicate that for the third quarter of 2015, properties showed a year-on-year price of 7.2%. This is slower than the 9.5% recorded from the previous quarter. The house price growth is in stark contrast to the market clocking up 57.3% in 2004 – a boom year.
Seeff Property Services chairman Samuel Seeff says holiday homes house price growth is similar to that of primary homes which stand at about 8% to 10%.
“This sector of the market is also likely to again settle back as it takes its cue from the primary housing market. For example, if the primary housing market and consumers come under pressure, they are not going to be investing in leisure property,” says Seeff.
Despite the holiday home market being under pressure, Seeff says the level of house price growth recorded is satisfactory, given that economic growth this year is expected to be less than 2%.
According to FNB, holiday home buyers expressed as a percentage of total housing sales is 3%, which is still below the peak of 5% in 2007. But this is still an improvement from the 1% low seen in 2010.
FNB’s household and property sector strategist John Loos says there shouldn’t be much expected from this market as “we would expect the growth recovery to taper off.” You don’t have to look far for reasons behind this; a weak economic environment and low levels of consumer confidence.
Some of the active buying areas include traditional coastal towns like Plettenberg Bay and Hermanus in the Western Cape and KwaZulu-Natal’s Umhlanga, says Jawitz Properties director Francois Venter.
Seeff paints a similar picture: just in Hermanus, Seeff Property Services had “a particularly good year” with beachfront sales ranging up to R24 million. Cape South Coast areas such as Witsand, Pringle Bay, and West Coast villages such as Langebaan, have been sought after, he says.
The Atlantic Seaboard – from the V&A Waterfront right through to Sea Point, Camps Bay and Clifton and stretching past Llandudno to Hout Bay – has piqued the interest of buyers.
It seems like buyers prefer the middle-end priced properties and are not rushing for top-end trophy homes usually above R10 million. “People are looking at buying properties under R5 million, which most of the activity sits in at the moment,” says Venter.
Those buying properties, mostly local rather than foreigners, are snapping them at a discount and getting good value for money because the market is still far from being fully on the mend. Says Venter: “The logic is that in good times you save and in bad times you buy. People who have the means to buy second homes assume that there is good value in the holiday buying space.”