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Leisure property: a buyer’s market

Market to face further setbacks but traditional holiday home spots bounce back.
SA's leisure property market is still in for tough times.

It has been a slow recovery for the market after five years of zero demand for leisure properties, which sent property values crashing.

Though industry players are reporting a tick up in buyer demand, actual sales still remain subdued and house price growth is still muddling along.

FNB’s 2015 fourth quarter figures show that holiday towns posted a 1.6% year-on-year growth on properties, which is slower than the revised 5.3% recorded in the previous quarter.

The performance of leisure properties is even markedly lower than the 12% peak during the same period in 2014 – when the market was emerging from the onslaught of the 2008 global financial crisis.

FNB property strategist John Loos says the growth rate posted is much lower than that of the primary property market, which amassed a growth rate of 5.6%.

SA’s slowing economic growth, rising interest rates, sustained rising costs and household indebtedness, has resulted in the waning appetite for leisure properties among buyers. “This [difficult economic] environment works more against holiday home buying levels than it does for primary residential demand,” says Loos. 

In early 2014, the estimated percentage of holiday home buyers as a total of housing sales touched 4%, but this estimate has since dropped to 2%. This is still below the peak of 5% in 2007, but an improvement from the 1% low seen in 2010.

Buying a leisure home is still seen as a nice-to-have and when times are tough, homeowners are likely to sell their holiday homes. This has created a glut in the market.

While demand for properties is starting to improve compared to five years ago, Seeff Property Services chairman Samuel Seeff says overall sales volumes remain well below the pre-2007/8 highs. 

“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.

Based on the activity at Seeff Property branches, traditional holiday home spots such as the Western Cape’s Atlantic Seaboard (Sea Point, Clifton and Hout Bay), Llandudno, Cape South Coast areas such as Witsand and Pringle Bay, and West Coast villages such as Langebaan, have bounced back and are a hot-bed of demand among buyers. Other active areas include coastal towns like KwaZulu-Natal’s Umhlanga and Ballito.  

Some buyers are taking advantage of the distressed market, by acquiring leisure properties at a bargain. It’s now a buyer’s 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 desperate to sell their properties. And therefore, buyers can call the shots,” Ennik recently told Moneyweb.

As uncertainty grows about the domestic economy and low consumer confidence, leisure properties are likely to be on a slippery slope. Loos says the slowing of leisure property prices may be a sign of affordability becoming more of an issue. “But [it] is also likely to reflect an increasingly cautious household and consumer in a period where economic news is not overly positive,” he says.

Not only is the leisure property market under pressure, but overall SA’s property market in general is taking strain. Analysts expect an average house price growth rate of below 5% for 2016, lower than the 6% recorded for 2015.

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Hi Ray

Owning property in SA is perhaps not a good idea. There are many years to go of ZANC and that is a worry for any investor. Rather rent your holiday house and send any spare loot you might have overseas. ZANC are running out of money and the SOE’s are either all bankrupt or going bankrupt. This means higher taxes and one area ZANC might look at is second homes. ZANC are capable of anything as regards attacking one’s assets to raise money.

owning property in sa – well like all things in life – it all depends on timing. I made money – I know people who bought a house in Llandudno in ’76 (after Soweto mk1) for R45,000 – today’s value +R8m. likewise who bought cheap after Sharpeville in 1960. I like to take my own experience. bought a house in tokai in 1981 for R80,000 – sold it 2 years later for R125,000. that house today is probably R4m. what we did was to leave sa and take that money to buy a house in suburban Sydney for A$125k (when the rand =Aus$1). we sold that house 4 years ago for A$1.3m (R15m). so the issue in sa is twofold: 1) the exchange rate fall (part of inflation) misleads the raw figures. 2) there are probably 4 places in sa that will always be in demand – the atlantic seaboard. other than that wouldn’t touch it. as a postscript – have started reading the Saturday weekend argus only to study these incredible houses on the market going for a song (in aus $ terms). if anything there are MORE homes coming on the market AND prices are coming down. don’t ask agents abt this – they only give good news – ie more commission for them

Catch a wake-up.

First, all underground rights got nationalised and all miners had to reapply for New Mining Rights Licences, subject to prescribed T&C’s.

All land and all improvements thereon, howsoever directly and/or indirectly affixed thereto was in legal effect and practice nationalised upon the 2006/7 implementation of the Municipal Property Rates Act of 2004. Became illegal to trade any land / any improvement thereon to foreigners, only its tenure rights.

All registered (business) entities got nationalised when it became obligatory for all registered entities to (as prescribed) deliver annual Audited Financial Statements and other Statutory Returns to Government acting on behalf of the State (RSA Citizens) on how well said nationalised entities are managed.

Free-market trading of whatever aforesaid nationalised asset, continued as before, and for many years since. Market valuations updated annually.
Thus in compliance with market related compensation per the Constitution.

President amused by nationalisation demands and clearly stated, “its done”.

End of comments.

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