If you’ve been thinking about buying a holiday home – or even a permanent home at the coast – then now’s the time to do so, says Tony Clarke, Managing Director of the Rawson Property Group.
“For a few years after the 2008/09 recession, the property markets in SA’s coastal ‘holiday towns’ were really in the doldrums, thanks to a glut of holiday and rental properties dumped onto the market by people who found themselves in financial trouble, coupled with very few people in a position to buy them,” he notes.
“But by 2012, these markets had recovered substantially and prices had started to rise again, thanks to the improving state of household finances and to a major new lifestyle trend termed ‘downshifting’. This has seen many people relocate permanently from big cities to small country and coastal towns over the past few years, in search of a more relaxed and affordable lifestyle.
“It has also significantly reshaped the character and the property markets of many holiday towns that used only to fill up once or twice a year, and whose few permanent residents were mostly retirees. Coastal examples that come to mind are Langebaan, Hermanus, Knynsa, Plettenberg Bay, Amanzimtoti and Ballito, where the rising numbers of permanent residents have created and opened new businesses of their own, and prompted many new retail and commercial developments, as well as the establishment of new schools, hospitals and other community facilities.”
However, says Clarke, SA’s economy has been struggling since the beginning of 2015, and this has put property price growth in holiday towns on a declining trend once more. “This makes sense, because in difficult times people tend to migrate towards big cities that offer more employment opportunities, and the demand for permanent homes in smaller towns decline.
“There are also far fewer consumers with money to spend on holiday homes or buy-to-let properties, and this becomes all the more obvious in holiday towns which still don’t have a large permanent population and remain dependent on secondary property purchases.”
In fact, he says, the latest available statistics on holiday towns from First National Bank (see https://blog.fnb.co.za/2016/05/fnb-property-barometer-holiday-towns-house-price-index-may-2016/) shows that the Holiday Towns Price Index turned negative in the first quarter of this year for the first time since the start of 2012, after a solid period of growth during 2013 and 2014.
In addition, FNB household and property sector expert John Loos makes the point that while prices in holiday towns tend to inflate faster than those in major metros during times of prosperity, they also tend to run out of steam faster than prices in the major metros when times are tough, because they often rely so heavily on non-essential holiday home purchasing.
In other words, these markets are much more volatile than the major metro markets which are generally primary-residence driven, and tend to experience higher growth peaks and lower troughs over time.
And such cycles, says Clarke, provide excellent opportunities for astute buyers and investors to “buy low and sell high”, with the current downswing being an excellent time for those who have been planning to relocate to the coast or to acquire a holiday home or buy-to-let investment to put those plans into action.
“There is some really excellent value to be had at the moment, especially in KwaZulu-Natal, such as a newly-listed four bedroom apartment in an eco-estate near St Michael’s-on-Sea which is on sale for R1,08 million, or a three bedroom house with sea views in Pennington, which is on sale for R1,05 million. We also have a handful of perfect buy-to-let apartments for sale in Umhlanga’s sought-after New Town Centre at prices from R1,2 million to R1,85 million.”
What is more, he says, buyers with a medium to long-term outlook don’t need to worry about their costal investments under-performing compared to properties in major metros. “A comparison of the FNB Major Metro House Price Index and Holiday Town Price Index since 1999 shows that while they have performed differently at different times, the cumulative growth in house prices over the past 17 years has ended up relatively closely matched, with the Holiday Town Index having risen 521,4% and the Major Metro Index having grown 537%."
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