Whatshot
Property Talk
Property Talk
Date: 2017-10-26
Price performance of holiday homes
As we head towards the end of the year and brace ourselves for the expected influx of holiday makers to the Dolphin Coast, it is interesting to review the price performance of holiday homes around the country using the FNB Holiday Towns House Price Index.
Over the most recent period the year-on-year house price index for holiday homes has softened slightly from 6,3% as at the 3rd quarter of 2016 to 4,5% in the 3rd quarter of 2017. This however is considered reasonable price growth in a weak economy.
With tougher economic conditions, households in general are more concerned with primary residential markets and non-essential holiday home purchases typically take less of a priority. Second homes are the first to be sold in a cash crunch. It is interesting to note how during the boom period of 2003 through to 2006, the price growth of holiday towns far exceeded that of primary residential markets. Since 2007 however the holiday house price index has underperformed the national price index.
When we consider how the FNB Valuers view the holiday town housing market it is evident that they perceive a strengthening in the Coastal Holiday Town markets, after a period of weakening during 2016. For the period post 2008 it is clear that the main metro areas dominated by primary residential sales have outperformed the holiday towns.
On a scale from 0 to 100, with 50 being a well-balanced market where buying and selling strength are in equilibrium, the Metro market in SA has a market strength rating of 51.72 (i.e. above average market strength). The rural regions (non-metro and non-holiday) have a market strength rating of 49.16, which is marginally below equilibrium with buyer and seller strength almost equally weighted.
The Holiday Towns market strength indicator is however only provided as 39,55. Although there has been a recent strengthening this nevertheless indicates a market heavily favouring buyers where the relative market strength would be described as "weak demand facing abundant supply".
This confirms my assertion that it is currently probably the best buyers market you are going to see over the next decade. Many sellers are tired and worn out by a steady stream of bad news, which has shattered business and consumer confidence. Cash remains king and for those buyers not dependent on mortgage debt finance.
The outlook for the holiday town residential property market for the next year remains subdued and a time for securing great buys. Only once GDP growth rates have stabilized at more meaningful levels will we expect resurgence in demand for holiday homes. For those markets such as Ballito that are enjoying the semi-gration driven demand by families moving from Gauteng and the surrounding areas to our greater Dolphin Coast area, continued growth rates in excess of the national averages can be expected.