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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2018-03-02

Holiday home demand

Is the holiday home property market making a comeback According to FNB their Holiday Towns House Price Index comprising coastal and inland towns whose housing markets are deemed to be strongly driven by holiday home demand has shown a recovery over the last two quarters of 2017.

The year-on-year growth accelerated to 5,9% in the final quarter of 2017 from 5,5% in the prior quarter. Interestingly this meant that the Holiday Town house price growth has slightly exceeded the 5% National average house price growth in the 4th quarter of 2017. For a traditional holiday town like Ballito the sectional title beachfront property market characterizes this holiday home market and this national level of demand would also be felt on the ground by the agents servicing these properties.

It is crazy to think that the Holiday Town Index grew by a whopping 59,2% in 2005 far exceeding the National House Price Index growth of 32,8% in the same period. Had you managed to buy in 2002 and sell towards the end of 2004 you would have enjoyed the main capital growth of the period. Had you bought towards the end of 2005 the growth was already falling rapidly and by 2007 you would have missed the opportunity to sell out.

Compared to the boom years the current annual growth rates seem unimpressive but they do represent normal buying and selling. The FNB Estate Agent Survey estimates holiday home buying as a percentage of total home buying. From a recent low of 1,77% in the 4th quarter of 2015, holiday home buying is estimated to have gradually risen to 3,65% of total home buying by the 4th quarter of 2017. So while we would have predicted that tougher financial times as experienced recently would translate into less demand for luxuries such as holiday homes, this does not appear to have happened.

The boom times predictably saw the holiday homes price index soar above the total home price index. However from 2008 onwards the national house price index has grown a cumulative 55,3% to the 4th quarter of 2017 while the FNB Holiday Towns House Price Index has only managed cumulative growth of 18,35%. When considering a longer period of 18 years from 2001 through to the end of 2017, the cumulative Holiday Town House Price Index grew by 465% and the national House Price Index by a similar 444%.

The prediction by FNB for the foreseeable future however is that as long as the country's economy is mired in weakness and household disposable income growth remains low, the holiday towns property market will underperform the national market in terms of house price growth.

For holiday towns that are also benefitting from a migration from Gauteng by people seeking better lifestyle opportunities the demand for homes can be expected to continue and gain momentum in the year ahead. As property professionals serving the greater Ballito market we do not see any signs of this demand dissipating at this stage.