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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2018-06-01

Price growth for holiday homes

Do you own a holiday home As Ballito has been a favorite destination for holiday home buying for decades and with the current semi-gration we see from Pretoria and Johannesburg to the Dolphin Coast, it is interesting the explore what holiday home buying and demand has been like recently in South Africa.

FNB's Holiday Towns House Price Index report provides us with a unique insight into this market and helps us understand the current levels of demand for holiday homes. The price growth for holiday homes accelerated to 7,5% in the first quarter of 2018 from 6,7% recorded in the fourth quarter of 2017. The good news is that this was the third consecutive quarter of price growth across this market segment.

This also means that the holiday town house price growth has actually exceeded the national average house price growth rate. For most of the past decade the holiday towns price index has lagged the national price index and only recently we have seen the acceleration of holiday towns to 7,5% versus the 5.5 % national average price growth rate.

So despite there being no boom in the prices of homes in general it is the relative outperformance of holiday homes that has surprised us. On a cumulative basis over the past ten years the holiday towns house price index has grown by 22,12% which is actually a decline in real terms.

By comparison the national house price index has achieved a far more significant 57,91% cumulative growth rate. FNB estimate that 3,18% of total home buying is holiday home buying. This is down from the 3,65% recorded in the previous quarter or the lows of 1,77% reached in 2015 of the 1% reached in 2010 and 2012.

On the demand side we see that a driver is the migration in search of lifestyle with an estimated 10% of all sellers in South Africa selling in order to re-locate within South Africa. This relocation from Johannesburg and Pretoria to the Dolphin Coast has definitely fueled the demand for certain properties long the coastline. Whereas typically Cape Town has been the largest recipient of the semi-gration phenomena, we see that the KZN coast with its strong holiday home status is becoming increasingly more attractive given its relative affordability.

The distinction between holiday homes and retirement opportunities has become less clear recently and many of the buyers moving down to the Dolphin Coast are relocating for retirement purposes rather than simply buying a holiday home. Holiday homes are also often purchased in advance of a specified retirement age in order to secure the property with the anticipation of retiring to the property at a date in the future.

Given the superb winter weather we experience and the relative absence of major traffic and congestion along the Dolphin Coast at this point in time it does not surprise me that the KZN North Gate is becoming a contender with Cape Town in attracting the interest of those semi-migrants who looking for a safe and affordable alternate.