Holiday homes price growth slows down

The FNB holiday towns house price index released this week revealed that quarter-on-quarter price growth slowed down for the third consecutive quarter to 2.1 percent in the first quarter of this year from the high of 3.3 percent reached in the second quarter of last year.

John Loos, a household and property economist at FNB, said the index had begun to show signs recently of a loss in growth momentum after some resurgence off a low base last year.

Loos said the slowing quarter-on-quarter price growth had now started to translate into slower growth in the still high year-on-year price growth rate to 11.8 percent in the first quarter of this year from 12.1 percent in the fourth quarter last year.

"From here onwards... we expect slowing house price growth in the holiday town markets to be the order of the day.

"This expectation comes on the back of a slow economy, which looks set to remain so for the foreseeable future, as well as interest rates being expected to resume their rise late in 2015," he said.

Loos added that given the nonessential nature of holiday home buying and therefore the more cyclical nature of holiday home driven residential markets, FNB expected the price growth in the FNB holiday townhouse price indeed to drop back to low single digit rates, and below that of the major metro regions, in the not too distant future.

He said prior to last year, house price growth in holiday towns had lagged the major metro residential regions for most of the period from 2010 to 2013 and holiday towns experienced house price deflation over a significant part of that period.

This was explained by a financially constrained and highly indebted household sector following the 2008/9 recession, adding it was understandable that primary residential demand driven metros would perform better than holiday markets that were strongly driven by non-essential holiday property buying.

However, Loos said the financial pressures had by last year eased after some years of low interest rates, resulting in the holiday town market beginning to make a noticeable "comeback".

The prior price deflation in holiday towns and very low inflation over the 2010 to 2013 period had also driven a significant improvement in affordability of residential property in holiday towns.

Meanwhile, mortgage originator ooba reported this week that the overall property market continued to show positive growth trends.

It said its oobarometer, which tracks average purchase prices and other market trends, achieved double digit growth last month for the first time since May 2010 despite the challenging local economic conditions and subdued business and consumer confidence.

ooba chief executive Rhys Dyer said they were pleasantly surprised by the 10.3 percent year-on-year increase in average purchase price to a high of R1 045 038 last month.

Dyer said the average purchase price for first time home buyers rose by 6.2 percent to R788 953 in the same period.

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