Holiday towns’ house price inflation tapers further in the second quarter

(By John Loos*)

After some resurgence, off a low base, through 2013/2014, the FNB Holiday Towns House Price Index has more recently shown signs of a loss in growth momentum.

This index is compiled from transaction data for towns deemed to be “strongly holiday property-driven”.

In the second quarter of 2015, the index showed quarter-on-quarter growth of 1.9 percent, down for the fourth consecutive quarter from a high of 3.2 percent reached in the second quarter of 2014.

This has begun to translate into slower growth in the still-high year-on-year rate, from 11.6 percent in the final quarter of 2014 to 10 percent in the second quarter of 2015.

Before 2014, holiday towns had lagged the major metro residential regions for most of the period from 2010 to 2013, showing 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, and 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.

By 2014, however, financial pressures had eased after some years of low interest rates, and the holiday town market began to make a noticeable comeback. Its prior price deflation and very low inflation from 2010 to 2013 had also driven a significant holiday town residential affordability improvement.

Creating a major metro house price index and a holiday town index with 1999 = 100 in both, one can see how the gap between the two that had been built up during the boom years (when holiday town inflation was far stronger at a stage) was all but wiped out by early-2014. Recently, in a relatively good property period, the gap started to widen slightly once more, with holiday town prices inflating slightly more than the major metros. But this is not expected to last for very long as economic times toughen.

We witnessed a similar 2014 improvement in the FNB Estate Agent Survey, where the estimated percentage of home buyers believed to be holiday home buyers elevated broadly from early-2014 to hover at around 3 percent, after prior years of being more around 2 to 3 percent.

Since then, however, we have not seen any further increase in this percentage, which appears to tie in with tapering house price growth.

We expect the gradual slowing in house price growth in the holiday town markets to continue in the near term.

This ties in with various other of our market indicators which point to a more conservative home buying approach emerging in a deteriorating economic environment. This includes fewer non-essential activities such as upgrading to better primary homes, and we would expect that buying of second holiday homes may also once again take more of a back seat.

Given the non-essential nature of holiday home buying, and thus the more cyclical nature of holiday home-driven residential markets, we continue to expect that in this rising interest rate and low economic growth environment, the price growth in our FNB Holiday Town House Price Index will drop back to lower single digit rates below that of the major metro regions in the not too distant future.

*John Loos is the household and property sector strategist at FNB Home Loans.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    • 15 Feb 2018
      One positive consequence of the financial crash in 2008 was the rise in consumerism, especially in the property market, where buyers have steadily become more knowledgeable and more value conscious.
    • 15 Feb 2018
      While most homeowners will take the agent’s commission into consideration when they are trying to determine what the will get out from the sale of their property, many often forget to factor in the other costs involved in a home sale, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      The forecast for the national rental market in 2018 remains a mixed bag of good news and bad news. Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria tighten their grip, it’s a double-edged sword as the market also will come under increasing pressure from factors like declining disposable income levels.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us