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Holiday home investment tips

As the year draws to an end, many will start making plans to go on a holiday trip and spend some time in South Africa’s top leisure destinations. 

Apart from taking some time off from a busy schedule to refresh for the year ahead, it is also an excellent time for property buyers to get a feel for the market in these destinations, especially if they have plans to purchase a holiday home, says Warwick Heny, Broker/Owner of RE/MAX Kowie Port Alfred, whose office is halfway between East London and Port Elizabeth on the Sunshine Coast.


On the market for R 3.795 million, this well-built, double-story home lies within the Royal Alfred Marina facing the banks of the Kowie River.This is an ideal medium size home on the marina, offering comfortable living in a peaceful and secure waterside environment. 

“With the property market continuing to improve, it is expected that there will be higher demand for holiday property this year than last. As large numbers of inland holidaymakers make their way to the coastal regions during the months ahead, we can expect to see the number of property transactions within these areas increase,” says Heny. “We operate in Port Alfred and Kleinemonde, a small resort village about 12km to the east of Port Alfred. We expect good demand for beachfront holiday duplexes as they are very well priced and generate rental income. We are also expecting high demand for well-priced family homes in the suburbs that can be let out year round when not in use by the purchaser.”

He notes that as the area is a student town, buyers can purchase property and collect fairly good rental income between February and the end of November from students or staff at the International Hospitality University called Stenden, as well as students or employees of the well-known 43 Air School. Heny adds that at the top end, the Royal Alfred Marina is always popular for families looking to relocate and secure long-term investments, which initially serve as a holiday home, but often become permanent homes as the purchaser retires or decides to commute to the city for work on a weekly basis.

According to Heny, during this holiday period, two-bedroom apartments priced from R600 000 to around R700 000 should be a popular choice among holiday home buyers, along with homes in higher price brackets, provided they are perceived to be good value for money. “Fortunately for buyers, Port Alfred offers exceptionally good value at present. In the Royal Alfred Marina, buyers can secure great properties between R3.5 million and R4 million,” he adds.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that those who have access to the necessary finance can escape to a second home that is away from the hustle and bustle of city life to enjoy the lifestyle benefits these types of properties offer. He adds that property is considered to be a strong asset class in which to invest, particularly over the medium to long term. A leisure property can prove to be a home to enjoy as well as an investment that generates healthy returns. “However, as with any property investment, when looking to purchase a leisure property there are several aspects that buyers should consider to before deciding to commit financially,” advises Goslett.

Heny notes that buyers need to look at the key factors that will impact on the property’s investment potential. He provides points that need to be considered before a buyer purchases a leisure property:

Affordability

Before purchasing a holiday home, buyers need to be sure of monthly holding costs, which include rates and taxes, insurance, maintenance costs, and even travel costs to get to the holiday property. They should also consider any improvements they may want to make and the costs of this when looking at various homes. This is to make sure that they purchase the right property and expenses are kept to a minimum - a holiday home should provide a place to relax, and not be a source of stress and financial strain. 

Position

As with any property investment, location is highly important. “Buyers should ask themselves a few questions regarding the property’s position,” says Heny. “Will the position of the property be suitable for their needs as a family versus the investment value they are making? Should they pay more to be on the front beachfront road for example, or rather spend 30 % less for a similar property further from the beach? Is the road to the property tarred or in good or bad condition, and what impact is this likely to have on the value of the property? Are the surrounding homes in good condition and are they lived in permanently or not?”

Accommodation

Apart from location, another important aspect is the set-up of the home.  Think about whether the property meets the needs of the family. Are there enough rooms or space for friends of the family to also stay over if necessary?

Re-sale potential

Will the property appreciate in value or not and will one be able to recover their investment should one need to sell for some reason? This will be largely determined by the property’s location, along with the level of maintenance of both the home and the nature of the area itself.

Can it generate an income?

Would the holiday home be popular for weekend and mid-year holiday rentals and therefore generate income to help pay for the holding costs? While it is possible to receive a rental income from a holiday home during the times when the owner is not using it, there is little point in keeping a holiday home that is seldom or never used by the owner. Before purchasing a holiday property, the buyer will need to establish whether the cost of owning and maintaining the property is worth their while.

In closing, Heny advises buyers who are looking to purchase a leisure home to work with a professional, reputable agent who has lived in the town for a long time and who can provide useful and sound advice on the area and a specific property.


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