FNB property barometer - South African holiday homes now on a recovery path

Roughly a year ago, Tony Clarke, Managing Director of the Rawson Property Group, commented that potential investors willing and able to take a five year or longer view should be looking seriously at the coastal property market where, at that time, many units were selling at 50% of their previous value.

“Right now,” said Clarke, “second homes are not yet the flavor of the month, but I am convinced that this will change.  Those buying now will, I believe, see big value increases in the not too distant future, i.e. within 24 months.”

This prediction, it now appears, was sound.  A very recent (July 2014) FNB Property Barometer indicated that holiday homes in the last three quarters comprised 3% of the total market spend on homes.

This, said the FNB survey, does not as yet point to any strong upward trend but it is well above the low point of 1% reached at the end of 2010 and this, the report added, is beginning to have an impact on the overhangs (quantity of old unsold property) in many holiday town markets.

The FNB Property Barometer, said Clarke, also warned that current ‘affordability deterioration’, i.e. decreased spending power of the average South African consumer, is likely to limit value increases in secondary homes in the near future. It has, however, to be remembered that holiday homes in areas, such as Knysna and Hermanus, regularly bring in sums on short term summer and April holiday lets, as the Rawson Property Group’s Knysna franchisee, Peter Southey, has pointed out. These sums can often cover well over half the annual bond costs of the property (if it is bonded) or if it is already paid for contribute significantly to its running and maintenance costs, while still leaving it open for use by the owner and his family for seven to eight months a year.

“I therefore repeat what I said a year ago,” said Clarke, “and that it is, in my opinion, a good time to buy holiday property, which, despite the rises, are still low priced by any standards.”

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