The FNB Holiday Towns report reveals price stability in holiday markets but no fireworks to get excited about.
In early early-2007, holiday home buying was estimated to be around 5 percent of total home buying and Q2 2013 shows a 2 percent estimate.
In early early-2007, holiday home buying was estimated to be around 5 percent of total home buying and Q2 2013 shows a 2 percent estimate.
Meanwhile, primary residential buying remained high at an estimated 89 percent of total home buying, still higher than the 80 percent estimated for early-2007.
According to the Q2 2013 survey, the holiday home market continues to point to nominal price stabilisation at best and this reflects holiday home buying being on the backburner relative to primary residential demand, with the household sector still experiencing significant financial constraints.
Writing in the report, John Loos, FNB household and property sector strategist notes that whereas the house price index for the six major metros showed 6.3 percent year-on-year growth in Q2 2013, the Holiday Town House Price Index recorded 1.7 percent from 1.1 percent in the previous quarter.
Loos says in real terms, the estimated downward correction in the Holiday Town price levels, since the peak of real prices as at the fourth quarter of 2007 has been a cumulative -27.5 percent.
By comparison, the drop in real prices in the Major Metro House Price Index has been a lesser -14.7 percent, he says.
He says according to their estimates, since Q1 1999 (when interest rates had just started to fall rapidly from a 1998 prime rate peak of 25.5 percent, which precipitated the start of the house price boom), the Holiday Town House Price Index has grown by a cumulative 396.2 percent compared to the Major Metro House Price Index’s 393.6 percent.
“For the foreseeable future, we would expect the major city markets to continue to outperform the holiday town markets,” he says.
While it should be encouraging for property owners in holiday markets to see some mild nominal house price growth, agents point to holiday home buying being moderate and primary residential demand being king, says Loos.
He says the bank’s expectations for holiday home buying to be more constrained than primary residential buying are not only about current household sector financial constraints, including high levels of indebtedness.
It is also about the ongoing cost increases relating to owning and running a home, notably in the form of strongly rising municipal rates and tariffs.
Loos adds that such running cost affordability deteriorations may not appear too severe, but could be expected to impact more negatively on non-essential property buying than on primary residential buying. –Denise Mhlanga
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