Slight growth in holiday property

Holiday property market prices in SA experienced a mild growth of 3.8% year on year indicating stability in nominal terms after a lengthy period of decline‚ a survey released on Monday revealed.

According to the FNB Holiday Towns Average House Price Index the 3.8% was up from the previous quarter’s revised 0.5%‚ and was only the second consecutive quarter of increase after seven quarters of consistent year-on-year decline.

The index is estimated from deeds office data‚ using transactions by individuals in holiday areas deemed to be strongly residential.

“In nominal terms‚ the index is down 5% since the first quarter of 2010‚ the quarter after which the lengthy period of nominal house price decline set in. In real terms‚ when house prices are adjusted for consumer price inflation‚ the situation looks uglier‚ with the second quarter 2012 average real price being down 13.1% on the first quarter of 2010‚ and an even bigger 22.9% down on the first quarter of 2008‚ the quarter which represented the national real house price peak at the very end of the property boom‚” read the survey.

FNB said the holiday market had had a significant real price “correction” in recent years‚ and even at 3.8% growth‚ was still declining in real terms. The index further explained that the 2012 return to low nominal price growth‚ could probably at best be seen as prices stabilising after the significant declines.

The survey said that in mid-2010‚ the panel of agents surveyed in the FNB Estate Agent Survey suggested that holiday home buying had reached a low of around 1% of total buying‚ after a declining trend from up around 5% back in early-2007. “Thereafter‚ there was some mild improvement to a level hovering between 2%-3% in 2011‚ whereafter the percentage appears to have declined in 2012 to between 1% and 2%. The improvement in holiday town price growth is believed to be reflecting last year’s mild improvement in holiday property buying off the 2010 low.” The survey revealed that although agent holiday buying estimates were volatile from quarter to quarter‚ broadly lower percentages recorded in the survey in the first two quarters of this year‚ compared to last year‚ suggest that the market should not expect too much in the way of improvement in the performance in holidays town markets in the near future.

“Rather‚ given the still high level of ongoing financial pressure in the household sector‚ along with significant increases in municipal rates and utilities tariffs related to housing‚ we would expect these markets to continue to lag the more primary residential demand-driven markets of the major metropolitan regions‚ due to the non-essential nature of holiday home buying. But it does appear that nominal price in holiday towns may be stabilising‚” the survey read.