Holiday Towns Property Review (The Bugle)

Holiday towns around South Africa have been particularly hard hit by the general economic conditions of the past four and a half years, as far as demand for residential property in these areas. When compared to the typical primary residential property markets found in Gauteng, the price behaviour of holiday properties, which in many cases are coastal properties, have been far more volatile. When the markets were booming in 2005 and 2006, holiday home price escalations were far higher than the primary markets. However, as the demand and supply balance changed from as early as 2005 onwards, the rate of growth of holiday home prices, as measured by the FNB Holiday Town House Price Index, started to fall off dramatically. The smart money would have sold off these assets in 2006 after the price index peaked at over 50% growth rates and potentially bought back the same properties, for less, a few years later. That is with the benefit of perfect hindsight and is the theory only. For those eternal optimists, like myself, the second quarter of 2012 provided a glimmer of hope. The Holiday Towns Price Index grew in nominal terms by 3.8% year-on-year, up from the previous quarters 0.5% growth rate, and is only the second consecutive quarter of increase after almost two years (7 quarters) of consistent year-on-year decline. In nominal terms the Holiday Towns Price Index was reported as being  minus 5% down since the first quarter of 2010, the quarter after which the lengthy period of nominal house price decline set in. However, nominal house prices do not fully explain the market conditions. Adjusting nominal prices for consumer price inflation, the second quarter 2012 prices were minus 13.1% down from the 1^st quarter of 2010 and a more significant minus 22.9% down on the 1^st quarter of 2008, which represented the national real house price peak at the very end of the property boom. For those that had bought in 2007 or 2008, it often becomes a challenge today, to be able to get the market to pay the same nominal price for the property. The recent increase in nominal prices represents a change in direction, which indicates that we are moving (hopefully) away from the bottom of the cycle and up along the recovery segment of our price growth curve.