Holiday properties 'start to stabilise' after long slump
The residential property market in holiday towns appeared to have achieved some price stability last year after a significant price drop in 2010 and 2011, FNB said this week.
FNB household and consumer sector strategist John Loos said the average price growth in the major metro areas had exceeded that of holiday towns in the past three years. Average house prices in the big cities grew 3.8 percent last year.
By comparison, the price index for holiday towns showed only small average price growth estimated at 0.9 percent last year and still seemingly lagged the performance of major cities, Loos said.
However, he said the positive 0.9 percent growth in average house prices in holiday towns was significant after the 5.2 percent decline in the average holiday town price in 2011 over two years from 2009.
"The lagged impact of mildly improved holiday home demand after the low of 2010 may therefore just have been sufficient to improve the market balance by 2012 and restore some price stability after a period of decline," he said.
The FNB estate agent survey estimated holiday home buying as a proportion of total home buying at an average of about 2 percent last year. This was still significantly lower than the estimated 4 percent in 2007 but a bit higher than "the lowly 1.5 percent" recorded in 2010, Loos added.
The house markets in holiday towns were still expected to lag the major city markets in terms of price performance for the foreseeable future because there remained significant weakness in the economy and in household finances.
In addition, many municipal rates and utility bills were rising steadily, making second homes significantly more costly to own and run.
Loos said the performance of the holiday town house market remained a lot weaker than 2004 to 2006 when price growth was estimated to have outstripped that of the major cities.
He said these markets should be expected to be more cyclical than the cities due to the non-essential nature of holiday home demand.
The economies of many holiday towns could also be more cyclical because corporates often centralised activities to larger centres in tough economic times and the tourism or getaway demand that often sustained such smaller towns was tied to economic cycles.
"But nevertheless, while lagging the cities, holiday town markets seem slightly happier places to be as some semblance of price stability appears to have been reached," he said.