Holiday Home Buying in South Africa

“A holiday home is a lifestyle buy. Something you buy to enjoy,” says John Loos.

 

In the 3^rd Quarter of 2017 FNB’s Household and Property Sector Strategist, John Loos, reported in the Estate Agent Survey that the estimated Holiday Home Buying percentage had not shown a notable decline from the 1^st Quarter percentages. In comparison, the Buy-to-Let buying category – the largest category in secondary home buying – dipped from 9.77% of total home buying in the 1^st Quarter to 8.23% in the 3^rd Quarter.

Overall the Secondary Home Demand percentage declined from a high of 14.47% in the 1^st Quarter of 2017 - “the highest estimated percentage since the end of 2009” according to Loos - to 12.48% by the 3^rd Quarter.

What does this tell us about the Holiday Home Buying market? Despite the total Secondary Home Demand percentage falling there is still a significant percentage of secondary home buyers able and willing to purchase a holiday home. Following a December away it’s a guarantee that these aspirant holiday home-owners are strongly considering buying a home away from home.

In the past only corporate professionals in the upper income bracket could afford second homes in South Africa’s prime holiday destinations. Over the last few years as supply increased and the number of reasonably priced developments in sought-after holiday destinations doubled, holiday homes became more affordable, and the market welcomed a wider buyer pool. The demand for competitively-priced holiday homes has skyrocketed as South Africans (even those in the low to middle income bracket) seek a quiet place to escape city life. There is currently a wide variety of leisure and lifestyle property in every form, shape and colour available in all parts of the country.

The Western Cape, and in particular the spectacular Atlantic Seaboard (Cape Town’s “Riviera”) and the Cape Winelands, is a local and international favourite, winning Best City and Tourist Destination countless times over. The Garden Route – stretching from Heidelberg in the Western Cape to Tsitsikamma Forest and Storms River in the East, and passing through major tourist destinations like Witsand, Knysna, Plett and Nature’s Valley – is a spectacular and highly sought-after tourist route. Likewise, KwaZulu-Natal’s popularity as a holiday destination is predominantly the culmination of a subtropical climate, the warm Indian Ocean, long stretches of beach and majestic mountain passes.

South Africa is renowned for its rich and diverse landscapes, but regardless of where, it’s essential that holiday home-buyers consider their transaction carefully.

One of the most important things to keep in mind when considering a second home is the reason for doing so. Whether it’s a holiday getaway for the family, a temporary escape from the city, a future retirement home or a buy-to-let investment, holiday home buyers need to be sure that they know the area and surrounds well enough to ensure their need is met.

Aside from the primary reason for buying, location, proximity to amenities, lifestyle and life stage are important factors to consider when buying a holiday home.

Location is and always will be a major factor to consider, especially in a buy-to-let purchase, where investors hope to make a return on their investment. This said - property is a long-term investment, and leisure property even more so. According to Adrian Goslett, CEO of RE/MAX of Southern Africa, “Those looking to invest in a leisure property should remember that historically these kinds of property offered very attractive returns.”  Holiday homes primarily serve a leisure/investment purpose, and in renting it out owners are able to recover some of the costs of purchasing and owning the home.

The benefit of owning a buy-to-let leisure home is that investors are able to fetch attractive returns over peak season - provided they have bought in one of the country’s holiday hotspots. Coastal towns are among the highest returns in the holiday rental market. Understanding the local market, property price growth in the area and current rental rates is essential to making a decent return on investment.

Apart from the acquisition costs (deposit, transfer fees, conveyancing fees etc.) and monthly running expenses (insurance, rates, taxes and utility tariffs) owners find that tending to the ongoing security, maintenance and repairs of a holiday home in a different town or city is made easier with the help of a local managing agent – a monthly cost many aspirant holiday home buyers overlook. Additionally, should the owner wish to rent his property out in the “low-season”, managing agents are better equipped to screen and place tenants, and carry out regular inspections to ensure the property is well looked after. The monthly cost when weighed against the managing agent’s knowledge of the area, their personal connection to trustworthy local contractors and their close proximity to the property should there be any reason to have them visit is difficult to dispute.

Location is equally important if buying for retirement purposes. It’s essential that the holiday home buyer take into account any future development and infrastructure plans for the area, especially if peace and quiet is the predominant reason for choosing that area. Close proximity to quality medical care as well as recreational centres is essential for those looking to retire in quieter areas of the country or coast. Similarly, a family holiday home should cater to the likes and interests of the family members, bearing in mind that as children grow their likes may change, and their visits may become less frequent as they enter adulthood. There should be a certain degree of agelessness to the surrounding amenities and attractions.

Property experts maintain that careful consideration with regard to every aspect of the holiday home purchase will lay a firm foundation for future enjoyment and profit.

“By informing yourself carefully about every aspect of your purchase, you can set yourself up for a very happy future in your home away from home,” says Andrea Atkinson, ooba’s Eastern Cape Sales Manager.