Seaside still holds promise
Investors and second home buyers are beginning to come out of their shells and are once again looking at the leisure market. Lea Jacobs reports
THE property boom had a positive effect on the residential leisure market. A second home became a must and sales in coastal and other traditional holiday areas soared.
As one of the fastest growing sectors in the market, it also took the hardest knock when the recession hit. Many cash strapped homeowners suddenly realised that owning their little place in the sun was no longer affordable and the market was flooded with a glut of second homes.
Adrian Goslett, CEO of RE/MAX of Southern Africa, says the number of listed properties on his company’s website has increased by 40% over the past 12 months and a large percentage of these are second homes.
While viewed by many as an unnecessary luxury, there are those who are taking advantage of favourable interest rates as well as the value in many of the properties currently on the market.
He says coastal areas remain attractive to investors, although the investor pool has shrunk quite considerably in the past 24 months. “The days of ‘flipping’ a home (purchasing, slapping on a coat of paint and reselling) are long gone,” says Goslett. “An investor is looking for a well-built home in a decent area at a market related price that yields a viable return through letting.”
Mac van der Merwe, CEO of the Zorgvliet Group, says while it is a buyer’s market, this is set to change in the next 12 months. “Although investors have become shrewder in their approach, demand for leisure properties has risen over the past six months.”
He says the World Cup has led to international buyers discovering SA as an investment haven, and his company has noticed an increase in demand for lifestyle properties. “The tournament has exposed the country to many potential international buyers. This will stimulate the market further, providing the offering is of an international standard.”
It appears that while there may be interest in this segment of the market, the banks are putting a damper on second home ownership. Dina Porteous, area principal of Pam Golding Properties Margate, says banks have not eased up on their lending policies and believes within the leisure market sector they are taking an even stronger stand.
Goslett agrees, saying cash is king in the leisure market and buyers who submit offers with no major suspensive conditions attached can dictate the home’s value.
While the lock-up-and-go solution is still popular, according to Goslett many are taking advantage of the distressed portfolios of various banks. This has opened a different market that didn’t exist and buyers are acquiring a freestanding home at a lower price.
Regardless of price, there are still pitfalls associated with second home ownership and anyone considering investing in this market should do their homework before putting pen to paper.
Van der Merwe believes that planning an exit strategy before buying is important. “Buyers should not overextend themselves and need to ensure that there is a good value proposition. All methods of acquiring a vacation property should be investigated, including timeshare and fractional ownership options.”
Porteous says buyers should never submit an offer to purchase that includes the furniture. Although this is a common practice, it has monetary tax and commission implications for sellers and a rate and transfer cost to buyers. “Negotiate the furniture at a separate, market related price.”
Although buyers may want to buy on an emotional whim, Goslett says they need to be able to justify the buying decision. Factors such as interest rate hikes as well as letting opportunities in the area need to be considered.
Don’t lose sight of your usual investment strategy because of the holiday atmosphere: a cool head and steady wallet will reap rewards in the years to come.
An aerial view of Margate.