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

Business Day - Home Front - - HOME FRONT -

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.

Pic­ture: PAM GOLD­ING PROP­ER­TIES

An aerial view of Mar­gate.

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