House price growth in holiday towns tapering off

Johannesburg - There were further signs of slowing house price growth in holiday towns in South Africa, according to the latest FNB Holiday Town House Price Index released on Tuesday.

Despite house price inflation in holiday towns remaining reasonably solid, the slowdown reflected the impact of tougher economic times, according to John Loos, household and property sector strategist at FNB Home Loans.
 
In the second quarter of 2015 the index showed quarter-on-quarter growth of 1.9% - down for the fourth consecutive quarter from a high of 3.2% reached in the second quarter of 2014.

"This has begun to translate into slower growth in the still-high year-on-year rate, from 11.6% in the final quarter of 2014 to 10% in the second quarter of 2015," said Loos.

Prior to 2014, holiday towns had lagged the major metro residential regions for most of the period from 2010 to 2013, showing house price deflation over a significant part of that period.

"This was explained by a financially-constrained and highly indebted household sector following the 2008/2009 recession, and it was understandable that primary residential demand-driven metros would perform better than holiday markets that were strongly driven by non-essential holiday property buying," said Loos.

"By 2014, however, financial pressures had eased after some years of low interest rates, and the holiday town market began to make a noticeable 'comeback'. Its prior price deflation and very low inflation over the 2010 to 2013 period had also driven a significant holiday town residential affordability improvement."

A similar 2014 improvement was seen in the FNB Estate Agent Survey, where the estimated percentage of home buyers believed to be holiday home buyers “elevated broadly" from early-2014 to hover at around 3%, after prior years of being more around 2% to 3%.

"Since then, however, we have not seen any further increase in this percentage, which appears to tie in with tapering house price growth," said Loos.

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