Home sweet (holiday) home

Picture it: a country cottage in the Midlands or a beach bungalow in Balito that is your very own. You can go on holiday anytime you want to and you don’t even have to go through a central reservations desk.

A booming property market prompted many homeowners to invest in a holiday home – they could use it whenever they wanted to “just get away” and rent it out when they weren’t using it.

But, the market has weakened and even though property experts believe it is temporary, they are warning investors to stay away from these holiday homes.

Property buyers should look at investing in places driven by the economy, and not holiday homes, advises John Loos, FNB property strategist.

“The demand is too irregular”, he adds.

“In a rising interest rate environment, value growth in second properties increase slowly and at the moment, things aren’t good,” reckons Loos.

“Be careful about country and recreational properties,” warns Ronal Ennik, Pam Golding COO.

He says that even though these properties have been increasing steadily for a long time but they are also the quickest to slow down when the property market starts to soften.

But the picture is not all bleak.

Loos says people are thinking differently about holidays. He says the days are gone where people save all their leave, travel for hours and spend a month away. “Instead, people are taking shorter breaks and holidaying closer to home,” he reckons.

Durban (and its surrounds) is the closest coastal town to Gauteng and Loos expects this province to boom.

“Gauteng is the country’s engine of growth and will continue to remain superior.”

Loos believes Gauteng’s thriving market will support Durban and Port Elizabeth, through its port, rail and road links with the province.

Real estate, agent, Gerrit Venter of Lew Geffen Sotheby’s International Realty Margate believes South Coast property prices are bound to rocket if the proposed N2 Wild Coast toll road goes ahead.

The toll road will run between Gonubie, near East London and Isipingo, south of Durban and will extend over a distance of 560km.

It follows the existing N2 from East London to Umtata, taking over the existing R61 down to Port St Johns.

From close to Port St Johns, a newly constructed road will link Lusikisiki to the existing toll road at Port Edward, following a route close to the planned Pondoland Park.

The total cost is estimated at R2,5bn.

“If this goes ahead it will mean more through-traffic for the area which will boost the local economy, drawing increased number of holidaymakers as well as developers”, reckons Venter.

He says it is a matter of time before the area undergoes a complete makeover.

Currently, property in the area costs 10-15% less than that along the North Coast and, as a result the South Coast provides an excellent place of entry for first time homebuyers, reckons Venter.

“Although the area is in need of rejuvenation, the amount of commercial investment is sure to impact on its popularity and improve infrastructure.”

It is advisable to do your homework before buying a holiday home. Many lenders charge higher interest rates on second properties and buyers must consider transfer duties, Capital Gains Tax (CGT) and various additional costs such as rates and levies.

Homeowners are liable for CGT on second properties or holiday homes that are not occupied as a primary residence.

Investors must remember that demand for holiday homes will be high during peak holiday times and may sit empty for the rest of the year. You can earn good rental income over Christmas and Easter but this is often the time when people want to enjoy their home themselves.

Article by: Gaylyn Wingate-Pearse - www.moneyweb.co.za