Property Talk

Stronger economic growth and improved business and consumer confidence predicted for 2018

Owning a second property as an investment or holiday home is something many of us aspire to. Ballito has traditionally been a predominately holiday home destination. This demographic has been changing dramatically over the past ten years as migration into Ballito by hundreds of families on a permanent basis has started to tip the scales from a holiday village to a first choice primary residence option. For estate agents the prospect of serving a primary residence market rather than a holiday market can create more stability in the market, especially when tougher economic times dictate that secondary home markets come under pressure.

The FNB Estate Agent Survey report on secondary home buying provides a unique insight into how this market has behaved over the past two years and what we can expect over the year to come. Given the weak levels of consumer and business confidence in 2017 and the political instability that preceded the December 2017's ruling party elective conference, the secondary home market came under pressure and showed signs of weakening. In the first quarter of 2017 secondary home buying reached a multi-year peak of 14.47% of total home buying. Since then we have seen three quarters of decline to reach 11,99% by the 4th quarter of 2017.

As a comparative the pre-2008 boom years consistently had estimates exceeding 20%. The buy-to-let segment of the secondary home buying market showed a slight improvement to 8,55% in the 4th quarter of 2017 from the prior quarters' 8,23%. However the second half of 2017 showed on average a measure of 8,4% buy-to-let activity compared to the 9,7% average recorded in the first half of last year. These single digit buy-to-let figures have defined this market segment since 2010. As an active buy-to-let investor this suites me perfectly as it means less competition for the available stock and the opportunity to build a higher yielding rental property portfolio.

As part of the FNB Survey the question was asked as to what agent expectations were over the following three months. The majority expected a marginal improvement in the secondary home market over the next quarter.

Another interesting stat recorded was the percentage of properties released back onto the market because the owners were not getting the expected rental income. For the four quarters up to the end of the 4th quarter of 2017 this measure was recorded as 4,5% of total properties being sold. Although this did increase over the course of 2017, it is still well below the 10,25% of properties being sold in 2010. The percentage of homes resold at either the purchase price or below did deteriorate from 20% in 2016 to 28,5% in 2017 indicating the impact of sentiment and bad news on the property investment market.

The prediction for 2018 is that stronger economic growth and improved business and consumer confidence will positively impact on the demand for secondary properties. Interest rates are anticipated to remain flat and banks in general are expected to remain largely unchanged in their lending criteria.

Roll on 2018, better times are expected!