Buying a holiday home? There may be a more sensible option
Category Weekly Advice
After a ten year slump the Western Cape holiday home market is showing encouraging signs of revival, says Rowan Alexander, Director of Alexander Swart Property.
“Enquiries for this type of home were, I have been told, far higher in the recent December/January and Easter holiday periods than they have been for a very long time,” said Alexander. “and it is particularly pleasing that estate agents serving the holiday areas have reported that there was also a noticeable upturn in the enquiries from international buyers.”
On the Southern Cape coast ie. Cape Agulhas to Struisbaai, which he recently visited, says Alexander, impressive sums of money are being invested in big upgrades or new homes .
“I would say that in the last 36 months about 70% of the sea-facing homes along this stretch have either been upgraded or are brand new. What is more, one or two of the homes are rumoured to have cost in the region of R!4 million.”
In the Langebaan Golf Estate, added Alexander, 75 new homes are currently under construction and virtually all the owners are from out of town, the area having a very small permanent local population.
These and other indicators, says Alexander point to an increase in optimism for the property market generally and an improved confidence in the country’s economic future.
“There is now likely to be a new wave of buyers looking to own holiday homes but” -and this is the sting in the tail of his comments- “while the emotional satisfaction of owning a second home in an area you have come to like can obviously be great, from a strictly economic point of view it is very definitely not the wisest choice you can make.”
What, does Alexander propose as an alternative for those who do want to spend their leisure time in a holiday area and are contemplating a second home purchase there?
“I would like to suggest that the right way to go about this is to buy and then rent out a home in one of the fast appreciating metropolitan or suburban areas eg Brackenfell, Durbanville or any of the central Cape Peninsula suburbs. If you do this you will achieve an annual capital gain far greater than that of a home in the holiday areas -- and you will earn a rental income large enough to enable you to rent a holiday home which is probably bigger and better positioned than you would have been able to buy for yourself.”
A colleague of his, said Alexander, had bought and rented out a R2.5 million home in Brackenfell. The income from this enables him to rent year round a very large Langebaan home costing R17 000 per month (which would probably sell for around R4.5 million).
“An equally important consideration,” said Alexander, “ is that your investment in a suburban or metropolitan home will be far more secure than one in a holiday area. History has shown that in the cyclical downturns which inevitably hit the property market every 10 to 15 years, coastal leisure properties are always the first to lose value.
“In addition, a suburban property will usually need less maintenance than one on the coast- but the maintenance of a rental property will be your landlord’s responsibility, not your’s. In short, if you follow this advice you can have the best of both worlds ie satisfactory capital appreciation and all the enjoyment of a prestigious holiday home.”
Author: Independent Author
