International News

Good reason to buy a holiday home

In peak holiday season, when vacationers are heading out for what is often their main, annual break, thoughts may logically turn to the pros and cons of acquiring a leisure property where family and friends can unwind and spend quality time – in a great location.

So why would you opt to buy your own holiday home rather than rent or stay in a catered establishment?

Ling Dobson, Pam Golding Properties area principal for the prime destinations of Knysna and Plettenberg Bay on the scenic Garden Route, says internationally the trend towards owning a leisure property is on the increase, although not necessarily purely for the above seemingly obvious reason.

“Very often, the usage factor is secondary to the investment aspect and potential for holiday rental income. According to HomeAway, which provides a global on-line vacation rental marketplace, an astonishing 89 percent of newly-purchased holiday homes are being rented out within the first year.

“They say today, 23 percent of buyers intend renting out the property compared to only seven percent in 2004. This statistic shows that the growing popularity of vacation rentals is making a big impact on buyers’ investment intentions.

“We are definitely seeing this international trend manifesting here in South Africa and particularly in Knysna and Plett on the Garden Route, where the demand for holiday home rental is high and therefore at a premium.”

Dobson says buyers of holiday homes are seeing this as an opportunity to not only cover their expenses by renting out the property, they also perceive the longer term potential of capital growth of the property – all this while they enjoy several weeks’ or months’ usage during the year and have the option of a retirement home in the future.

“While a younger generation of home buyers is realising the wealth creation achievable through property ownership, they are also recognising there are a number of benefits in acquiring a vacation home sooner rather than later.”

She says this is particularly applicable to coastal property in a highly desirable location such as Knysna and Plett. “Consider if you invest in your 40’s or earlier, then by the time you retire you will have a fully paid-for home in a prime location which you know and enjoy, and have probably built up a local network, including friends.

“A second home purchase could therefore form part of your retirement planning and depending where it is located, this additional income could provide the means of funding further education for the children, or if you prefer variety, saving towards family vacations in other destinations.

“In addition, as we live in a world of connectivity where entrepreneurs can successfully run a business in downtown Johannesburg from their superb retreat here in Knysna or Plettenberg Bay, we are finding many go for the second house investment, try it out business-wise and relocate thereafter. They may then let out their house in the city, where rentals are always in demand.

“Buyers of vacation properties are also no longer limited by the distance the property is from their homes. For an increasing number of such buyers, the further away the better, which means they can escape from their daily routines to a revitalising, different environment, and with the use of a property management company, professional concierge service and modern technology the property is easily managed.”

If your holiday home investment is also your future retirement home, it is advisable to consider all related expenses you may encounter.  Then either let it out as a long-term rental at first or ensure that the rentals achieved cover levies and rates and taxes, as well as the finance obtained to make this investment.

Says Dobson:“In the popular coastal resorts you will generally find that you can cover a fair percentage of your expenses by renting the property out as a vacation home for as little as 18 weeks a year, which means you have plenty of time to enjoy your home as planned with friends and family.

“Bear in mind that the peak holiday season is the time when vacation rentals are in highest demand and as a result yield the most rewarding rental income. In the high season rates are often double those of mid and low season.”

She says for international buyers with foreign currency or returning expats, there is no better time than now to invest in a holiday home retreat in South Africa, where the location also complements the seasons for purchasers from the northern hemisphere.

“Depending on personal preference, many holiday home buyers or renters flock to the smaller resorts that offer lifestyle options. The outdoors always beckons and the Garden Route offers plenty of attractions including golf, sailing, boarding, fishing, cycling, running through the forests, following the increasingly popular Bubbles Route in Plett or just enjoy all the world-class beaches and restaurants in this region.”

Sage advice from Dobson is if you are planning to buy a holiday home for your own partial use or future relocation, make a decision for the lifestyle it affords you and not purely on investment returns.

“From an investment perspective, remember that a coastal property with a sea view tends to retain its value, while holiday renters look for proximity to a beach with the scenic ocean view a definite plus factor.

“A home in a secure complex or gated estate also has its advantages, as apart from security a homeowners association removes much of the maintenance hassle.

“Other features which holiday renters look for include free WiFi connectivity; clean, good quality furnishings; air-conditioning and heating – if required; a modern TV, and ample beds for children.”