With lower interest rates allowing people to borrow more money, buying a holiday home at the coast is again becoming a popular option. Absa home loans GM Richard Gahagan says that 10% of all new bonds are for purchases of a second property (holiday or rental). He reckons that a number of South Africans can now for the first time afford to consider buying a second home because lower rates allow them to borrow substantially more.

General recovery in the property market has made banks more inclined to lend money for the purchase of holiday homes. Gahagan says the average residential property price increase of 11%-18% in the past year means that bricks and mortar now constitute a less risky investment for banks than a few years ago, when residential property prices struggled to keep up with inflation.

He expects demand for coastal property to increase considerably over the next few months as more people come to use lower interest rates as an opportunity to acquire a holiday home. SA Home Loans CEO Simon Stockley has also seen an increase in demand for home loans to buy holiday properties. He reckons that apart from lower interest rates, the weak rand is playing a role. With overseas holidays becoming more expensive, South Africans are bound to start taking trips locally, with a seaside home becoming an attractive option.

Judging from the renewed interest in coastal property it looks like the dust has settled on the introduction of Capital Gains Tax in October. Pam Golding properties CEO Andrew Golding says people are starting to realise that CGT will affect holiday homes and other investments alike. Until recently though, fears about the impact of CGT on property investments put a damper on demand for holiday homes, he says. As a result coastal property price increases have lagged those of primary residences.

So the coming holiday season could be a good time to acquire coastal property, especially as a number of investors will still want to get rid of their holiday homes. ReMax MD Peter Gilmour says coastal property is now more realistically priced than a year or two ago but he warns investors to waste no time returning to the market before prices start to rise. He points out that many coastal developments are under construction offering investors new opportunities. And by contrast with the residential stock shortage in most cites, buyers still rule in most coastal areas. Notably those frequented by holiday makers.

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