Agents say that buyers who have an urge to invest in second homes while they are still on holiday show various forms of discretion.
Some potential buyers, they say, will view the same properties on several occasions. They often do so during the same holiday, yet might leave without making a commitment. In many instances these buyers take their time and return during different seasons, to make a point of experiencing varying weather conditions and holiday events before committing to a purchase. Hasty buyers who are unsure of speedy returns are more inclined to make impulse decisions and sign on the dotted line before going back home.
This is cause for concern among bankers, who say that buyers smitten with the idea of buying a holiday or investment home might have become part of a hyped frenzy within property communities. This happens when increased demand results in short supply and, while prices are driven upward, it also creates the perception of scarcity, which in turn motivates urgent purchases.
Don’t go on impulse
Impulse decisions result in many affluent buyers paying inflated prices during high season holiday times. On the other hand current affordability, rather than taking a longer view over five to 10 years, becomes the focal point of middle-income investors. While charming festive periods and memorable family holidays brighten investor interest over peak seasons, keeping up with rental payments during low seasons and economic downturns can be bankrupting.
High demand for luxury apartments in coastal nodes, such as KZN’s Umhlanga is due to the exclusive offerings to well-heeled investors, who are prepared to pay a premium for a sought-after lifestyle. However, when visitors from upcountry go property hunting while resident in seaside hotels and guesthouses, they underestimate these values when comparing similar Gauteng properties, says Nicolene Mc Lennon of Remax International Property Group.
She says that winter holiday periods produce ample market interest and good exposure for owners, with minimal real investment interest from passing visitors. Instead, she says that typical buy to let investors are astute, informed and would have completed their research via the Internet, before flying down to make their purchases.
Caution to the wind
Bankers say that it is vital that buyers who develop an interest in property while on holiday in the same area, speak to more than one agent, irrespective of the professional and efficiency of service levels. Bond originator ooba advises prospective buyers to ask pertinent questions related to both current and historic values of properties in specific, as well as surrounding, areas of interest.
Buy to let purchase require long-term calculations to include both high and low season rental income, as well as actual and potential expenses over 12 months. Before bankers grant mortgage loans on holiday purchases, they consider every reality around unexpected incidentals and reduced rental income. Most notably for purchases where long winter months in colder areas, such as in the eastern and southern Cape, hugely reduce rental income for up to six months of the year.
Holiday visitors who lose their hearts to small town living during winter festivals in Knysna and Grahamstown are best off returning in the off-season to make informed decisions.
