Data from FNB shows a slowing in year-on-year growth in South Africa’s ‘holiday towns’, having previously outperformed the national index by a considerable margin.

The bank’s data showed that cumulative growth in the FNB Holiday Towns House Price Index since pre-boom levels of early-2001 is almost the same as that of the National House Price Index over the same period.

The index predominantly comprises coastal towns whose housing markets are deemed to be strongly driven by holiday home demand, has had a reasonably good run since around 2013, said household and property sector strategist at FNB Home Loans, John Loos.

However, in recent quarters this index has seen its growth starting to lose momentum, from a relative high of 5.8% year-on-year, as at the third quarter of 2016, to 5.4% by the first quarter of 2017.

“5.4% year-on-year price growth is not yet a bad number for these highly cyclical markets, and still quite solid compared to our also-cyclical Mining Towns grouping for example.

“Nevertheless, we would expect some further slowing in house price growth in holiday towns as a group in the near term, given the constrained nature of household sector finances in what remains a very weak economic growth environment,” said Loos.

Whereas national average house price rate of change returned to positive year-on-year growth as early as the first quarter of 2010, on the back of major interest rate reduction in 2009, the Holiday Towns House Price Index only came “sustainably” out of deflation in the third quarter of 2012.

“This means that, since the first quarter of 2010, cumulative house price growth for the holiday towns grouping has totaled 22.56%, significantly under-performing our deeds data version of the FNB National House Price Index whose cumulative price growth over the same period has been a more significant 51.38%,” Loos said.

The analyst said that the underperformance by holiday town markets since the 2008/9 recession has much to do with a major affordability challenge that was created by these markets strongly outperforming the national average over the period 2004 to around 2007 in terms of house price growth.

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