Ian Fife

Owners of leisure properties and second homes have suffered most from the property slump that has just ended. Demand has fallen more than 50% since 2008, but there are two good reasons why it could recover fast.

First, there are strong secular (long term noncyclical) forces that will ensure growing demand over the coming decades. Secondly, this property subsector could get a short-term boost from the expected 400000 soccer World Cup visitors coming to SA in June. If they are impressed by the country, many could return as buyers of leisure properties.

But there are signs that the soccer dividend may not happen. After the 2006 World Cup, German property owners who attempted to milk the event for maximum profit lost money.

This lesson seems not to have been passed on to South Africans. Greed seems to be the order of the day. For instance, IFA Hotels & Resorts, which lets private houses in Zimbali, says owners in the posh golf and eco estate are demanding R35000/day for a five bedroom house. Last year the same houses were rented for R3500/day.

A two-bedroom flat at the V&A Waterfront that would normally rent for R25000/month is now available at R20000/day.

Locals aren’t the only profiteers. The Fifa money machine is extracting more than its fair share. Its official accommodation organiser Match commands a large commission on top of local agents’ letting fees.

Judging from accommodation booking statistics, not many SA property owners are likely to make a World Cup killing. Match is said to have dumped 7000 units back on the market already, with more likely to follow.

Fortunately, the second-home market on the highveld is almost exclusively local. Even coastal and high-end golf estates rely mainly on SA demand.

The leisure industry appears to be realistic about the soccer dividend. Research by global hotel and leisure consultants Howarth shows hoteliers expect revenue to improve in 2010 with Fifa-contracted accommodation ranging between R1816 and R4545/day.

Howarth expects room occupancy in SA to rise to between 55% and 65% this year, falling back to between 50% and 60%.

Seeff chairman Samuel Seeff and Pam Golding Properties CEO Andrew Golding agree that the market will probably remain in a trough until late 2011 or early 2012. “Around then the rising take-up rate will have mopped up the oversupply, and sales and price growth will accelerate again,” says Seeff.

Secular trends such as growth in the number of middle-class households, the desire to escape urban density and growing world tourism will underpin further real growth in demand for leisure property.

Source: Financial Mail