Johannesburg – Hundreds of millions of rands worth of holiday homes remain unsold as the downturn in the property market carries on longer than expected, estate agents have said.
Luxury house price growth has lagged the overall recovery of the house price market, which was driven by primary residential buying.
Property players expect the supply of holiday houses in the market to increase as home owners run out of reserves due to the extended economic downturn.
"There is a vast oversupply of holiday homes," said Andrew Golding, CEO of Pam Golding Estates.
"The hundreds of millions worth of stock between Mosselbay and St. Francis is just an example of what is happening in other parts of the country."
"Holiday homes are in trouble. People don’t need a second home, but they do need liquidity when their cash flow dries up," said Marc Schneider of the International Property Databank.
Auction Alliance CEO Rael Levitt concurred, saying his group recently sold five homes in Bantry Bay at discounts of up to 30% on prices reached in 2007.
"We still expect to see more distressed luxury sales as the residential market recovery lags the general economy by up to two years," Levitt said.
According to Golding, high net worth individuals initially opted to wait out the recession, expecting it to last no longer than two years.
However, the market for secondary homes has remained in the doldrums.
According to FNB property economist John Loos, holiday home buying will lag the overall recovery as it is seen as non-essential spending.
FNB reported that house prices in coastal holiday towns have fallen by 5.6% in the first quarter of 2010.