Holiday Towns House Price Indices
The additional “froth” that Holiday Town housing markets built up from 2004 to around 2007, where they far outperformed the “also-hot” national market at the time, has all but been eliminated from price their levels.
We have undertaken an overhaul of our FNB Holiday Towns House Price Index (see note at the end of this report regarding the methodology). The FNB Holiday Towns House Price Index, comprising towns (both coastal and inland) whose housing markets are deemed to be strongly driven by holiday home demand, has had a reasonably good run since around 2013. 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 3rd quarter of 2016 to 5.4% by the 1st 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. LONGER TERM RELATIVE
PERFORMANCE OF HOLIDAY TOWN MARKETS
We mentioned that holiday town markets have had a reasonably good run since around 2013, after they had taken significantly longer to recover from the 2008/9 recession than did the more primary residencedriven major urban markets. Whereas national average house price rate of change returned to positive year-on-year growth as early as the 1st 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 3rd quarter of 2012.
This means that, since the 1st quarter of 2010, cumulative house price growth for the holiday towns grouping has totaled 22.56%, significantly underperforming 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% This 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. That outperformance by holiday towns was reflective of the national property “bubble” at the time, with such periods often being characterized by “over-exuberance” and very strong levels of non-essential home buying such as holiday property and buy-to-let buying. It was thus largely to be expected that, after prior outperformance by holiday towns of the national average, the postrecession period from 2010 to 2017 would be characterized by holiday town underperformance of the national average, as the market got rid of the additional “froth” in the prices that was created by that pre-2008 price boom. The longer term net result is that, taking 2001 as a starting point for both indices, the Holiday Towns House Price Index and the National House Price Index had, by the 1st quarter of 2017, more-or-less converged, after a lengthy earlier period in which the Holiday Town Index was at a far higher level than the National Index. So, while the cumulative house price inflation for the country as a whole is measured at 432% (using the FNB Deeds data driven House Price Index) over the past 16 years since early 2001, the FNB Holiday Towns House Price Index has inflated by a very similar 440% over the same period. In short, after a relatively good period from 2013, recent quarters have shown some slowing in year-onyear growth in the FNB Holiday Towns House Price Index. These holiday town markets’ price levels are all but free of that “additional froth” (compared to the overall national housing market) that they possessed following an outperformance from 2004 to 2007, due to having lagged the national market considerably in their post-2008/9 recession recovery. By all of this we mean that the 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, following a period in between where the Holiday Town House Price Index “temporarily” outperformed the National Index by a considerable margin.
Note: The FNB Holiday Town House Price Index is derived from Deeds Office Data, utilizing only property transactions by individuals (“natural persons”) in towns deemed to possess residential markets strongly driven by holiday home demand. The index methodology used is a “repeat sales” methodology The FNB National House Price Index quoted in this report is also compiled from deeds data using the same methodology as the Holiday Town House Price Indices. It is thus comparable with the Holiday Town House Price Indices, but is a different house price index to the monthly FNB National House Price Index (our “official” house price index, which is compiled using FNB-specific data and according to a different methodology.
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Author John Loos, FNB