Holiday homes are not the best property purchases from an economic viewpoint

Holiday homes are not the best property purchases from an economic viewpoint

With many Western Cape holidaymakers now back home after enjoyable stays in coastal and other holiday resorts, there is once again (for the first time in a long while) an interest in holiday home purchases.  While this is wholly understandable, says Rowan Alexander, Director of Alexander Swart Property, - "Who does not want his own bolthole in attractive surroundings away from the work environment?" - it has to be accepted that the purchase of a holiday home is not the best route to go if you hope to see satisfactory capital growth on your second property.

According to Alexander the wiser choice, if you are contemplating having a holiday home, is to buy a property in one of the popular suburban areas, rent it out, and then use the proceeds to hire a holiday home for specific periods during the year - or even possibly for the whole year.

This is the better choice, says Alexander, because the capital growth and rentals of the suburban home will always be far higher than that of a holiday home.

"A R2 million two or three bedroom house in an area like Brackenfell will give the buy-to-let investor an assured income of R15,000 per month and this will enable the hirer to rent a holiday home valued at R3 million plus.  The same capital outlay on purchasing a home in a holiday area will probably give you a property on which the monthly rent is unlikely to be more than R10,000 - and it is possible that the rents will be occasional rather than year round.  In addition, the annual capital growth of the holiday property will in percentage terms probably be at least 40% less than that of the suburban home."

Another factor to be considered, says Alexander, is that the maintenance costs of a holiday home, especially one close to the sea, will almost invariably be a great deal higher than those of a suburban home because salt laden atmospheres are highly corrosive to paint, woodwork and metal.

A further point to be taken into account, says Alexander, is that in renting holiday property the tenant need not be confined to one area, i.e. he has flexibility of choice.

"Even if one is very attached to a specific holiday destination, a change now and then can be refreshing," says Alexander.

For further information contact Rowan Alexander on cell phone number 082 581 3116 or by email rowan@asproperty.co.za.