Inflation of properties closer to the beach shows slow growth
Lightstone's latest research looks at the various price dynamics of properties in the coastal segment, with rather interesting results.
Between 2014 and 2015, inflation in the coastal property segment surpassed national inflation. In November 2014, where national inflation was at 6.13%, coastal inflation was sitting at roughly 8.7%.
© Chris Putnam – 123RF.com
Fluctuations in the coastal market segment are similar to that of the luxury property segment, but are a lot more pronounced during booms and dips. The average price and rand per square metre differs significantly the further a property is from the beach.
Luxury segment
In general, inflation of properties closer to the beach climbs at a slower rate than those that are more inland. This could owe to the fact that most of the beachfront properties are in the luxury segment which tend to have a slower growth rate.
Properties within a 1km and 3km radius from the beach see inflation growth of roughly 6% per annum, whereas properties 1km from the beach only see 4% growth per annum. The biggest inflation growth, however, is seen with properties that are between 3km's and 5km's from the beach which peak at around 7.7% per annum.
The two graphs below show that freehold properties within 3km from beach are growing much faster than the national average, whereas sectional title properties close to the beach see inflation at a much slower rate.
Sectional title properties
Freehold properties within 3km from the beach are rising at roughly 9%, while sectional title properties rise at 4%. Sectional title properties inflation has remained sluggish since the crash and has not grown by more than 6% per annum since. This then begs the question: why are sectional title beach properties seeing slower inflation growth?
Sectional title properties are often bought for investment purposes and are dependent on the desire by people to take a holiday (which would have been negatively affected when the market took a dip), whereas beachfront freehold properties are usually bought by the wealthier segment of the market that hasn't particularly been affected by the crash.
While properties at varying distances from the beach may see different inflation figures, there is still very much an upward trend of inflation for both freehold and sectional title properties - which is great news for buyers and property professionals alike.
