Way to go
U.S. property prices have yet to heat up, making it the ideal time to find a cut-price holiday rental, or even buy a vacation home, says Andre Cooray
‘‘Now is not the time to buy U.S. property with the intention of renting it out or selling it on, but if you have the funds and are looking at a long-term investment you will be able to cash in’’
To vay-k or not to vay-k? (Should I stay or should I go?) That is the question being asked by many Americans, not to mention us Hong Kongers, who are indecisive about vacationing this year as the economic downturn follows us all into summer. But rather than skipping your annual getaway, now is the time to shop around for a cut-price U.S. rental, or maybe even take the plunge and invest in a wildly discounted holiday home.
All over the U.S., rental prices in holiday hotspots are being slashed like there’s no tomorrow, as landlords attempt to entice frugal holidaymakers into a short stay. What’s more, as the season heats up, the prices of homes across the U.S. continue to fall – making it an ideal time for investors to buy at seriously low bargain rates. Of course now is not the time to buy U.S. property with the intention of renting it out or selling it on, but if you have the funds and are looking at a long-term investment you will be able to cash in.
Take the U.S. island of Nantucket in Massachusetts, situated south of Cape Cod. Here homes ranging from one-bedroom bungalows to palatial seaside mansions are renting at a huge discount. Holiday rentals have in fact dropped by 20 percent at this elite summer colony. Mid-priced rentals offer some great deals, for example, homes on the market for US$10,000 (HK$77,500) per week can now be rented for around US$8,000. High-end luxury rentals are being discounted as well: you can lease a seven-bedroom waterfront home with a pool and tennis court, which last year rented for US$55,000 per week, for US$45,000 per week.
The population of Nantucket usually increases from about 10,000 to 60,000 during the high season. However, the effect of the global financial crisis has reduced the number of visitors by between 20 percent and 30 percent. As a result, not just home rentals but hotels, bed-and-breakfast accommodation and restaurants are lowering their rates in order to tempt vacationers.
Beach resorts all along the east coast are experiencing a dip in vacation numbers compared to last year. Traditionally bookings were made six months in advance, such was the demand. This summer, however, smart vacationers are waiting until the last minute before securing their spot in the sun in the hope of getting the lowest price possible. They are also choosing to rent on a weekly, rather than a monthly basis, and taking pains to shop around for the best deals at a time when money really matters.
Homeowners are responding with a range of special incentives to attract the financially cautious holidaymaker. Clearly, the current economic situation is giving vacationers the upper hand, and forcing landlords to become more inventive.
In Long Beach Island (situated in New Jersey), one vacation property owner has reduced the asking rental on his portfolio of properties by 25 percent – meaning a US$14,000 per week rental is now going for US$9,800 per week – and he is offering a 20 percent discount on top of that. And in Cape Cod, one landlord is offering vacationers US$500 off the US$3,000 per week rent, plus two-dozen fresh oysters.
Further incentives include additional free nights, no minimum stay and free maid service.
A recent study by an American internet-based company specialising in U.S. holiday rentals, that represents about 200,000 properties, revealed that 66 percent of holiday-rental owners provided special offers in reaction to the economic crisis in the first quarter of this year. It also found that 27 percent of owners adjusted prices by dollar amounts, and 24 percent offered set-percentage reductions of regular rental costs.
What’s more, as demand for holiday rentals has decreased, supply has increased, further saturating the market. Home-owners effected by the recession, by risk of foreclosure or an inability to sell property, have been forced to put their vacation homes up for rent to try to earn some extra cash.
Savvy renters are negotiating like never before, because they know that business is slow. Throughout Cape Cod, customers can expect discounts of at least 10 percent. One seasoned haggler managed to bargain US$800 off a four-bedroom Cape Cod home near the beach, and is paying (upfront) US$2,500 per week. A six-bedroom waterfront home close by is renting for US$1,000 a week, down from US$6,900. Owners prefer to rent for less than not at all – any additional income in the recession is welcome.
Holiday rental deals are not the only thing up for grabs this summer: there are still a lot of U.S.-wide property bargains to be had. Standard & Poor’s/Case-Shiller Home Price Indices revealed a 19.1 percent drop in the U.S. property market in the first quarter of this year, the highest recorded year-on-year fall in the history of the survey for any quarter. In San Francisco prices dropped by 28.7 percent, in Miami they dipped by 30.1 percent, and in Las Vegas by 31.2 percent.
Deals such as these, fuelled by bargain-basement prices on foreclosed homes, are exactly the type of ‘holiday specials’ investors and first-home buyers have been waiting for.
While Las Vegas has an array of tempting attractions and a ‘whatever happens [there] stays there’ mentality, market watchers are pushing Miami as one of the best places to invest if you are after a home on the coast. The so-called Magic City is already bouncing back from the property slump, and according to the Florida Association of Realtors, in February this year, condo purchases rose by 71 percent from a year earlier and home sales increased by 68 percent.
If you aspire to own a holiday home on the west coast, it’s worth noting that prices in the San Francisco Bay Area, one of the hardest hit by the market crash, have dropped drastically since last year. In Solano prices have gone down by 44 percent, with the average house now costing US$180,000. And in Napa, where the average house now comes in at US$315,000, prices have dropped by 37 percent.
The average price for a home in the Bay Area has dropped from US$518,000 in 2008 down to US$304,000 this year. This is a 54 percent reduction since the market peaked two years ago. The number of home sales increased by 13 percent from April last year, almost half of which are attributed to foreclosures. It’s clear that unfortunate circumstances for some have turned into golden opportunities for others.
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