Why holiday investments are a business decision

Glorious white beaches, turquoise waters, lazy summer days and ice cream.

It’s all too easy, in a reverie of romantic relaxation, to immediately start planning to buy an investment property in any of our great holiday meccas.

That’s absolutely fine if you plan to stay regularly in your investment home and let it out the rest of the time, or if you intend to move there eventually for a sea change or retirement.

But while some of our traditional holiday hotspots, like Byron, the Mornington Peninsula and the Sunshine and Gold coasts might yield good investment returns, other factors need to be taken into consideration before the big decision.

“We find that, at the start of every year, people have fallen in love with those amazing places all over again after their holidays there,” says investment specialist Ben Plohl of BFP Property Group.

“Investing there can be amazing too, especially if you buy an asset with your self-managed super fund to utilise it later.

“But some locations can be expensive and very reliant on tourism, which can be tricky – and, if you’re purely looking at an investment, it should be a business decision based on data and research for a better outcome.

“At the moment, for instance, we’re looking at strategic locations in Melbourne and Geelong, which are moving in the right direction, rather than holiday destinations.”

The Byron area has long been a major focus for both holidays and homes, but prices can fluctuate wildly.

The median house price of Byron Bay slumped 13 per cent over the past year to $2 million, according to the latest Domain House Price Report, while units rose 16.2 per cent to $1.5 million.

In the wider Byron LGA, however, the median house price rose 5.3 per cent to $1.5 million.

“There’s been a different alignment in pricing over the last two years to 18 months,” says Liam Annesley of Byron Bay Real Estate Agency.

“It’s really just been from December onwards that we can see the turnover in sales of investment properties.

“Permanent rentals and holiday rents have become particularly strong, and we’re seeing a lot of bidders on properties after a period of buyers sitting on the fence.

“Yields are 2.5 per cent upwards, but Byron has always benefitted mostly from that kick in capital gains, which has been fairly strong.”

Further north, prices on the Gold Coast are moving back up, with houses up 10.3 per cent year-on-year to a median of $1.159 million, and units up 11.1 per cent to $800,000.

The Sunshine Coast is also performing strongly, with house prices rising 7.9 per cent to $1.112 million, and units 9.4 per cent to $789,607.

In Victoria, the Mornington Peninsula is soft, with house prices dropping 6.8 per cent to $1.035 million, and units down by 5.1 per cent to $650,000.

“On the Gold Coast, there’s still an undersupply of homes that is driving prices up, and means they’re a good investment,” says Michael Kollosche of the Kollosche agency.

“There’s particularly strong demand for fully-furnished executive leases for two, three and six months. Rents are strong, and the vacancy rate is very low.”