Investing in Australia's coastal hotspots: here's what you need to know

It’s easy to choose to invest in one of Australia’s coastal hotspots – but it’s the absolute hardest decision to get right.

Too many people fall in love with a beautiful home in a gorgeous seaside location, daydreaming about a laidback lifestyle and further capital growth, and then buy on a surge of romanticism.

“But investing in property is a marriage, not a one-night stand,” says successful investor and founder of Freedom Property Investors Scott Kuru.

“It should be a 10-year commitment, at least.”

“So, you have to be very careful to do all your due diligence and remember the long-term fundamentals before throwing capital around. You can be less strategic and more opportunistic, but you do risk your returns being less, especially at a time when coastal properties have already gone up so much in price.”

The latest Domain House Report revealed that prices of houses in coastal areas of Australia nationally showed phenomenal growth over 2020, driven by a renewed appetite for a COVID-19 sea change or tree change, and being able to work remotely.

In NSW’s Byron Bay, for instance, prices rose by a staggering 37 per cent, in Western Australia’s Port Hedland by 30.4 per cent, Queensland’s Noosa region by 18 per cent, Victoria’s Mornington Peninsula by 14.6 per cent and South Australia’s Yorke Peninsula by 13.6 per cent.

The danger then is investing in a location that’s already at its capital growth peak, or beyond its peak.

“Those places have been so popular, they’re booming, but investors may find they’re paying over the odds for property there,” says John Moore, general manager of the Property Investors Association.

“That might be difficult if tourism drops off or there aren’t the amenities you need for the demographic that wants to rent properties long-term at the coast – like schools for families or health services for older people.”

It’s for those kinds of reasons that Domain senior research analyst Dr Nicola Powell suggests investors look at areas close, or similar, to those that have shown record growth instead – Ballina rather than Byron, the Sunshine Coast beyond Noosa, and Warrnambool on Victoria’s south coast.

“Ballina is like Byron’s poorer cousin, which has experienced good price growth, but still lower than Byron,” says Dr Powell.

“In Victoria, Warrnambool hasn’t had the hype of the Mornington Peninsula, but that’s still popular, while in Queensland, the Sunshine Coast would be my pick because it has a strong pull for retirees and will still see a flow of residents from the eastern states.

“They all have good fundamentals in that they’re close to transport and roads, the ocean and beach, and have good family facilities.”

Investors should always look for those basics, advises Suburbanite property valuer and investment adviser Anna Porter.

If the plan is to Airbnb the property, check the competition and maintenance costs.

“Otherwise, you need to find out whether there are enough potential long-term tenants in the area you’re targeting, with jobs and attractions for them to choose to live there,” she says.

“Don’t get swept away by a place; remember it has to be a sustainable investment for you.”