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Reproduced with permission.
With the summer holidays in full swing, I’m sure many of you have booked a holiday house and are enjoying the lovely walks along the beach, the great surf and the fish and chips from the local shop.
I would imagine that because you’re having such a great time, some of you have even contemplated buying your own holiday house. Of course it would be great to enjoy this lifestyle more regularly but be careful! The last thing you want to be doing is making a major property investment decision based on the clear blue water, glistening white sand and the aroma of fish and chips.
Owning your own holiday home as a lifestyle choice may be a good decision but buying a holiday house with investment in mind, is not such a good choice.
In the table below, I have included 10 of Australia’s top holiday spots and the performance of their house market over the last 12 months and the past five years.
Location / Capital Growth prev 12 mths / Capital Growth past 5 yrs
Port Douglas (QLD) / -13.0% / -22.7%
Maroochydore (QLD) -3.5% +1.2%
Southport (QLD) -8.9% -8.9%
Surfers Paradise (QLD) -11.9% -11.1%
Tweed Heads (NSW) -8.8% -9.3%
Byron Bay (NSW) -17.0% -23.4%
Sorrento (VIC) -12.8% +26.6%
Portsea (VIC) -10.7% +39.0%
Victor Harbor (SA) -6.1% +20.1%
Margaret River (WA) -0.2% -1.7%
Australian Capital Cities -1.1% +10.4%
As can be seen from the table above, compared to the performance of the capital city markets, property prices in most holiday locations have not performed as well.
On average, house prices in all Australian capital cities have dropped by 1.1% in the last 12 months. This small drop in price seems good compared to the drop in house prices in Byron Bay or Port Douglas. I know a total capital growth of 10.4% in five years in the capital cities is well below the long term average but this is much better than most of the holiday locations listed in the table.
Property in holiday markets performs differently to that of the capital cities. Prices of holiday homes can increase noticeably during an economic and property boom. The prices of our homes in the cities are increasing markedly; we are feeling more confident and more likely to spend money. This is the time when many people consider buying holiday houses. In recent times, this is what happened in 2002 and 2003 and then again in some areas in 2007.Often holiday markets will outperform the city market, for a short period of time. Some evidence of this can be seen in the table with the high 5 year growth rates in Sorrento, Portsea and Victor Harbor. This 5 year period included the later part of 2007 and first three months of 2008 when Victoria and South Australia were in the midst of a mini property boom.
However, for most of the property cycle, property prices in holiday locations are very subdued and when economic times are very slow, as they are now, property in holiday locations is the last thing on people’s mind. This results in less demand for holiday property which can then cause prices to fall.
My family loves our annual beach holiday but what I particularly like about it is that I am in someone else’s house. For one week a year, I can enjoy a great beach house with lovely fixtures and fittings but I’m not the one paying the council rates, maintenance and repairs. Nor am I the one who has to watch the value of his holiday house drop due to a slow economy and even slower holiday property market.
By all means, go on holidays, have a great time and spend your money at your favourite holiday location. Enjoy your time in the holiday house but think twice (or three times) before you buy one.
Written by Peter Koulizos, university lecturer, author and buyers advocate.