Thinking of buying a holiday home? Here’s what to weigh up

The coming weeks will see millions of Aussies enjoy a well-earned getaway, and for some, a memorable holiday will inspire plans to buy a holiday home. But is it a good idea? And can a weekender still stack up financially? We explain what to consider plus tips to fund a vacation property.

It’s that time of year when we lock up our home, load up the car, and hit the highway to unwind with an all-too-brief sea or tree change.

It can add up to a wonderful experience, and some holidaymakers will stretch the vacation buzz a lot further by purchasing a holiday home.

But given the current state of property prices, is a weekender a smart move?

Here’s what to weigh up.

A holiday retreat is a major outlay

No matter whether you’re thinking of a coastal retreat or hinterland hideaway, homes in popular holiday spots can be pricey.

As a guide, an apartment in Coolum on Queensland’s Sunshine Coast, can set you back about $870,000.

If you’re thinking of a house in Byron Bay on the NSW north coast, you’ll likely need a budget of around $3.5 million.

That said, there can still be relatively affordable holiday spots.

A unit in Victoria’s seaside town of Portland, about four hours drive from Melbourne, can cost around $304,000,

And in the wine growing regions of WA’s Margaret River, or Tanunda in South Australia’s Barossa Valley, you may be able to pick up a house priced from around $670,000-$770,000.

Can a weekender still be a smart investment?

Wherever you buy, a holiday home is likely to involve an outlay of several hundred thousand dollars.

That sort of money could pay for a lot of vacations around the nation – and across the world.

So, first and foremost a holiday home should stack up as a good investment.

This is where it’s worth putting down the pina colada and taking off the rose-tinted glasses.

Ideally, you probably want your holiday home to deliver long-term capital growth.

The thing is, vacation properties tend to be located in regional areas where price growth can be very different from our big cities.

That’s not to say regional neighbourhoods don’t tick the box for capital gains.

CoreLogic points to areas such as Mackay, Geraldton and Townsville, which are seeing “exceptional growth” driven by affordability and lifestyle appeal.

However, not all regional markets are booming.

The holiday town of Batemans Bay, on NSW’s south coast, and Victoria’s coastal city of Warrnambool, for example, have both experienced declining values over the past year, according to CoreLogic.

Long story short, be sure to research any area you’re looking at buying into to get a feel for how property values are likely to move in the future.

Can a holiday property pay its way?

Gone are the days when most holiday homes stood empty for most of the year.

Platforms like Airbnb and Stayz offer a chance to put a vacation retreat to work earning short-term rental income.

The catch is that various state governments are limiting the number of nights these properties can be offered for rent each year.

Also, a number of councils such as Hobart City Council, have raised rates for short-term accommodation properties.

These factors need to be accounted for in your holiday home budget.

On the plus side, if your vacation property is rented out or available for rent, you may be able to claim at least some of the ongoing costs as tax deductions each year.

Funding your holiday home

Loans for holiday homes work in much the same way as a regular mortgage, but with a few differences.

Demand for properties in holiday hot spots can be highly seasonal. This increases the risk for lenders, who may ask you to stump up a bigger deposit compared to an owner-occupied home loan.

Your vacation retreat could also be seen as an investment property, meaning you could be asked to pay a higher investment loan rate.

The big plus is that if you are a home owner, you may be able to use your existing home equity in lieu of a cash deposit on a holiday property.

Get in touch

Call us today to find out more about loans to buy a holiday home.

It could turn a vacation pipedream into a fun-filled, financially rewarding reality for your family.